EXHIBIT 2
__________________________________________________________
AGREEMENT AND PLAN OF MERGER
Between
CYRUS ACQUISITION CORP.
and
GENERAL HOST CORPORATION
Dated as of November 22, 1997
__________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER...................................2
SECTION 1.1 The
Offer..................................................
2
SECTION 1.2 Company
Action.............................................3
ARTICLE II
THE MERGER...................................4
SECTION 2.1 The
Merger.................................................
4
SECTION 2.2 Effective
Time.............................................4
SECTION 2.3 Effects of the
Merger......................................4
SECTION 2.4 Certificate of Incorporation;
By-Laws......................4
SECTION 2.5 Directors and
Officers.....................................5
SECTION 2.6 Conversion of
Securities...................................5
SECTION 2.7 Dissenting
Shares..........................................6
SECTION 2.8 Surrender of
Shares........................................6
SECTION 2.9 No Further Transfer or Ownership
Rights....................8
SECTION 2.10 Treatment of
Options.......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................9
SECTION 3.1 Organization and Qualification;
Subsidiaries...............9
SECTION 3.2 Certificate of Incorporation and
By-Laws................. 10
SECTION 3.3 Capitalization.........................................
.. 10
SECTION 3.4 Authority Relative to This
Agreement..................... 11
SECTION 3.5 No Conflict; Required Filings and
Consents............... 12
SECTION 3.6 Compliance.............................................
.. 13
SECTION 3.7 SEC Filings; Financial
Statements........................ 13
SECTION 3.8 Absence of Certain Changes or
Events..................... 14
SECTION 3.9 Absence of
Litigation.................................... 14
SECTION 3.10 Employee Benefit
Plans................................... 15
SECTION 3.11 Tax
Matters..............................................
17
SECTION 3.12 Offer Documents; Proxy
Statement......................... 17
SECTION 3.13 Environmental
Matters.................................... 18
SECTION 3.14 Material
Contracts....................................... 20
SECTION 3.15 Permits................................................
.. 20
SECTION 3.16 Properties.............................................
.. 20
SECTION 3.17 Intellectual
Property.................................... 22
SECTION 3.18 Management Information
Systems........................... 22
SECTION 3.19 Affiliate
Transactions................................... 22
SECTION 3.20 Approvals; Vote
Required................................. 23
SECTION 3.21 Brokers................................................
.. 23
SECTION 3.22 Rights
Agreement......................................... 23
-i-
ARTICLE IV
Page
REPRESENTATIONS AND WARRANTIES OF PURCHASER................. 24
SECTION 4.1 Corporate
Organization................................... 24
SECTION 4.2 Certificate of Incorporation and
By-Laws................. 24
SECTION 4.3 Authority Relative to This
Agreement..................... 24
SECTION 4.4 No Conflict; Required Filings and
Consents............... 24
SECTION 4.5 Offer Documents; Proxy
Statement......................... 25
SECTION 4.6 Debt
Financing........................................... 26
SECTION 4.7 Equity
Financing......................................... 26
SECTION 4.8 Brokers................................................
.. 26
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER.................... 26
SECTION 5.1 Conduct of Business of the Company Pending the
Merger....... 26
ARTICLE VI
ADDITIONAL AGREEMENTS............................ 29
SECTION 6.1 Shareholders
Meeting..................................... 29
SECTION 6.2 Proxy
Statement.......................................... 30
SECTION 6.3 Company Board Representation; Section
14(f).............. 31
SECTION 6.4 Access to Information;
Confidentiality................... 32
SECTION 6.5 No Solicitation of
Transactions.......................... 32
SECTION 6.6 Benefits
Matters......................................... 33
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance...... 35
SECTION 6.8 Notification of Certain
Matters.......................... 35
SECTION 6.9 Further Action; Reasonable Best
Efforts.................. 35
SECTION 6.10 Public
Announcements..................................... 37
SECTION 6.11 Cancellation of Common Stock
Equivalents................. 38
SECTION 6.12 Disposition of
Litigation................................ 38
SECTION 6.13 Equity
Contribution...................................... 38
SECTION 6.14. Anti-Dilution..........................................
.. 38
SECTION 6.15. Support
Agreement........................................ 39
ARTICLE VII
CONDITIONS OF MERGER............................. 39
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger.................................................
.. 39
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER...................... 39
SECTION 8.1 Termination............................................
.. 39
SECTION 8.2 Effect of
Termination.................................... 41
SECTION 8.3 Fees and
Expenses........................................ 42
SECTION 8.4 Amendment..............................................
.. 42
SECTION 8.5 Waiver.................................................
.. 42
-ii-
Page
ARTICLE IX
GENERAL PROVISIONS.............................. 43
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements.............................................
.. 43
SECTION 9.2 Notices................................................
.. 43
SECTION 9.3 Certain
Definitions...................................... 44
SECTION 9.4 Severability...........................................
.. 45
SECTION 9.5 Entire Agreement;
Assignment............................. 45
SECTION 9.6 Parties in
Interest...................................... 45
SECTION 9.7 Governing
Law............................................ 46
SECTION 9.8 Headings...............................................
.. 46
SECTION 9.9 Counterparts...........................................
.. 46
Annex A - Offer Conditions
Annex B - Debt Offer Terms
Annex C - Amendment to Company Certificate of Incorporation
-iii-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1997 (the
"Agreement"), between CYRUS ACQUISITION CORP., a New York corporation
("Purchaser"), and GENERAL HOST CORPORATION, a New York corporation (the
"Company").
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and the shareholders of the Company to
enter into this Agreement with Purchaser, providing for the merger (the
"Merger") of Purchaser with and into the Company in accordance with the New York
Business Corporation Law (the "NYBCL") and the other transactions contemplated
hereby, upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Purchaser has approved the Merger
of Purchaser with and into the Company and such other transactions in accordance
with the NYBCL upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company and Purchaser have agreed that, upon the terms
and subject to the conditions contained herein, Purchaser shall commence an
offer (the "Offer") to purchase for cash all of the issued and outstanding
shares of common stock, par value $1.00 per share (referred to herein as either
the "Shares" or "Company Common Stock"), of the Company and the associated
Company Common Stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of March 7, 1990 and subsequently amended by
Amendment No. 1 thereto, dated as of March 1, 1995, between the Company and
ChaseMellon Shareholder Services, as successor to Chemical Bank (the "Rights
Agreement"); and
WHEREAS, as a condition to its willingness to enter into this
Agreement and consummate the transactions contemplated hereby, Purchaser has
required that a principal shareholder (the "Supporting Shareholder") agree to
tender and vote Shares (as hereinafter defined) owned by him in the Offer in
accordance with the Support Agreement (as hereinafter defined) and to take such
other actions provided for therein; and in order to induce Purchaser to enter
into this Agreement, the Supporting Shareholder has agreed to execute and
deliver the Support Agreement, dated as of the date hereof, between Purchaser
and the Supporting Shareholder (the "Support Agreement").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchaser and the Company hereby agree as follows:
2
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall, as soon as reasonably practicable after the date
hereof (and in any event within five business days from the date of public
announcement of the execution hereof), commence the Offer at a price of $5.50
per Share (and associated Right), net to the seller in cash. The obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer shall be
subject to the satisfaction of the Offer Conditions. Purchaser expressly
reserves the right, in its sole discretion, to waive any such condition (other
than the Minimum Condition as defined in the Offer Conditions) and make any
other changes in the terms and conditions of the Offer, provided that, unless
previously approved by the Company in writing, no change may be made which
decreases the price per Share payable in the Offer, changes the form of
consideration payable in the Offer (other than by adding consideration), reduces
the maximum number of Shares to be purchased in the Offer, or imposes conditions
to the Offer in addition to those set forth herein which are adverse to holders
of the Shares. The initial expiration date of the Offer shall be 20 business
days following (and inclusive of) the date of commencement. Purchaser covenants
and agrees that, subject to the terms and conditions of this Agreement,
including but not limited to the Offer Conditions, it will accept for payment
and pay for Shares as soon as it is permitted to do so under applicable law,
provided that Purchaser shall have the right, in its sole discretion, to extend
the Offer from time to time for up to an aggregate of 20 business days,
notwithstanding the prior satisfaction of the Offer Conditions. It is agreed
that the Offer Conditions are for the benefit of Purchaser and may be asserted
by Purchaser regardless of the circumstances giving rise to any such condition
(including any action or inaction by Purchaser) or, except with respect to the
Minimum Condition, may be waived by Purchaser, in whole or in part at any time
and from time to time, in its sole discretion.
(b) As soon as reasonably practicable on the date the Offer is
commenced, Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer with the Securities and Exchange
Commission (the "SEC"). The Schedule 14D-1 shall contain an Offer to Purchase
and forms of the related letter of transmittal (which Schedule 14D-1, Offer to
Purchase and other documents, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents").
Purchaser and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents that shall have become false or
misleading in any
3
material respect, and Purchaser further agrees to take all steps necessary to
cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other
Offer Documents as so corrected to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws.
SECTION 1.2 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on November 21, 1997, has
unanimously (A) determined that this Agreement and the transactions contemplated
hereby, including each of the Offer and the Merger, are fair to and in the best
interests of the holders of Shares, (B) approved this Agreement, the Offer and
the Merger, the Equity Contribution, the Debt Offer and the Financing (each as
hereinafter defined) and the other transactions contemplated hereby and (C)
resolved to recommend that the shareholders of the Company accept the Offer,
tender their Shares to Purchaser thereunder and approve this Agreement, the
Merger and the other transactions contemplated hereby; and (ii) Credit Suisse
First Boston Corporation (the "Financial Adviser") has delivered to the Board of
Directors of the Company its opinion that the consideration to be received by
holders of Shares pursuant to the Offer and the Merger is fair to such holders
from a financial point of view. The Company will promptly provide Purchaser
with a true and complete written copy of such fairness opinion and has been
authorized by the Financial Adviser to permit the inclusion of such fairness
opinion (and, subject to prior review and consent by such Financial Adviser, a
reference thereto) in the Offer Documents and in the Schedule 14D-9 referred to
below and the Proxy Statement referred to in Section 3.12. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Company's Board of Directors described in this Section 1.2(a).
(b) The Company shall file with the SEC, contemporaneously with the
commencement of the Offer pursuant to Section 1.1, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing the recommendations of the Company's
Board of Directors described in Section 1.2(a)(i) and shall promptly mail the
Schedule 14D-9 to the shareholders of the Company. The Company and Purchaser
each agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws.
(c) In connection with the Offer, if requested by Purchaser, the
Company shall promptly furnish Purchaser with mailing labels, security position
listings, any non-objecting beneficial owner lists and any available listings or
computer
4
files containing the names and addresses of the record holders of Shares, each
as of a recent date, and shall promptly furnish Purchaser with such additional
information (including but not limited to updated lists of shareholders, mailing
labels, security position listings and non-objecting beneficial owner lists) and
such other assistance as Purchaser or its agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the NYBCL, at the Effective Time (as
defined in Section 2.2), Purchaser shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 2.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Department of State of the State
of New York, in such form as required by and executed in accordance with the
relevant provisions of the NYBCL (the date and time of the filing of the
Certificate of Merger with the Department of State of the State of New York (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the NYBCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Restated Certificate of Incorporation of the Company (as amended,
the "Certificate of Incorporation"), as in effect immediately prior to the
Effective Time, shall be amended so as to add the provision set forth in Annex C
hereto, and, as so amended, until thereafter further amended (subject to Section
6.7) as provided therein and under the NYBCL, shall be the certificate of
incorporation of the Surviving Corporation following the Merger.
5
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the By-Laws of the Company shall be the By-Laws of
the Surviving Corporation and thereafter may (subject to Section 6.7) be amended
or repealed in accordance with their terms or the Certificate of Incorporation
of the Surviving Corporation and as provided by law.
SECTION 2.5 Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
SECTION 2.6 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(i) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
(ii) Each share of Company Common Stock held in the treasury of the
Company and each Share owned by Purchaser or any direct or indirect
subsidiary of the Company, in each case immediately prior to the Effective
Time, shall be cancelled and retired without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(iii) Each issued and outstanding share of Company Common Stock (other
than shares cancelled pursuant to Section 2.6(ii) and any Dissenting Shares
(as defined in Section 2.7(a))) shall be converted into the right to
receive $5.50 in cash or any higher price that may be paid pursuant to the
Offer (the "Merger Consideration") payable to the holder thereof, without
interest, upon surrender of the certificate formerly representing such
share in the manner provided in Section 2.8, less any required withholding
taxes.
(iv) Immediately following the Effective Time, the Surviving
Corporation shall execute and deliver to the trustee under the Indenture,
dated as of February 28, 1992, between the Company and United States Trust
Company of New York, as trustee (the "Convertible Notes Indenture"),
executed in connection with the issuance by the Company of its 8%
convertible subordinated notes due 2002 (the "Convertible Notes"), a
Supplement to the Convertible Notes
6
Indenture pursuant to Section 14.11 thereof providing that each Convertible
Note remaining outstanding shall after the Effective Time be convertible
into an amount in cash equal to the product of (x) the number of Shares
into which such Convertible Note was convertible immediately prior to the
Effective Time times (y) the Merger Consideration.
SECTION 2.7 Dissenting Shares. (a) Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have not
voted such Shares in favor of the Merger (or consented thereto in writing), who
shall have delivered a written objection to the Merger and a demand for
appraisal of such Shares in accordance with Sections 623 and 910 of the NYBCL,
and who shall not have failed to perfect or shall not have effectively withdrawn
or lost their rights to appraisal and payment under the NYBCL (the "Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration, but shall instead entitle the holder thereof to receive that
consideration determined pursuant to Sections 623 and 910 of the NYBCL;
provided, however, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right to appraisal and
payment under the NYBCL, such holder's Shares shall thereupon be deemed to have
been converted, at the Effective Time, into the right to receive the Merger
Consideration, without any interest thereon.
(b) The Company shall give Purchaser (i) prompt notice of any demands
for appraisal pursuant to Sections 623 and 910 of the NYBCL received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the NYBCL and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
the NYBCL. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any such demands for appraisal or
offer to settle or settle any such demands.
SECTION 2.8 Surrender of Shares. (a) Prior to the mailing of the
Proxy Statement (as defined in Section 3.12), Purchaser shall appoint a bank or
trust company which is reasonably satisfactory to the Company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration. When
and as needed, the Surviving Corporation will deposit with the Paying Agent for
the benefit of former holders of the Company's Common Stock sufficient funds to
make all payments pursuant to this Section 2.8. Such funds shall be invested by
the Paying Agent as directed by the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or
7
banker's acceptances of commercial banks with capital exceeding $500 million.
Any net profit resulting from, or interest or income produced by, such
investments will be payable to the Surviving Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates"), a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon surrender
to the Paying Agent of a Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
aggregate amount of Merger Consideration into which the number of shares of
Company Common Stock previously represented by such Certificate or Certificates
surrendered shall have been converted pursuant to this Agreement. If any Merger
Consideration is to be remitted to a person whose name is other than that in
which the Certificate for Company Common Stock surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer, and that the person requesting such exchange shall
have paid any transfer and/or other taxes required by reason of the remittance
of Merger Consideration to a person whose name is other than that of the
registered holder of the Certificate surrendered, or the person requesting such
exchange shall have established to the satisfaction of the Surviving Corporation
that such tax either has been paid or is not applicable. No interest shall be
paid or accrued, upon the surrender of the Certificates, for the benefit of
holders of the Certificates on any Merger Consideration.
(c) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been deposited with the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) and only as general creditors thereof for payment of their
claim for Merger Consideration to which such holders may be entitled.
(d) Notwithstanding the provisions of Section 2.8(c), neither the
Surviving Corporation nor the Paying Agent shall be liable to any person in
respect of any Merger Consideration
8
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates representing shares of Company
Common Stock shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any governmental entity), any such cash shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
SECTION 2.9 No Further Transfer or Ownership Rights. After the
Effective Time, there shall be no further transfer on the records of the Company
(or the Surviving Corporation) or its transfer agent of certificates
representing Shares of Company Common Stock which have been converted pursuant
to this Agreement into the right to receive Merger Consideration, and if such
certificates are presented to the Company for transfer, they shall be cancelled
against delivery of Merger Consideration. From and after the Effective Time,
the holders of Certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for herein or by applicable
law. All Merger Consideration paid upon the surrender for exchange of
Certificates representing shares of Company Common Stock in accordance with the
terms of this Article II shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the Shares of Company Common Stock
exchanged for Merger Consideration theretofore represented by such Certificates.
SECTION 2.10 Treatment of Options. Prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding stock option heretofore granted under any Company
Plan (as defined in Section 3.10) (each "Option"), whether or not then vested or
exercisable, shall, at and after the Effective Time, be exercisable solely for,
and shall entitle each holder thereof solely to, a payment in cash from the
Company (subject to any applicable withholding taxes, the "Cash Payment"), upon
exercise, equal to the product of (x) the total number of Shares subject or
related to such Option, whether or not then vested or exercisable, and (y) the
excess, if any, of the Merger Consideration over the exercise price or purchase
price, as the case may be, per Share subject or related to such Option, each
such Cash Payment to be paid to each holder of an outstanding Option upon
exercise; provided, however, that with respect to any person subject to Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
such amount shall be paid as soon as practicable after the first date payment
can be made without liability to such Person under Section 16(b) of the Exchange
Act. As provided herein, the
9
Company Plans (and any other plan, program or arrangement) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time. The Company
will take all commercially reasonable steps to ensure that none of the Company
or any of its subsidiaries is or will be bound by any Options, other options,
warrants, rights or agreements which would entitle any person, other than the
current shareholders of Purchaser or its affiliates, to own any capital stock of
the Surviving Corporation or any of its subsidiaries or, except as otherwise
provided in this Section 2.10, to receive any payment in respect thereof and to
cause or request the holders of the Options to agree to an automatic exercise
thereof at the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth with reasonable specificity in a corresponding
numbered section of the Company Disclosure Schedule delivered to Purchaser at
the execution of this Agreement (the "Company Disclosure Schedule"), the Company
hereby represents and warrants to Purchaser that:
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of
the Company and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted except
where the failure to be in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect.
Each of the Company and each of its Significant Subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the consummation
of any of the Offer, the Merger, the Equity Contribution, the Debt Offer, the
Financing or the other transactions contemplated hereby (collectively, the
"Transactions"). When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change or effect
that, either individually or in the aggregate with all other changes or effects,
is materially adverse to the business, operations, assets, liabilities,
properties, financial condition, or results of operations of the Company and its
subsidiaries taken as a whole.
10
SECTION 3.2 Certificate of Incorporation and By-Laws. The Company
has heretofore furnished to Purchaser complete and correct copies of the
Certificate of Incorporation and the By-Laws of the Company and the equivalent
organizational documents of each of its Significant Subsidiaries as currently in
effect. Such Certificate of Incorporation, By-Laws and other organizational
documents are in full force and effect and no other organizational documents are
applicable to or binding upon the Company or its Significant Subsidiaries.
Neither the Company nor any of its Significant Subsidiaries is in violation of
any of the provisions of its Certificate of Incorporation, By-Laws or other
organizational documents.
SECTION 3.3 Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $1.00 per share ("Company Preferred
Stock"). As of November 2, 1997, (i) 24,413,686 shares of Company Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights,
(ii) 7,338,764 shares of Company Common Stock were held in the treasury of the
Company, (iii) an aggregate of 1,322,688 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Options issued pursuant to the Company Plans
and (iv) an aggregate of 7,616,003 shares of Company Common Stock were reserved
for issuance and issuable upon or otherwise deliverable in connection with the
exercise of conversion rights of the Convertible Notes. Since November 2, 1997,
no options to purchase shares of Company Common Stock have been granted and no
shares of Company Common Stock have been issued except for shares issued
pursuant to the exercise of Options or the conversion of Convertible Notes. As
of the date hereof, no shares of Company Preferred Stock are issued and
outstanding. Except (i) as set forth above, (ii) as provided pursuant to
Sections 6.13 and 6.14 and (iii) for 200,000 aggregate common stock equivalents
(the "Common Stock Equivalents") issued pursuant to the agreements set forth on
Section 3.3 of the Company Disclosure Schedule (provided that any inaccuracies
in such Section 3.3 with respect to the Common Stock Equivalents which are not,
individually or in the aggregate, material to the Offer and the Merger shall not
constitute a breach of this representation and warranty), true and complete
copies of which have been provided to Purchaser, there are outstanding or
reserved for issuance (a) no shares of capital stock or other voting securities
of the Company, (b) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(c) no options or other rights to acquire from the Company, and no obligation of
the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company and (d) no equity equivalents, interests in the ownership or earnings of
the Company or other similar rights (collectively, "Company Securities").
Section 3.3 of the Company Disclosure Schedule
11
sets forth a true and complete list of the Options and the Common Stock
Equivalents, indicating for each Option or Common Stock Equivalent the holder
thereof, the number of shares of Company Common Stock subject thereto, and the
exercise price and expiration date thereof (provided that any inaccuracies in
such list which are not, individually or in the aggregate, material to the Offer
and the Merger shall not constitute a breach of this representation and
warranty). The conversion price for the Convertible Notes is $8.53466 per share
of Company Common Stock. There are no outstanding obligations of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth above, there are no options, calls, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of its
subsidiaries to which the Company or any of its subsidiaries is a party. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, and all Shares issued pursuant to Sections 6.13 and 6.14, shall be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive (or similar) rights. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any subsidiary of the Company or any other entity which would be material to
the Company or such subsidiary, as the case may be. Each of the outstanding
shares of capital stock of each of the Company's Significant Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and all such
shares are owned by the Company or another wholly owned subsidiary of the
Company and are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations in voting rights, charges or other encumbrances
of any nature whatsoever except where the failure to own such shares free and
clear would not, individually or in the aggregate, have a Material Adverse
Effect. The Company does not hold any capital stock or other equity interests,
directly or indirectly, in any person other than its wholly-owned subsidiaries,
a true and complete list of which subsidiaries is set forth in Section 3.3 of
the Company Disclosure Schedule (provided that any inaccuracies in such list
which are not, individually or in the aggregate, material to the Offer and the
Merger shall not constitute a breach of this representation and warranty).
SECTION 3.4 Authority Relative to This Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the
12
transactions so contemplated (other than, with respect to the Merger, the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of Company Common Stock if and to the extent required by applicable law,
and the filing of appropriate merger documents as required by the NYBCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by Purchaser,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of bankruptcy.
SECTION 3.5 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by the Company do not and
will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
Significant Subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, statute, rule, regulation, order,
judgment or decree applicable to the Company or any of its Significant
Subsidiaries or by which its or any of their respective properties are bound or
affected; or (iii) conflict with or result in any breach or violation of or
constitute a default (or an event which with notice or lapse of time or both
could become a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the properties
or assets of the Company or any of its Significant Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries or its or any of their respective properties are bound
or affected, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay consummation of any of the Transactions.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except for (i) applicable requirements, if any, of the Exchange Act,
and the rules and regulations promulgated thereunder, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state
securities, takeover and "blue sky" laws, (ii) the filing and
13
recordation of appropriate merger or other documents as may be required by the
NYBCL, (iii) filings with the New York Stock Exchange (the "NYSE") and (iv) such
consents, approvals, authorizations, permits, actions, filings or notifications
the failure of which to make or obtain would not, individually or in the
aggregate, prevent or materially delay consummation of any of the Transactions
or have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
statute, rule, regulation, order, judgment or decree applicable to the Company
or any of its Significant Subsidiaries or by which its or any of their
respective properties are bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Significant
Subsidiaries is a party or by which the Company or any of its Significant
Subsidiaries or any of its or their respective properties are bound or affected,
except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay consummation of any of the Transactions.
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company and,
to the extent applicable, each of its then or current subsidiaries, has filed
all forms, reports, statements and documents required to be filed with the SEC
since January 30, 1995 (collectively, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
regulations promulgated thereunder, each as in effect on the date so filed.
None of the SEC Reports (including but not limited to any financial statements
or schedules included or incorporated by reference therein) contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except to the extent revised or
superseded by a subsequent filing with the SEC prior to the date hereof, none of
the SEC Reports contains any untrue statement of a material fact or omits to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial
statements of the Company (including any related notes thereto) included in the
SEC Reports at the time filed complied as to form in all material respects with
all applicable accounting requirements and with the published rules and
14
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis throughout the periods involved (except as specifically
indicated in the notes thereto) and fairly presents the consolidated financial
position of the Company and its subsidiaries at the respective date thereof and
the consolidated results of its and their operations and cash flows for the
periods indicated (subject, in the case of unaudited quarterly statements, to
normal year-end audit adjustments).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at January 26, 1997, including the
notes thereto, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with generally accepted accounting
principles, except for liabilities or obligations: (i) specifically reflected in
the most recent unaudited quarterly statements included in the Current SEC
Reports (as defined in Section 3.8) or (ii) incurred in the ordinary course of
business since January 26, 1997 which would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or Events. Since January 26,
1997, except as specifically contemplated by this Agreement or disclosed in the
SEC Reports filed and publicly available prior to the date of this Agreement
(the "Current SEC Reports"), the Company and its subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been: (i) any condition, event
or occurrence other than those which, individually or in the aggregate, would
not have a Material Adverse Effect; (ii) any material change by the Company in
its accounting methods, principles or practices; or (iii) any revaluation by the
Company of any of its assets, including but not limited to writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business, other than those resulting in an aggregate decrease
in valuation over all such revaluations which would not have a Material Adverse
Effect.
SECTION 3.9 Absence of Litigation. Except as disclosed in the
Current SEC Reports, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its Significant Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, other than those which (i) individually or in the aggregate, would not
have a Material
15
Adverse Effect and (ii) do not seek to delay or prevent the consummation of any
of the Transactions. As of the date hereof, neither the Company nor any of its
Significant Subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or award
other than those which, individually or in the aggregate, would not have a
Material Adverse Effect or prevent or materially delay consummation of any of
the Transactions.
SECTION 3.10 Employee Benefit Plans. (a) Section 3.10 of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, without limitation,
multiemployer plans within the meaning of ERISA section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated by
this Agreement or otherwise), whether formal or informal, under which any
employee or former employee of the Company or any of its subsidiaries has any
present or future right to benefits or under which the Company or any of its
subsidiaries has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Company Plans".
(b) With respect to each Company Plan, the Company has delivered to
Purchaser a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description; and
(iv) for the three most recent years (A) the Form 5500 and attached schedules,
(B) audited financial statements, (C) actuarial valuation reports and
(D) attorney's response to an auditor's request for information. No
communication by the Company or any of its subsidiaries to any of their
employees requires the payment of any benefits other than those required under
the terms of the Company Plans.
(c) Except as set forth in the Current SEC Reports and except as would
not, individually or in the aggregate, have a Material Adverse Effect or prevent
or materially delay the consummation of any of the Transactions:
(1) (i) Each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and
other applicable laws, rules and regulations; (ii) each Company Plan which
is intended to be qualified within the meaning of
16
Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred,
whether by action or failure to act, that would cause the loss of such
qualification; (iii) no event has occurred and no condition exists that
would subject the Company or any of its subsidiaries, either directly or by
reason of their affiliation with any member of their "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)),
to any tax, fine, lien or penalty imposed by ERISA, the Code or other
applicable laws, rules and regulations; (iv) for each Company Plan with
respect to which a Form 5500 has been filed, no material change has
occurred with respect to the matters covered by the most recent Form since
the date thereof; and (v) no "reportable event" (as such term is defined in
ERISA section 4043), "prohibited transaction" (as such term is defined in
ERISA section 406 and Code section 4975) or "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code section
412 (whether or not waived)) has occurred with respect to any Company Plan;
(2) With respect to the only Company Plan that is not a multiemployer
plan within the meaning of section 4001(a)(3) of ERISA but is subject to
Title IV of ERISA, as of the Effective Time, the assets of such Company
Plan (as valued as of October 31, 1997 by the Company Plan's actuary) are
at least equal in value to the present value of the accrued benefits
(vested and unvested) of the participants in such Company Plan on a
termination and projected benefit obligation basis, based on the actuarial
methods and assumptions indicated in the most recent actuarial valuation
report, dated January 1, 1996, but using current interest rates;
(3) Since 1990 there has been no multiemployer pension plan (within
the meaning of ERISA section 4001(a)(3)) to which the Company, any of its
subsidiaries or any member of their Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation to
contribute); and
(4) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or threatened, and (ii) no facts or circumstances exist that would give
rise to any such actions, suits or claims.
(d) Effective as of the date hereof, the Company and its subsidiaries
have terminated any obligations under any Company Plan or other arrangement to
make loans to directors, officers or employees in respect of the exercise of any
Options or the purchase of any Shares.
17
(e) No action has been taken by the Board of Directors of the Company
which would entitle any director, in his or her capacity as such, upon
retirement from the Board of Directors to any payments, repurchase of Shares or
other benefits.
SECTION 3.11 Tax Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Material Adverse Effect: (i)
The Company and each of its subsidiaries, and any consolidated, combined,
unitary or aggregate group for tax purposes of which the Company or any of its
subsidiaries is or has been a member, has timely filed all Tax Returns required
to be filed by it in the manner provided by law, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial statements
according to generally accepted accounting principles for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns; (ii) no
material claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries except for statutory
liens for Taxes not yet due; no audit of any Tax Return of the Company or any of
its subsidiaries is being conducted by a Tax authority; and no extension of the
statute of limitations on the assessment of any Taxes has been granted by the
Company or any of its subsidiaries and is currently in effect; and (iii) neither
the Company nor any of its subsidiaries is a party to or is otherwise bound by
(or has any assets bound by) any Tax indemnity, Tax sharing or Tax allocation
agreement or arrangement except for the tax sharing arrangement with Calloway's
Nursery, Inc. (a true and complete copy of which has been provided to
Purchaser). Neither the Company nor any of its subsidiaries has undergone an
"ownership change" within the meaning of Section 382 of the Code. As used
herein, "Taxes" shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes.
SECTION 3.12 Offer Documents; Proxy Statement. (a) None of (i) the
Schedule 14D-9, the Debt Offer Documents (as defined in Section 6.9(b)) or the
information supplied by the Company for inclusion in the Offer Documents
(including any information incorporated by reference in the Schedule 14D-9, Debt
Offer Documents or Offer Documents), shall, at the respective times such
Schedule 14D-9, the Debt Offer Documents, the Offer
18
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to shareholders, as the case may be, 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
the light of the circumstances under which they were made, not misleading and
(ii) the proxy statement or the information statement (as selected by Purchaser)
to be sent to the shareholders of the Company in connection with the
Shareholders Meeting (as defined in Section 6.1) (such proxy statement or
information statement, as amended or supplemented, is herein referred to as the
"Proxy Statement"), including any information incorporated by reference therein,
shall, at the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Shareholders
Meeting or at the Effective Time, 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 the light of the
circumstances under which they are made, not false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Purchaser or any of its
representatives which is contained in the Schedule 14D-9, the Debt Offer
Documents or the Proxy Statement.
(b) The Schedule 14D-9, the Debt Offer Documents and the Proxy Statement
will comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 3.13 Environmental Matters. (a) Except (i) as disclosed in
the Current SEC Reports or (ii) to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, would not have a Material Adverse Effect:
(i) (A) The Company and its subsidiaries are and within the
period of all applicable statutes of limitation have been in compliance
with all applicable Environmental Laws; and (B) the Company and its
subsidiaries hold all Environmental Permits (each of which is in full force
and effect) required for any of their current operations and for any
property owned, leased, or otherwise operated by any of them, and are and
within the period of all applicable statutes of limitation have been in
compliance with all such Environmental Permits.
(ii) Neither the Company nor any of its subsidiaries has received
any Environmental Claim (as hereinafter defined) against any of them, and
the Company has no knowledge of any such Environmental Claim being
threatened.
(iii) The Company has no knowledge of the presence or suspected
presence of any Materials of Environmental Concern
19
at any location that could be reasonably likely to form the basis of any
Environment Claim against the Company or any of its subsidiaries or any
entity for which any of them may be responsible.
(b) To the knowledge of the Company, the Company has provided to
Purchaser all Environmental Reports, and has disclosed to Purchaser all costs
the Company and any of its subsidiaries expect to incur for ongoing, and
reasonably anticipated, investigation and remediation of Materials of
Environmental Concern (including, without limitation, any payments to resolve
any threatened or asserted Environmental Claim for investigation and remediation
costs), except any such Environmental Reports which do not disclose or indicate
circumstances which, and except any such costs which, would not, individually or
in the aggregate, have a Material Adverse Effect.
(c) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter, or
notice (written or oral) asserting liability or potential liability
(including without limitation liability or potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Materials of Environmental Concern at any location, (ii) circumstances
forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (iii) otherwise relating to
obligations or liabilities under any Environmental Law.
"Environmental Law" means any law, rule, order, regulation, statute,
ordinance, guideline, code, decree, or other legally enforceable
requirement (including, without limitation, common law) of any foreign
government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the
environment.
"Environmental Permit" means any permit, license, registration,
approval, exemption, or other filing with or authorization by any
Governmental Authority under any Environmental Law.
"Environmental Report" means any report, study, assessment, audit, or
other similar document that addresses any issue of actual or potential
noncompliance with, or actual or potential liability under or cost arising
out of,
20
any Environmental Law that may in any way affect the Company or any of its
subsidiaries.
"Materials of Environmental Concern" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude oil
or any fraction thereof), petroleum products, asbestos, pollutants,
contaminants, radioactivity, and all other materials and forces, whether or
not defined as such, that are regulated pursuant to or that could result in
liability under any Environmental Law.
(d) For purposes of this Section 3.13, the term "subsidiaries" of the
Company shall include any former subsidiaries of the Company to the extent that
the failure of any representation and warranty contained in this Section (as so
interpreted) could give rise to any liability or obligation of, its present
subsidiaries.
SECTION 3.14 Material Contracts. Except as would not, individually
or in the aggregate, have a Material Adverse Effect, (i) the Company and its
subsidiaries are not in default under any agreement, contract, arrangement or
other understanding ("Contract") to which the Company or any of its Significant
Subsidiaries is a party or by which any of their properties are bound, and (ii)
to the Company's knowledge, the other parties thereto are not in default
thereunder and such Contracts are valid and binding obligations of the other
parties thereto in accordance with their terms.
SECTION 3.15 Permits. Each of the Company and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
(collectively, the "Company Permits") that are necessary to own, lease and
operate the properties of the Company and its subsidiaries and to carry on their
business as owned, leased, operated or carried on as of the date of this
Agreement, except, in each case, where the failure to possess such Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect. The Company Permits are in full force and effect and there is no
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits,
except, in each case, where the failure to possess, or the suspension or
cancellation of, such Company Permits, individually or in the aggregate, would
not have a Material Adverse Effect.
SECTION 3.16 Properties. (a) The Company or its Significant
Subsidiaries has good, valid, and, in the case of Owned Properties (as defined
below), marketable fee title to: (i) all of the real property and interests in
real property owned by the Company or its Significant Subsidiaries indicated in
the most recent financial statements included in the SEC Reports, except
21
for properties sold or otherwise disposed of in the ordinary course of business
(the "Owned Properties"), and (ii) leasehold estates in all leased real
properties indicated in the most recent financial statements included in the SEC
Reports, except leasehold interests terminated in the ordinary course of
business (the "Leased Properties"; the Owned Properties and Leased Properties
being sometimes referred to herein as the "Real Properties"), in each case free
and clear of all mortgages, liens, security interests, easements, covenants,
rights-of-way and other similar restrictions and encumbrances ("Encumbrances"),
except for (x) Encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect, and (y) those Encumbrances set forth in Section
3.16(a) of the Company Disclosure Schedule.
(b) Except to the extent that the inaccuracy of any of the following,
(or the circumstances giving rise to such inaccuracy), individually or in the
aggregate, would not have a Material Adverse Effect:(i) each of the agreements
by which the Company has obtained a leasehold interest in each Leased Property
(individually, a "Lease" and collectively, the "Leases") is in full force and
effect in accordance with its respective terms and the Company or its subsidiary
is the holder of the lessee's or tenant's interest thereunder; to the knowledge
of the Company, there exists no default under any Lease and no circumstance
exists which, with the giving of notice, the passage of time or both, could
result in such a default; the Company and its subsidiaries have complied with
and timely performed all conditions, covenants, undertakings and obligations on
their parts to be complied with or performed under each of the Leases; the
Company and its subsidiaries have paid all rents and other charges to the extent
due and payable under the Leases;(ii) there are no leases, subleases, licenses,
concessions or any other contracts or agreements granting to any person or
entity other than the Company or any of its subsidiaries any right to the
possession, use, occupancy or enjoyment of any Real Property or any portion
thereof;(iii) the current operation and use of the Real Properties does not
violate any statute, law, regulation, rule, ordinance, permit, requirement,
order or decree now in effect; the use being made of each Real Property at
present is in conformity with the certificate of occupancy issued for such Real
Property;(iv) there are no existing, or to the knowledge of the Company,
threatened, condemnation or eminent domain proceedings (or proceedings in lieu
thereof) affecting the Real Properties or any portion thereof;(v) no default or
breach exists under any of the covenants, conditions, restrictions,
rights-of-way, or easements, if any, affecting all or any portion of a Real
Property, which are to be performed or complied with by the Company or any of
its subsidiaries; and (vi) all the buildings, structures, equipment and other
tangible assets of the Company (whether owned or leased) are in normal operating
condition (normal wear and tear excepted) and are fit for use in the ordinary
course of business.
22
(c) Neither the Company nor any of its subsidiaries is obligated
under or bound by any option, right of first refusal, purchase contract, or
other contractual right to sell or dispose of any Owned Property or any portions
thereof or interests therein which property, portions and interests,
individually or in the aggregate, are material to the Company and its
subsidiaries.
SECTION 3.17 Intellectual Property. Except to the extent the failure
of any of the following would not, individually or in the aggregate, have a
Material Adverse Effect: (i) the Company and each of its subsidiaries owns
and/or is licensed to use (in each case, clear of any liens, claims or similar
encumbrances) all patents, trademarks, trade names, copyrights, technology,
know-how and processes used in or necessary for the conduct of its business as
currently conducted; (ii) the use of such patents, trademarks, trade names,
service marks, copyrights, technology, know-how and processes by the Company and
its subsidiaries and their agents does not infringe on the rights of any person;
(iii) to the knowledge of the Company, no person is infringing on any right of
the Company or any of its subsidiaries with respect to any such patents,
trademarks, service marks, trade names, copyrights, technology, know-how or
processes; (iv) the Company and its subsidiaries are not in breach or violation
of any agreement relating to the use of any of the intellectual property
identified in this provision, and they have not received any notification,
written or oral, from any third party that there is any such violation, breach
or inability to perform under any such agreement; and (v) there are no
agreements, written or oral, which in any material respect limit or otherwise
relate to any rights by the Company or its subsidiaries to use any of their
intellectual property.
SECTION 3.18 Management Information Systems. The implementation of
the Company's planned management information systems is proceeding on schedule
and, to the Company's knowledge, there are no circumstances currently existing
or reasonably anticipated to delay such implementation or increase the cost
thereof, except to the extent the failure of any of the foregoing would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.19 Affiliate Transactions. Except to the extent that the
inaccuracy of any of the following, (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have a Material Adverse
Effect, Section 3.19 of the Company Disclosure Schedule sets forth a true and
complete list (including names of parties, amounts involved and brief
descriptions) of all transactions, agreements, arrangements or understandings
(or series thereof), written or oral, between the Company or any of its
subsidiaries and any of its or their directors or officers (including, in the
case of natural persons, any of such persons' relatives or affiliates, but
excluding any dealings exclusively among the Company and its subsidiaries)
23
currently existing or effected or entered into since January 30, 1995 involving
amounts in excess of $25,000, other than any such transactions, agreements,
arrangements or understandings otherwise disclosed with at least the same level
of detail elsewhere in the Company Disclosure Schedule.
SECTION 3.20 Approvals; Vote Required. The Board of Directors of the
Company has approved this Agreement, the Offer, the Merger and the other
Transactions, and such approval is sufficient to render inapplicable hereto and
thereto the provisions of Section 912 of the NYBCL. To the best knowledge of
the Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, the Offer, this Agreement or any of
the other Transactions. The Board of Directors of the Company has also approved
this Agreement and the Support Agreement as a "memorandum of understanding" with
Purchaser pursuant to Section (D)(i) of Article XI of the Company's Certificate
of Incorporation with respect to the transactions contemplated hereby and by the
Support Agreement, and such action is sufficient to render Section (A) of
Article XI of the Certificate of Incorporation inapplicable hereto and to the
Support Agreement, the Offer, the Merger and the other Transactions. As a
result of the foregoing actions, the only action required to authorize this
Agreement and the Merger is the affirmative vote of two-thirds of the
outstanding Shares, and no further action is required to authorize the other
Transactions.
SECTION 3.21 Brokers. No broker, finder or investment banker (other
than the Financial Adviser) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company. The Company has heretofore furnished to
Purchaser a complete and correct copy of all agreements between the Company and
the Financial Adviser pursuant to which such firm would be entitled to any
payment relating to the Transactions.
SECTION 3.22 Rights Agreement. The Company and the Board of
Directors of the Company have taken all necessary action so that none of the
execution of this Agreement or the Support Agreement, the making of the Offer,
the acquisition of Shares pursuant to the Offer and the Equity Contribution, or
the consummation of the Merger or the other Transactions will (i) cause any
Rights issued pursuant to the Rights Agreement to become exercisable, (ii) cause
Purchaser or any of its Affiliates (as defined in the Rights Agreement) or
Associates (as defined in the Rights Agreement) to be an Acquiring Person (as
defined in the Rights Agreement) or (iii) give rise to a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement), and
will take any further action as may be necessary in furtherance of the
foregoing. The copy of the Rights Agreement included in the Current SEC Reports
is complete and correct and includes all amendments and supplements to and
including the date of this Agreement. The Company has delivered
24
to Purchaser a true and complete copy of all resolutions of the Company's Board
of Directors made with respect to the actions referred to in this Section 3.22,
which resolutions are in full force and effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company that:
SECTION 4.1 Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals could not, individually or in
the aggregate, reasonably be expected to prevent or materially delay the
consummation of the Offer or the Merger.
SECTION 4.2 Certificate of Incorporation and By-Laws. Purchaser has
heretofore furnished to the Company complete and correct copies of the
Certificate of Incorporation and the By-Laws of Purchaser as currently in
effect. Such Certificate of Incorporation and By-Laws are in full force and
effect and no other organizational documents are applicable to or binding upon
Purchaser. Purchaser is not in violation of any provisions of its Certificate
of Incorporation or By-Laws.
SECTION 4.3 Authority Relative to This Agreement. Purchaser has all
necessary corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the Transactions have been duly authorized by all necessary
corporate action on the part of Purchaser other than filing and recordation of
appropriate merger documents as required by the NYBCL. This Agreement has been
duly executed and delivered by Purchaser and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each such corporation enforceable against such corporation in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of bankruptcy.
SECTION 4.4 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Purchaser do not and
will not: (i) conflict with or
25
violate the certificate of incorporation or by-laws of Purchaser; (ii) assuming
that all consents, approvals and authorizations contemplated by clauses (i),
(ii) and (iii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
statute, rule, regulation, order, judgment or decree applicable to Purchaser or
by which it or its properties are bound or affected; or (iii) conflict with or
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets of Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Purchaser is a party or by
which Purchaser or any of its properties are bound or affected, except, in the
case of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent or materially delay the consummation of the
Offer or the Merger.
(b) The execution, delivery and performance of this Agreement, and the
consummation of the Offer, by Purchaser do not and will not require any consent,
approval, authorization or permit of, action by, filing with or notification to,
any governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act, and the rules and
regulations promulgated thereunder, the HSR Act, state securities, takeover and
"blue sky" laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the NYBCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the consummation of the Offer or the
Merger.
SECTION 4.5 Offer Documents; Proxy Statement. None of (i) the Offer
Documents, as filed pursuant to Section 1.1, or the information supplied by
Purchaser for inclusion in the Debt Offer Documents or the Schedule 14D-9,
shall, at the time such Offer Documents, Debt Offer Documents, Schedule 14D-9 or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to shareholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) the information supplied by Purchaser for inclusion in
the Proxy Statement shall, on the date the Proxy Statement is first mailed to
shareholders, at the time of the Shareholders Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
26
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
false or misleading. Notwithstanding the foregoing, Purchaser makes no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in or incorporated by
reference in any of the foregoing documents. The Offer Documents will comply in
all material respects as to form with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
SECTION 4.6 Debt Financing. Assuming the Financing is obtained, the
Company or the Surviving Corporation, as the case may be, will have sufficient
funds to (i) consummate the transactions contemplated by the Debt Offer and (ii)
make and satisfy the obligations under the change in control offer under the
Convertible Notes Indenture.
SECTION 4.7 Equity Financing. Purchaser will have sufficient funds
to (i) accept for payment and pay for all Shares tendered pursuant to the Offer,
(ii) purchase the Shares in the Equity Contribution (iii) permit the Surviving
Corporation to pay the aggregate Merger Consideration in the Merger and (iv)
purchase Shares in the event it exercises its rights pursuant to the
anti-dilution provisions set forth in Section 6.14, in each case upon the
consummation thereof and subject to terms and conditions specified herein
including, in the case of the Offer, the Offer Conditions.
SECTION 4.8 Brokers. No unaffiliated broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date hereof to
such time as Purchaser's designees shall constitute a majority of the Company's
Board of Directors, except as specifically contemplated hereby, unless Purchaser
shall otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable laws; and
the Company and its subsidiaries shall each use its commercially reasonable
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries
27
with customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and
not limitation, except as specifically contemplated hereby, neither the Company
nor any of its Significant Subsidiaries (or, in the case of clause (j) below,
its subsidiaries) shall, during such period, directly or indirectly do, or
commit to do, any of the following without the prior written consent of
Purchaser:
(a) Amend or otherwise change its certificate of incorporation or
by-laws or equivalent organizational documents or, except as expressly
contemplated by this Agreement, amend the Rights Agreement;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, (A)
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including but not limited
to stock appreciation rights or phantom stock), of the Company or any of
its subsidiaries (except for (i) the issuance of up to 1,322,688 shares of
Company Common Stock issuable in accordance with the terms of Options
outstanding as of November 2, 1997, and (ii) the issuance of up to
7,616,003 shares of Company Common Stock issuable in accordance with the
terms of Convertible Notes outstanding as of November 2, 1997) or (B) any
assets of the Company or any of its subsidiaries, except for (x) assets
(excluding real property) sold, leased, pledged or otherwise encumbered in
the ordinary course of business and in a manner consistent with past
practice and (y) sale/leaseback transactions on commercially reasonably
terms and in an aggregate amount not in excess of $15 million, so long as
such transactions are not consummated prior to January 15, 1998 and so long
as such transactions can be abandoned by the Company at any time prior to
consummation without the payment or incurrence of material cost, expense or
fees;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) other than with respect to borrowings necessary to
effect the Debt Offer, incur any indebtedness for borrowed money (other
than (x) up to an aggregate principal amount of $10
28
million at any one time outstanding and incurred in the ordinary course of
business or (y) pursuant to the Financing), or issue any debt securities,
or enter into any sale/leaseback transaction other than as described in
clause (b) above, or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments in,
any other person; (iii) enter into any contract or agreement other than in
the ordinary course of business consistent with past practice; (iv)
authorize any single capital expenditure (or series of capital
expenditures) which is in excess of $50,000 or capital expenditures which
are, in the aggregate, in excess of $250,000 for the Company and its
subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(e); provided that the Company and its
subsidiaries may obtain commitments for up to $25 million of financing in
replacement for any existing commitments so long as no material fees are
incurred in respect thereof on or prior to the initial expiration date of
the Offer and so long as any such commitments may be terminated by the
Company at any time without the payment or incurrence of material cost,
expense or fees;
(f) Except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement, increase the compensation or fringe benefits of any of its
directors, officers or employees, other than increases in salary or wages
of employees of the Company or its subsidiaries who are not officers of the
Company in the ordinary course of business in accordance with past
practice, or grant any severance or termination pay not currently required
to be paid under existing severance plans or enter into any employment,
consulting or severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its
subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining agreement or Company Plan, including, but not limited
to, bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees, or make any loans to
any employees, officers or directors (other than advances in respect of
reimbursable expenses) or cancel or forgive any such existing loans;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
29
(h) Make or change any tax election, file any amended Tax Return, or
settle or compromise any material federal, state, local or foreign Tax
liability;
(i) Settle or compromise any pending or threatened suit, action or
claim for an amount in excess of $25,000 or which relates to the
Transactions;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries other than the
Merger and other than with respect to an inactive subsidiary so long as
neither the Company nor its Significant Subsidiaries incurs or assumes any
liabilities or obligations in connection therewith or as a result thereof;
(k) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities; or
(l) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(k)
or any action which would make any of the representations or warranties of
the Company contained in this Agreement untrue and incorrect as of the date
when made if such action had then been taken, or would result in any of the
Offer Conditions not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Shareholders Meeting. (a) The Company, acting through
its Board of Directors, shall, if required to approve the Merger in accordance
with applicable law and the Company's Certificate of Incorporation and By-Laws,
(i) duly call, give notice of, convene and hold a meeting of its shareholders as
soon as practicable following consummation of the Offer for the purpose of
considering and taking action on this Agreement, the Merger and the other
Transactions (the "Shareholders Meeting"), (ii) include in the Proxy Statement
the unanimous recommendation of the Board of Directors that the shareholders of
the Company vote in favor of the approval of this Agreement, the Merger and the
other Transactions, which recommendation may not be withdrawn, amended or
modified in a manner adverse to Purchaser (nor may the Board of Directors of the
Company announce publicly its intention to do so), and the written opinion of
the Financial Adviser that the consideration to be received by the shareholders
of the Company pursuant to the Merger is fair to such shareholders and (iii) use
its reasonable
30
best efforts to obtain the necessary approval of this Agreement and the Merger
by its shareholders. At the Shareholders Meeting, Purchaser shall cause all
Shares then owned by it or for which it has the power to vote or direct the vote
to be voted in favor of approval of this Agreement and the Transactions.
(b) The Board of Directors of the Company shall set the record date
for the Shareholders Meeting to occur immediately following the consummation of
the Offer and the Equity Contribution so that Purchaser is the holder of record
for purposes of such Shareholders Meeting of the Shares acquired in the Offer
and the Equity Contribution, which Shares shall constitute in excess of
two-thirds of the issued and outstanding Shares of record at such record date.
In the event that it becomes necessary to delay the date of the Shareholders
Meeting, the Company shall use its reasonable best efforts to ensure that any
such delay does not frustrate the purpose of the immediately preceding sentence,
including by issuing Shares in accordance with Section 6.14 immediately prior to
setting any new record date for the Shareholders Meeting.
(c) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Purchaser, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
shareholders, in accordance with Section 905 of the NYBCL.
SECTION 6.2 Proxy Statement. (a) As soon as practicable following
the date hereof, the Company shall prepare and file with the SEC under the
Exchange Act and the rules and regulations promulgated thereunder, and shall use
its reasonable best efforts to have cleared by the SEC as promptly as
practicable after such filing, the Proxy Statement with respect to the
Shareholders Meeting. Purchaser and the Company will cooperate with each other
in the preparation of the Proxy Statement; without limiting the generality of
the foregoing, Purchaser will furnish in writing to the Company the information
relating to it and its affiliates required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company agrees to use its reasonable best efforts, after consultation with
Purchaser, to respond promptly to any comments made by the SEC with respect to
the Proxy Statement and any preliminary version thereof filed by it, and to
cause such Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable. The Company and Purchaser each agrees to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading.
(b) The Company will as promptly as practicable notify Purchaser of
(i) the receipt of any comments from the SEC with
31
respect to the Proxy Statement and (ii) any request by the SEC for any
additional information. All filings by the Company with the SEC, including the
Proxy Statement and any amendments thereto, and all mailings to the Company's
shareholders in connection with the Merger, including the Proxy Statement, shall
be subject to the prior review, comment and approval of Purchaser (such approval
not to be unreasonably withheld or delayed).
SECTION 6.3 Company Board Representation; Section 14(f). (a)
Immediately upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser (including Shares as to which any such
person has the right to vote or direct the voting) bears to the total number of
Shares then outstanding, and the Company shall, at such time, take all action
necessary to cause Purchaser's designees to be so elected, including by securing
the resignations of incumbent directors. Purchaser shall determine for the
approval of the Board of Directors the classes into which such directors are
placed, so long as such placement does not violate or conflict with the
Company's Certificate of Incorporation or By-laws or the NYBCL and the Company
shall cause Purchaser's designees to be so placed. The Company will use its
reasonable best efforts to cause persons designated by Purchaser to constitute
the same percentage as is on the board of (i) each committee of the Board of
Directors, (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board, in each case only to the extent
permitted by law and the rules of the NYSE to the extent applicable.
(b) The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 6.3 and shall include in the Schedule 14D-9 or a separate
Rule 14f-1 information statement provided to shareholders such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 6.3.
Purchaser will supply to the Company and be solely responsible for any
information with respect to it and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Purchaser's designees
pursuant to this Section 6.3 and prior to the Effective Time, so long as at
least one director of the
32
Company then in office is neither designated by Purchaser nor an employee of the
Company (a "Disinterested Director"), any amendment of this Agreement or, to the
extent material, the Certificate of Incorporation or By-Laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of
Purchaser or waiver of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors hereunder, will require the
concurrence of a majority of the Disinterested Directors or, if there is only
one Disinterested Director, of such Disinterested Director. The Company shall
use its best efforts to insure that at least one Disinterested Director remains
on the Board of Directors prior to the Effective Time.
SECTION 6.4 Access to Information; Confidentiality. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Purchaser and its
affiliates, and financing sources who shall agree to be bound by the provisions
of this Section 6.4 as though a party hereto, access at all reasonable times (i)
to its officers, employees, agents, properties, offices, stores and other
facilities and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as they may from time to
time request, (ii) the Company's and its subsidiaries' vendors and (iii) the
Company's and its subsidiaries' management information systems and other
consultants.
(b) The documents and information provided pursuant to this Section
6.4 shall be subject to the provisions of the letter agreement dated March 25,
1997 between the Company and The Cypress Group L.L.C. (the "Confidentiality
Agreement").
(c) No investigation pursuant to this Section 6.4 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.5 No Solicitation of Transactions. The Company agrees that
it shall not, and shall cause its subsidiaries and its and its subsidiaries'
officers, directors, employees, representatives, agents, advisors and affiliates
not to, solicit, initiate or encourage inquiries or proposals with respect to,
or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, or enter into an agreement with,
any person relating to any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries or any proposal or offer to acquire in any manner a greater than
20% equity interest in, or more than 20% of the assets of, the Company or any of
its subsidiaries, other than the
33
Transactions (any of the foregoing, an "Acquisition Proposal"); provided, that
the Company may (i) at any time prior to the consummation of the Offer, if the
Company is not otherwise in violation of this Section 6.5, furnish information
to, and negotiate or otherwise engage in discussions with, any party who
delivers a written proposal for an Acquisition Proposal if and so long as the
Board of Directors of the Company determines in good faith by a majority vote,
based upon advice of its outside legal counsel, that failing to take such action
would reasonably be expected to constitute a breach of the fiduciary duties of
the Board; and (ii) take a position with respect to the Acquisition Proposal, or
amend or withdraw such position, in compliance with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to the Acquisition Proposal. The
Company also agrees immediately to cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Purchaser and its affiliates, with respect
to any of the foregoing. The Company shall promptly (and in any event within 24
hours) advise Purchaser following the receipt by it of any Acquisition Proposal
or any inquiry or request relating thereto and the substance thereof (including
the identity of the person making such Acquisition Proposal and a copy of any
written proposal), and, if consistent with its fiduciary duties, advise
Purchaser of any developments with respect to such Acquisition Proposal, inquiry
or request promptly upon the occurrence thereof, including the Company's
entering into discussions or negotiations with respect thereto. The Company
agrees not to release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party.
Without limiting the generality of the foregoing, it is understood that any
violation of the restrictions set forth in this paragraph by any officer,
director, employee, representative, agent, advisor or affiliate of the Company
or any subsidiary shall be deemed to be a breach of this paragraph by the
Company.
SECTION 6.6 Benefits Matters. (a) On and after the Effective Time,
the Surviving Corporation shall promptly pay or provide when due all
compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees) and
directors (and former directors) of the Company and previously disclosed to
Purchaser. Purchaser and the Company agree that the Surviving Corporation shall
pay promptly or provide when due all compensation and benefits accrued or
incurred prior to the Effective Time and required to be paid pursuant to the
terms of any individual agreement with any employee, former employee, director
or former director in effect and disclosed to Purchaser as of the date hereof,
or pursuant to any applicable collective bargaining agreement.
34
(b) Notwithstanding the remaining provisions of this Section 6.6, the
Company and its subsidiaries, and the Surviving Corporation, its subsidiaries
and its successors and assigns, will honor all director retirement benefits, and
all employment or severance agreements with any Employee (as defined below) or
former employee of the Company or any of its subsidiaries, in existence on the
date hereof which are listed on Section 3.10 of the Company Disclosure Schedule
and a full and complete copy (or, in the case of oral agreements, written
summary) of which has been provided to Purchaser prior to the date hereof.
"Employee" shall mean any employee of the Company or its subsidiaries
immediately prior to the purchase of Shares pursuant to the Offer.
(c) Notwithstanding the remaining provisions of this Section 6.6, from
the Effective Time until the first anniversary of the Effective Time, the
Surviving Corporation, its subsidiaries, successors and assigns shall provide
Employees and former employees of the Company and its subsidiaries (and
directors and former directors of the Company) with benefit and compensation
plans, programs, policies or arrangements (including, without limitation, annual
and long-term incentive plans, retirement plans, life insurance, medical, dental
and other similar employee welfare benefit plans) no less favorable (subject to
the following proviso) in the aggregate as to each Employee, former employee,
director or former director than those currently provided to similarly situated
persons by the Company and its subsidiaries pursuant to plans, programs,
policies and arrangements listed on Section 3.10 of the Company Disclosure
Schedule and a full and complete copy (or, in the case or oral agreements,
written summary) of which has been provided to Purchaser prior to the date
hereof; provided, however, that this sentence shall not require the Surviving
Corporation or its subsidiaries, successors and assigns to provide any plan,
program or arrangement providing for the issuance or grant of any interest or
right in respect of the capital stock of the Surviving Corporation or any of its
subsidiaries. Purchaser acknowledges that the purchase of Shares pursuant to
the Offer will constitute a change in control of the Company (to the extent such
concept is applicable) for the purposes of all agreements, contracts, plans,
programs, policies or arrangements of the Company listed in Section 3.10 of the
Company Disclosure Schedule.
(d) Purchaser acknowledges the obligations of the Company and the
Surviving Corporation (and their subsidiaries, successors and assigns) set forth
in this Section 6.6. Nothing in this Section 6.6 shall require the continued
employment of any person or prevent the Company and/or the Surviving Corporation
(or its subsidiaries) from taking any action or refraining from taking any
action which the Company (or its subsidiaries), prior to the Effective Time,
could have taken or refrained from taking.
35
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation and the By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the By-Laws of the Company on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who prior to the
purchase of Shares in the Offer were directors, officers or employees of the
Company unless such modification is required by law.
(b) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect for six years from the Effective Time the current policies of
the directors' and officers' liability insurance maintained by the Company with
respect to matters occurring prior to the Effective Time (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
advantageous to the covered officers and directors) to the extent available;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 200% of current annual premiums
paid by the Company (which annual premium the Company represents and warrants to
be not more than $230,000) to maintain or procure insurance coverage pursuant
hereto, but in such case shall purchase as much coverage as possible for such
amount.
SECTION 6.8 Notification of Certain Matters. The Company shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.8 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 6.9 Further Action; Reasonable Best Efforts. (a) Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or
advisable, including under applicable laws and regulations, to consummate and
make effective the Transactions, including but not limited to (i) cooperation in
the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy
Statement or any required filings under the HSR Act and any amendments to any
thereof, (ii) using its reasonable best efforts to make and cooperate in making
all required regulatory filings and applications and to obtain and
36
cooperate in obtaining all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and third
parties as are necessary or advisable for the consummation of the Transactions
and to fulfill the conditions to the Offer, the Merger, the Debt Offer, and the
Financing and (iii) using its reasonable best efforts to oppose, defend against,
remove and appeal any injunction, order, decree or ruling restraining, enjoining
or otherwise prohibiting the Offer, the Merger or any of the other Transactions.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such necessary action.
(b) The Company shall, as soon as reasonably practicable after the
date hereof (and in any event within five business days from the date of
public announcement of the execution hereof), commence a debt tender offer
for its 11-1/2% senior notes due 2002 (the "Senior Notes"), together with a
solicitation of consents to amend the Senior Notes Indenture, dated as of
February 28, 1992, between the Company and Bankers Trust Company, as trustee
(the "Senior Notes Indenture"; such amendment, the "Senior Notes Indenture
Amendment"; and such debt tender offer and consent solicitation,
collectively, the "Debt Offer"). The Debt Offer shall be on the terms and
conditions specified in Annex B hereto or as otherwise agreed by the Company
and Purchaser. Purchaser shall be entitled to be involved in and shall
cooperate with the Company in the Company's preparation of the documents to
be sent to the holders of the Senior Notes in connection with the Debt Offer
(together with any supplements or amendments thereto, the "Debt Offer
Documents"). The Company shall waive any of the conditions to the Debt Offer
and make any other changes in the terms and conditions of the Debt Offer as
may be reasonably requested by Purchaser, and the Company shall not, without
Purchaser's prior written consent, waive any condition to the Debt Offer or
make any changes to the terms and conditions of the Debt Offer. In
determining whether or not to give such consent, Purchaser agrees to act in a
commercially reasonable manner. Purchaser and the Company each agrees
promptly to correct any information provided by it for use in the Debt Offer
Documents that shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to cause the Debt
Offer Documents as so corrected to be disseminated to holders of Senior
Notes. Provided the Company is able to obtain the Financing to consummate
the Debt Offer, and the other conditions of the Debt Offer are met or, at the
sole discretion of Purchaser, waived, the Company shall accept for payment
and pay for the Senior Notes validly tendered and not withdrawn pursuant to
the Debt Offer simultaneously with the consummation of the Offer.
(c) The Company agrees to provide, and will cause its subsidiaries and
its and their respective officers, employees,
37
representatives and agents to provide, cooperation in connection with the
arrangement and closing of the financing described in the commitment letter
dated November 21, 1997 from The Chase Manhattan Bank, Chase Securities Inc. and
Goldman Sachs Credit Partners L.P. to, and accepted and agreed by, The Cypress
Group L.L.C., including the attached term sheet (a true and complete copy of
which has been provided to the Company) or any other financing on terms and
conditions not significantly less favorable to or otherwise reasonably
acceptable to the Company and arranged or approved by Purchaser or its
affiliates (the "Financing"), to be consummated contemporaneous with or at or
after consummation of the Offer or the Effective Time in respect of the
Transactions, including without limitation, the negotiation and execution of
loan documents, the preparation of disclosure schedules, the preparation of
offering memoranda, private placement memoranda or other similar documents,
participation in meetings, due diligence sessions and road shows (consistent
with such individuals' responsibilities for the ongoing operations of the
Company), the execution and delivery, with effectiveness no earlier than
consummation of the Offer, of any pledge and security documents, other
definitive financing documents, or other requested certificates or documents as
reasonably may be requested by Purchaser. In addition, in connection with the
obtaining of any such financing, the Company agrees to request opinions of the
Company's legal counsel and "comfort letters" of the Company's accountants
reasonably required in connection with such financing and, at the request of
Purchaser, following the consummation of the Offer, to call for prepayment or
redemption, or to prepay, redeem and/or renegotiate, as the case may be, any
then existing indebtedness of the Company to the extent financing is available
therefor.
(d) If any "fair price" or "control share acquisition" or other state
takeover statute or regulation shall become or be deemed applicable to this
Agreement or any of the Transactions, Purchaser and the Company and their
respective Boards of Directors shall use their best efforts to grant such
approvals and take such actions as are necessary so that the Transactions may be
consummated as promptly as practicable on the terms and subject to the
conditions contemplated hereby and otherwise act to minimize the effects of any
such statute or regulation on the Transactions.
(e) Following the consummation of the Offer, the Company or the
Surviving Corporation, as the case may be, shall make the change in control
offer required under the Convertible Notes Indenture at the times and pursuant
to the procedures provided therein.
SECTION 6.10 Public Announcements. Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer or the Merger and shall not issue
any such press release or make any such public statement prior to such
38
consultation, except as may be required by law or any listing agreement with its
securities exchange.
SECTION 6.11 Cancellation of Common Stock Equivalents. The Company
shall use its commercially reasonable efforts to cause the cancellation of the
Common Stock Equivalents in consideration of a payment in cash at the Effective
Time to the holders thereof equal to the product of (x) the number of Shares
represented by the Common Stock Equivalents and (y) the excess of the Merger
Consideration over the exercise price per Common Stock Equivalent.
SECTION 6.12 Disposition of Litigation. The Company and Purchaser
each agrees that it will not settle any litigation against it or any of its
directors by any shareholder or creditor of the Company relating to any of the
Transactions without the prior written consent of the other.
SECTION 6.13 Equity Contribution. Simultaneously with the
consummation of the Offer, the Company will sell to Purchaser, and Purchaser
will purchase from the Company, an aggregate number of Shares specified by
Purchaser up to 5,586,314 Shares (including from treasury or through new
issuance) at a price per Share equal to the Merger Consideration (the "Equity
Contribution"), such Shares to be validly issued, fully paid and nonassessable,
approved for listing on the NYSE and issued and sold free of preemptive (or
similar) rights and any liens, claims or similar encumbrances.
SECTION 6.14. Anti-Dilution. The Company will as promptly as
practicable notify Purchaser if it issues any Shares, whether upon the exercise,
exchange or conversion of securities exercisable or exchangeable for or
convertible into Shares or otherwise. If the Offer is consummated, the Company
agrees that if, at the time of closing of the Offer and the Equity Contribution
or at any time thereafter until the later of (a) the Effective Time of the
Merger and (b) two years from the closing of the Offer and the Equity
Contribution, the number of Shares held by Purchaser shall not represent at
least two-thirds of the outstanding Shares as a result of the issuance of Shares
by the Company, whether upon the exercise, exchange or conversion of Options,
Convertible Notes or other securities exercisable or exchangeable for or
convertible into Shares or otherwise, the Company will sell (including from
treasury or through new issuance) to Purchaser, upon notice from Purchaser, at a
price per share equal to the Merger Consideration, in cash, such number of
validly issued, fully paid and non-assessable shares of Company Common Stock
(which shares shall be approved for listing on the NYSE if the Shares are then
so listed and issued and sold free of preemptive (or similar) rights and any
liens, claims or similar encumbrances) as may be necessary so that the
percentage of outstanding shares of Company Common Stock held by Purchaser
represents at least two-thirds of the outstanding Shares.
39
SECTION 6.15. Support Agreement. The Company agrees not to take any
action, and shall direct its directors, officers, employees, transfer agent,
other agents, and representatives not to take any action, which would permit or
facilitate a transfer of record ownership of Shares held by the Supporting
Shareholder in violation of the Support Agreement.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) If required by the NYBCL, this Agreement shall have been approved
by the affirmative vote of the shareholders of the Company owning of record
at least two-thirds of the outstanding Shares entitled to vote thereon.
(b) No temporary restraining order, preliminary or permanent
injunction or other order shall have been issued by any court or by any
governmental or regulatory agency, body or authority which prohibits the
consummation of the Merger or any of the other Transactions and which is in
effect at the Effective Time, provided, however, that, in the case of any
such decree, injunction or other order, each of the parties shall have used
reasonable best efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any decree, injunction or
other order that may be entered.
(c) No statute, rule, regulation, executive order, decree, or other
order of any kind (whether temporary, preliminary or permanent) shall have
been enacted, entered, promulgated or enforced by any United States or
state court or governmental authority which prohibits or enjoins the
consummation of the Merger.
(d) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
(e) Purchaser shall have accepted for payment and paid for the Shares
tendered pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time
40
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) By mutual written consent of Purchaser and the Company;
(b) By Purchaser or the Company if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States shall have issued a final injunction, order, decree or ruling or
taken any other final action restraining, enjoining or otherwise
prohibiting the Offer, the Merger or any of the other Transactions and such
order, decree, ruling or other action is or shall have become final and
nonappealable;
(c) By Purchaser or the Company if due to an occurrence or
circumstance which would result in a failure of the Offer Conditions to be
capable of satisfaction, (i) Purchaser shall have terminated the Offer,
(ii) the Offer shall have expired without Purchaser having accepted Shares
for payment pursuant thereto, or (iii) Purchaser shall not have accepted
Shares for payment pursuant to the Offer in accordance with the terms
thereof, unless such failure has been caused by or results from the breach
by the party seeking termination of any of its representations, covenants
or agreements contained in this Agreement;
(d) By the Company if Purchaser shall have failed to commence the
Offer within five business days of the public announcement thereof (within
the meaning of Rule 14d-2(b) of the Exchange Act) unless the failure to
commence the Offer shall be due to (A) the failure of the Company to
perform in any material respect any of its obligations under this Agreement
then required to be performed or (B) the failure of any condition to the
Offer set forth in Annex A hereto;
(e) By Purchaser or the Company prior to the purchase of the Shares
pursuant to the Offer (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach is not cured within five business days following written
notice given by the terminating party to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the date on which
the Offer expires; or
(f) By either Purchaser or the Company prior to the purchase of
Shares pursuant to the Offer if the Board of Directors of the Company shall
reasonably determine in good faith by a majority vote that an Acquisition
Proposal is more favorable to the Company's shareholders in the
41
aggregate and from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transactions proposed by Purchaser in response to such
Acquisition Proposal) and shall reasonably determine in good faith by a
majority vote, based upon advice of its outside legal counsel, that failing
to accept such Acquisition Proposal would reasonably be expected to
constitute a breach of the fiduciary duties of the Board and the Company
shall have delivered to Purchaser a written notice of the determination by
the Company's Board of Directors to terminate this Agreement pursuant to
this Section 8.1(f) setting forth a summary of all material terms of such
Acquisition Proposal; provided, however, that the Company may not terminate
this Agreement pursuant to this clause (f) unless (i) five business days
shall have elapsed after delivery to Purchaser of the notice referred to
above, (ii) at the end of such five business day period the Company's Board
of Directors shall continue to believe that such Acquisition Proposal is
more favorable to the Company's shareholders in the aggregate and from a
financial point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions of such
transactions proposed by Purchaser in response to such Acquisition
Proposal), and (iii) simultaneously with such termination the Company shall
enter into a definitive acquisition, merger or similar agreement to effect
such Acquisition Proposal and shall make payment of the full reimbursement
required by Section 8.3(a)(i) hereof; or
(g) By Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger or
shall have recommended another Acquisition Proposal, offer or transaction;
or (ii) the Minimum Condition shall not have been satisfied by the
expiration date of the Offer and on or prior to such date (A) any person
(other than Purchaser or its affiliates) shall have made a public
announcement or proposal, or a communication to the Company which becomes
publicly known, with respect to an Acquisition Proposal which is superior
from a financial point of view to the Offer and the Merger or (B) any
person (including the Company or any of its affiliates or subsidiaries),
other than Purchaser or any of its affiliates, shall have become the
beneficial owner of 20% or more of the Shares.
SECTION 8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 8.3 and Section 9.1; provided, however, that nothing
42
herein shall relieve any party from liability for any breach hereof.
SECTION 8.3 Fees and Expenses.
(a) If Purchaser terminates this Agreement pursuant to Section 8.1(f),
(g)(i) or (g)(ii)(B) hereof, or if the Company terminates this Agreement
pursuant to Section 8.1(f) hereof or in circumstances that would have permitted
Purchaser to terminate pursuant to Section 8.1(f), (g)(i) or (g)(ii)(B) hereof,
then:
(i) The Company shall reimburse Purchaser and its affiliates for all
reasonable out-of-pocket fees and expenses actually incurred by any of them
or on their behalf in connection with the Offer and the Merger and the
negotiation, preparation, diligence in respect of and consummation of all
Transactions (including, without limitation, fees and disbursements payable
to financing sources, investment bankers, counsel to Purchaser or its
affiliates or any of the foregoing, and accountants) up to an aggregate
maximum reimbursement of $750,000. The Company shall pay the amounts
requested within one business day of such requests (accompanied by a
submission of statements therefor); and
(ii) If (x) such termination is pursuant to Section 8.1(g)(ii)(B) or
in circumstances that would have permitted Purchaser to terminate pursuant
to Section 8.1(g)(ii)(B) or (y) within 12 months of such termination the
Company consummates a transaction contemplated by the definition of
"Acquisition Proposal", then in each case the Company shall pay to or as
directed by Purchaser, within one business day following such termination,
in the case of clause (x) above, or within one business day following
consummation of such transaction, in the case of clause (y) above, a fee,
in cash, of $3 million, provided, however, that the Company in no event
shall be obligated to pay more than one such fee with respect to all such
terminations and transactions.
(b) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the Transactions.
SECTION 8.4 Amendment. Subject to Section 6.3 and any applicable
law, this Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time prior to the
Effective Time. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in
43
the representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements set forth in this
Agreement shall terminate upon the purchase of Shares in the Offer or upon the
termination of this Agreement pursuant to Section 8.1, as the case may be,
except that the agreements set forth in Article II, Section 6.6, Section 6.7 and
Article IX shall survive the Effective Time and those set forth in Section
6.4(b), Section 8.3 and Article IX shall survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Purchaser:
The Cypress Group
65 East 55th Street, 19th Floor
New York, NY 10022
Attention: David P. Spalding
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Robert E. Spatt, Esq.
if to the Company:
General Host Corporation
c/o Frank's Nursery & Crafts, Inc.
6501 East Nevada
Detroit, MI 43234
Attention: J. Theodore Everingham, Esq.
44
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Joseph A. Coco, Esq.
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any Shares means a person who,
or any of whose affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act), (i) beneficially owns, directly or indirectly,
such Shares, (ii) has, directly or indirectly, (A) the right to acquire
such Shares (whether such right is exercisable immediately or subject only
to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote such
Shares pursuant to any agreement, arrangement or understanding or (iii) has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of such Shares with any other beneficial owner
of such Shares; "beneficially own" and "beneficial ownership" shall have
correlative meanings.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock,
power to elect a majority of directors or other managers, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended January 26, 1997 were prepared;
45
(e) "knowledge" of the Company shall include knowledge of the officers
of its Significant Subsidiaries.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which the Company, the Surviving
Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder
of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity; and
(h) "Significant Subsidiary" has the meaning set forth in Regulation
S-X promulgated by the SEC.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
Transactions are fulfilled to the fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Purchaser may assign all or any of
its rights and obligations hereunder to any affiliate of Purchaser.
SECTION 9.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except for Sections 6.6(a) and (b) and 6.7,
46
which are intended to be for the benefit of the persons referred to therein, and
may be enforced by such persons.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CYRUS ACQUISITION CORP.
By: /s/ David P. Spalding
--------------------------
Title: President
GENERAL HOST CORPORATION
By: /s/ Harris J. Ashton
---------------------------------
Title: Chairman, President & CEO
ANNEX A to
Agreement and
Plan of Merger
Offer Conditions
The capitalized terms used in this Annex A have the meanings
set forth in the attached Agreement, except that the term "Merger
Agreement" shall be deemed to refer to the attached Agreement and the
term "Commission" shall be deemed to refer to the SEC.
Notwithstanding any other provision of the Offer, Purchaser
shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to Purchaser's obligation to
pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for any Shares tendered pursuant to the
Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may amend or terminate the Offer as to any
Shares not then paid for if, prior to the expiration of the Offer, (i)
a number of Shares which constitutes more than two-thirds of the
voting power (determined on a fully-diluted basis, without giving
effect to potential dilution resulting from conversion of Convertible
Notes which are outstanding and unconverted at the expiration date of
the Offer), on the date of purchase, of all the securities of the
Company entitled to vote generally in the election of directors or in
a merger shall not have been validly tendered and not properly
withdrawn prior to the expiration of the Offer (the "Minimum
Condition") or (ii) at any time on or after the date of the Merger
Agreement and prior to the acceptance for payment of Shares, any of
the following events have occurred:
(a) there shall have been instituted or pending any action
or proceeding brought by any governmental authority before any
federal or state court, or any order or preliminary or permanent
injunction entered in any action or proceeding before any federal
or state court or governmental, administrative or regulatory
authority or agency, or any other action taken, or statute, rule,
regulation, legislation, interpretation, judgment or order
enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to Purchaser, the Company or any subsidiary or
affiliate of Purchaser or the Company or to the Offer or the
Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency
which could reasonably be expected to have the effect of: (i)
making illegal, materially delaying or otherwise directly or
indirectly restraining or prohibiting or making materially more
costly the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates, or the consummation of any of the transactions
A-1
ANNEX A
contemplated by the Merger Agreement or materially delaying the
Merger; (ii) prohibiting or materially limiting the ownership or
operation by the Company or any of its Significant Subsidiaries
or Purchaser or any of Purchaser's affiliates of all or any
material portion of the business or assets of the Company or any
of its Significant Subsidiaries, or compelling Purchaser or any
of its affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company or any
of its Significant Subsidiaries or Purchaser or any of its
affiliates, as a result of the transactions contemplated by the
Offer or the Merger Agreement; (iii) imposing or confirming
limitations on the ability of Purchaser or any of its affiliates
effectively to acquire or hold or to exercise full rights of
ownership of Shares, including without limitation the right to
vote any Shares acquired or owned by Purchaser or any of its
affiliates on all matters properly presented to the shareholders
of the Company, including without limitation the adoption and
approval of the Merger Agreement and the Merger or the right to
vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (iv) requiring divestiture by
Purchaser or any of its affiliates of any Shares;
(b) there shall have occurred, after the date of the Merger
Agreement, an event that has had a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New
York Stock Exchange or in the Nasdaq National Market for a period
in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference not
relating to monetary conditions), (ii) a decline of at least 25%
in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date hereof, or a material
disruption of or material adverse change in financial, banking or
capital market conditions that could materially adversely affect
syndication of loan facilities, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States, (iv) any limitation (whether or not mandatory)
by any domestic government or governmental, administrative or
regulatory authority or agency on, or any other event that could
reasonably be expected to materially adversely affect the
extension of credit by banks or other lending institutions, (v) a
commencement of a war or armed hostilities or other national or
international calamity having a Material Adverse Effect or
materially adversely affecting (or materially delaying) the
consummation of the Offer or any of the other Transactions or
(vi) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening
thereof;
A-2
ANNEX A
(d) (i) it shall have been publicly disclosed or Purchaser
shall have otherwise learned that beneficial ownership
(determined for the purposes of this paragraph as set forth in
Rule 13d-3 promulgated under the Exchange Act) of more than 15.0%
of the outstanding Shares has been acquired by any corporation
(including the Company or any of its subsidiaries or affiliates),
partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than Purchaser or
any of its affiliates, or (ii) (A) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser the approval or recommendation
of the Offer, the Merger or the Merger Agreement, or approved or
recommended any Acquisition Proposal or any other acquisition of
Shares other than the Offer and the Merger or (B) any such
corporation, partnership, person or other entity or group shall
have entered into a definitive agreement or an agreement in
principle with the Company with respect to an Acquisition
Proposal;
(e) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified as to
materiality shall not be true and correct, or any such
representations and warranties that are not so qualified shall
not be true and correct in any material respect, in each case as
if such representations and warranties were made at the time of
such determination;
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with
any agreement or covenant of the Company to be performed or
complied with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated
with the consent of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares contemplated by the Merger Agreement,
including pursuant to the Offer, the Equity Contribution and the
Merger, shall not have expired or been terminated;
(i) consents in respect of the Senior Note Indenture
Amendment on behalf of Senior Notes representing at least a
majority in principal amount of all outstanding Senior Notes
shall not have been validly tendered and not withdrawn in the
Debt Offer, or any other condition to the Debt Offer shall not
have been satisfied or waived in accordance with the Merger
Agreement, or the Senior Note Indenture Amendment shall not have
been executed or shall not become operative immediately following
the consummation of the Debt Offer; or
A-3
ANNEX A
(j) all consents and approvals of and notices to or filings
with governmental authorities and third parties required in
connection with the Transactions shall not have been obtained or
made other than those the absence of which, individually or in
the aggregate, would not have a Material Adverse Effect or
prevent or materially delay consummation of any of the
Transactions.
The foregoing conditions are for the sole benefit of
Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by
Purchaser in whole or in part at any time and from time to time in its
sole discretion (subject in each case to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right,
the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any
other facts and circumstances, and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
Any determination by Purchaser concerning the events described in this
Annex A will be final and binding upon all parties.
A-4
ANNEX B to
Agreement and
Plan of Merger
Summary of Key Debt Offer Terms and Conditions
Transaction: Tender Offer and Consent Solicitation.
Type of Tender: Any and all; subject to minimum majority
tender with receipt of exit consents.
Conditions: Noteholders may not tender without consenting
and may not consent without tendering.
All of the conditions precedent to the Offer
as set forth in Annex A to the Merger
Agreement shall have been satisfied except
the condition set forth at paragraph (i); the
Company must have evidence that such
paragraph (i) will be satisfied upon the
Closing of the Debt Offer. Purchaser shall
have accepted Shares for payment
simultaneously with the acceptance for
payment of the Senior Notes.
The Financing shall be consummated
simultaneously with the acceptance for
payment of the tendered Senior Notes.
Other conditions typical for transactions of
this type and not inconsistent with the
foregoing.
Launch Date: Simultaneous with Offer launch.
Consent Date: 10 business days after launch date, or such
later date on which the requisite consents
have been received.
Expiration Date: 20 business days after launch date, or any
later date to which the Offer is extended.
Consideration: Tender price per Bond: Offer Price plus
accrued and unpaid interest to payment date.
Consent Fee per Bond: $20 per $1,000.
Payable only to noteholders who validly
tender (and do not withdraw) Senior Notes and
consents on or prior to Consent Date.
B-1
ANNEX B
Total Payment per Bond: Offer Price plus
accrued and unpaid interest to payment date.
Offer Price: $1,036.25 per $1,000.
Exit Consents: Exit consents to (i) eliminate certain
restrictive provisions set forth in Articles
5, 6 and 11 of the Indenture in order to
permit the Transactions to proceed,
including:
- Limitation on Restricted Payments;
- Limitation on Transactions with
Affiliates;
- Limitation on Indebtedness;
- Limitation on Dividend and Other Payment
Restrictions Affected Restricted
Subsidiaries;
- Restriction on Liens;
- Limitation on Asset Dispositions;
- Limitation on Sale or Issuance of
Certain Stock;
- Limitation on Issuance of Subordinated
Indebtedness;
and (ii) waive certain restrictive provisions
set forth in Articles 5, 6 and 11 of the
Indenture in order to permit the Transactions
to proceed, including:
- Change of Control;
- When Company May Merge, Etc.;
- Events of Default (paragraph (5)
(cross-acceleration) only).
Co-Dealer Managers: Goldman Sachs & Co.
Credit Suisse First Boston Corporation
B-2
ANNEX C to
Agreement and
Plan of Merger
Amendment to Company Certificate of Incorporation
XV. Whenever under the Business Corporation Law or otherwise the
shareholders of the Corporation are required or permitted to take any
action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted,
subject to any limitations under the Business Corporation Law.
C-1