CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
by and among
STONINGTON ACQUISITION CORP.,
GMG ACQUISITION CORP.
and
GLOBAL MOTORSPORT GROUP, INC.
dated as of
November 8, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE OFFER
SECTION 1.1. The Offer.............................................. 2
SECTION 1.2. Company Actions........................................ 3
SECTION 1.3. Directors.............................................. 4
ARTICLE II
THE MERGER
SECTION 2.1. The Merger............................................. 5
SECTION 2.2. Effective Time......................................... 5
SECTION 2.3. Effects of the Merger.................................. 5
SECTION 2.4. Certificate of Incorporation and By-Laws of the
Surviving Corporation.................................. 6
SECTION 2.5. Directors.............................................. 6
SECTION 2.6. Officers............................................... 6
SECTION 2.7. Conversion of Common Shares............................ 6
SECTION 2.8. Conversion of Purchaser Common Stock................... 6
SECTION 2.9. Options; Stock Plans................................... 7
SECTION 2.10. Stockholders' Meeting.................................. 8
SECTION 2.11. Merger without Meeting of Stockholders................. 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.1. Dissenting Shares...................................... 8
SECTION 3.2. Payment for Common Shares.............................. 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Organization and Qualification; Subsidiaries........... 10
SECTION 4.2. Capitalization of the Company and its Subsidiaries..... 11
SECTION 4.3. Authority Relative to This Agreement; Consents
and Approvals.......................................... 13
SECTION 4.4. SEC Reports; Financial Statements...................... 13
SECTION 4.5. Proxy Statement; Offer Documents....................... 14
SECTION 4.6. Consents and Approvals; No Violations.................. 15
SECTION 4.7. No Default............................................. 15
SECTION 4.8. No Undisclosed Liabilities............................. 15
SECTION 4.9. Litigation............................................. 16
SECTION 4.10. Compliance with Applicable Law......................... 16
SECTION 4.11. Employee Benefit Matters............................... 16
SECTION 4.12. Environmental Laws and Regulations..................... 19
SECTION 4.13. Rights Agreement....................................... 20
SECTION 4.14. Brokers................................................ 20
SECTION 4.15. Absence of Certain Changes............................. 20
SECTION 4.16. Taxes.................................................. 20
SECTION 4.17. Intellectual Property.................................. 22
SECTION 4.18. Labor Matters.......................................... 23
SECTION 4.19. Opinions of Financial Advisors......................... 24
SECTION 4.20. Real Property and Lease................................ 24
SECTION 4.21. Material Contracts..................................... 25
SECTION 4.22. Certain Business Practices............................. 26
SECTION 4.23. Product Liability...................................... 27
SECTION 4.24. Suppliers and Customers................................ 27
SECTION 4.25. Accounts Receivable; Inventory......................... 27
SECTION 4.26. Insurance.............................................. 28
SECTION 4.27. Title and Condition of Properties...................... 28
SECTION 4.28. Information in Financing Documents..................... 28
SECTION 4.29. Section 2115........................................... 29
SECTION 4.30. Affiliated Transactions................................ 29
SECTION 4.31. Full Disclosure........................................ 29
SECTION 4.32. Year 2000.............................................. 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
SECTION 5.1. Organization........................................... 30
SECTION 5.2. Authority Relative to This Agreement................... 30
SECTION 5.3. Consents and Approvals; No Violations.................. 30
SECTION 5.4. Proxy Statement; Schedule 14D-9........................ 31
SECTION 5.5. Financing.............................................. 31
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of the Company..................... 31
SECTION 6.2. Acquisition Proposals.................................. 34
SECTION 6.3. Access to Information.................................. 35
SECTION 6.4. Additional Agreements; Reasonable Efforts.............. 36
SECTION 6.5. Consents............................................... 37
SECTION 6.6. Public Announcements................................... 37
SECTION 6.7. Indemnification........................................ 37
SECTION 6.8. Financial Statements................................... 38
SECTION 6.9. Employee Benefit Arrangements.......................... 38
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SECTION 6.10. Notification of Certain Matters........................ 38
SECTION 6.11. Rights Agreement....................................... 39
SECTION 6.12. State Takeover Laws.................................... 39
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions............................................. 39
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. Termination............................................ 40
SECTION 8.2. Effect of Termination.................................. 41
SECTION 8.3. Fees and Expenses...................................... 42
SECTION 8.4. Amendment.............................................. 43
SECTION 8.5. Waiver................................................. 43
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Nonsurvival of Representations and Warranties.......... 43
SECTION 9.2. Entire Agreement; Assignment........................... 43
SECTION 9.3. Validity............................................... 43
SECTION 9.4. Notices................................................ 43
SECTION 9.5. Governing Law.......................................... 44
SECTION 9.6. Descriptive Headings................................... 45
SECTION 9.7. Parties in Interest.................................... 45
SECTION 9.8. Counterparts........................................... 45
ANNEX I CONDITIONS TO THE OFFER
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
November 8, 1998, by and among Stonington Acquisition Corp. ("PARENT"), GMG
Acquisition Corp., a Delaware corporation and a direct or indirect wholly
owned subsidiary of Parent (the "PURCHASER"), and Global Motorsport Group,
Inc., a Delaware corporation formerly known as Custom Chrome, Inc. (the
"COMPANY").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to
commence a tender offer (the "OFFER") to purchase all of the outstanding
shares of the Company's common stock, par value $.001 per share ("COMMON
SHARES"), including the associated preferred share purchase rights (the
"RIGHTS") issued pursuant to the Rights Agreement, dated as of November 13,
1996, by and between the Company and American Stock Transfer and Trust
Company, as Rights Agent (the "RIGHTS AGREEMENT"), at a price per Share of
$19.50 net to the seller in cash (the "OFFER PRICE");
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD")
has (i) approved the Offer and (ii) adopted, deemed advisable and approved
this Agreement, and is recommending that the Company's stockholders accept
the Offer, tender their Common Shares to the Purchaser and approve this
Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the merger of the Purchaser with and into the Company
as set forth below (the "MERGER") in accordance with the General Corporation
Law of Delaware (the "GCL") and upon the terms and subject to the conditions
set forth in this Agreement, whereby each of the issued and outstanding
Common Shares not owned directly or indirectly by Parent, the Purchaser or
the Company will be converted into the right to receive $19.50 in cash;
WHEREAS, Parent, the Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with the Offer and the Merger and also to prescribe various conditions to the
Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Parent, the Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and none of the events set forth in Annex
I hereto (the "TENDER OFFER CONDITIONS") shall have occurred, as promptly as
practicable but in no event later than the fifth business day from the date
of this Agreement, the Purchaser shall, and Parent shall cause the Purchaser
to, commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended (including the rules and regulations promulgated
thereunder, the "EXCHANGE ACT")) an offer to purchase all outstanding Common
Shares at the Offer Price and shall file all necessary documents with the
Securities and Exchange Commission (the "SEC") in connection with the Offer
(the "OFFER DOCUMENTS"). The obligation of the Purchaser to accept for
payment or pay for any Common Shares tendered pursuant thereto will be
subject only to the satisfaction of the Tender Offer Conditions.
(b) Without the prior written consent of the Company, the Purchaser
shall not (i) impose conditions to the Offer in addition to the Tender Offer
Conditions, (ii) modify or amend the Tender Offer Conditions or any other
term of the Offer in a manner adverse to the holders of Common Shares, (iii)
reduce the number of Common Shares subject to the Offer, (iv) reduce the
Offer Price, (v) except as provided in the following sentence, extend the
Offer, if all of the Tender Offer Conditions are satisfied or waived, or (vi)
change the form of consideration payable in the Offer. Notwithstanding the
foregoing, the Purchaser may, without the consent of the Company, extend the
Offer at any time, and from time to time, (i) if at the then-scheduled
expiration date of the Offer any of the conditions to the Purchaser's
obligation to accept for payment and pay for all Common Shares shall not have
been satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or its staff applicable to
the Offer; or (iii) if all Tender Offer Conditions are satisfied or waived
but the number of Common Shares tendered is at least equal to 75%, but less
than 90%, of the then-outstanding number of Common Shares, for an aggregate
period of not more than 10 business days (for all such extensions) beyond the
latest expiration date that would be permitted under clause (i) or (ii) of
this sentence. So long as this Agreement is in effect, the Offer has been
commenced and the Tender Offer Conditions have not been satisfied or waived,
the Purchaser shall, and Parent shall cause the Purchaser to, cause the Offer
not to expire, subject, however, to the Purchaser's and Parent's rights of
termination under this Agreement. Parent and the Purchaser shall comply with
the obligations respecting prompt payment pursuant to Rule 14e-1(c) under the
Exchange Act.
(c) Parent and the Purchaser represent that the Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws, and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, except that no representation is
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made by Parent or the Purchaser with respect to information supplied by the
Company in writing for inclusion in the Offer Documents. Each of Parent and
the Purchaser, on the one hand, and the Company, on the other hand, agrees to
promptly correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading
in any material respect and the Purchaser further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the
SEC and to be disseminated to stockholders of the Company, in each case, as
and to the extent required by applicable federal securities laws.
SECTION 1.2. COMPANY ACTIONS.
(a) The Company shall file with the SEC and mail to the holders of
Common Shares, on the date of the filing by Parent and the Purchaser of the
Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "SCHEDULE 14D-9")
reflecting the recommendation of the Company Board that holders of Common
Shares tender their Common Shares pursuant to the Offer, and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under
the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents that the Company Board, at a meeting duly called and held, has (i)
determined by unanimous vote of its directors that the Offer and the Merger
are fair to, advisable and in the best interests of the Company and its
stockholders, (ii) approved the Offer and adopted this Agreement in
accordance with the GCL, (iii) resolved to recommend acceptance of the Offer
and approval of this Agreement by the Company's stockholders, and (iv) taken
all action necessary to render Section 203 of the GCL and the Rights
inapplicable to the Offer and the Merger; PROVIDED, HOWEVER, that such
recommendation and approval may be withdrawn, modified or amended to the
extent that the Company Board determines in good faith and on a reasonable
basis, after consultation with its outside counsel, that such action is
required in the exercise of the Company Board's fiduciary duties under
applicable law. The Company further represents that, prior to the execution
hereof, Cleary Gull Reiland & McDevitt, Inc., the Company's financial advisor
(the "FINANCIAL ADVISOR"), has delivered to the Company Board its written
opinion (the "FAIRNESS OPINION"), to the effect that, as of the date of this
Agreement, the consideration to be received by the holders of Common Shares
(other than Common Shares held by Parent or any of its affiliates, in the
treasury of the Company or by any wholly-owned subsidiary of the Company)
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view. The Company further represents and warrants that it has been
authorized by the Financial Advisor to permit, subject to prior review and
consent by the Financial Advisor (such consent not to be unreasonably
withheld), the inclusion of such opinion (or a reference thereto) in the
Offer Documents and in the Schedule 14D-9. The Company hereby consents to the
inclusion in the Offer Documents of the recommendations of the Company Board
described in this Section 1.2(a).
(b) The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws, and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information
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supplied by Parent or the Purchaser in writing for inclusion in the Schedule
14D-9. Each of the Company, on the one hand, and Parent and the Purchaser, on
the other hand, agree promptly to correct any information provided by either
of them for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading, 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 to be disseminated to the holders of Common Shares, in each case, as
and to the extent required by applicable federal securities law.
(c) In connection with the Offer, the Company will promptly furnish
the Purchaser with mailing labels, security position listings, any
non-objecting beneficial owner lists and any available listing containing the
names and addresses of the record holders of Common Shares as of the most
recent practicable date and shall furnish the Purchaser with such additional
information (including, but not limited to, updated lists of holders of
Common Shares and their addresses, mailing labels and lists of security
positions and non-objecting beneficial owner lists) and such other assistance
as the Purchaser or its agents may reasonably request in communicating the
Offer to the Company's record and beneficial stockholders. Subject to the
requirements of applicable law, and except for such steps as are appropriate
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent, the Purchaser and their affiliates,
associates, agents and advisors shall use the information contained in any
such labels, listings and files only in connection with the Offer and the
Merger, and, if this Agreement shall be terminated, will deliver to the
Company all copies of such information then in their possession.
SECTION 1.3. DIRECTORS.
(a) Subject to compliance with applicable law, promptly upon the
payment by the Purchaser for Common Shares pursuant to the Offer, and from
time to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is
equal to the product of the total number of directors on the Company Board
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Common
Shares beneficially owned by Parent or its affiliates bears to the total
number of Common Shares then outstanding, and the Company shall, upon request
of Parent, promptly take all actions necessary to cause Parent's designees to
be so elected, including, if necessary, seeking the resignations of one or
more existing directors; PROVIDED, HOWEVER, that, prior to the Effective Time
(as defined herein), the Company Board shall always have at least two members
who are neither officers, directors or designees of the Purchaser or any of
its affiliates ("PURCHASER INSIDERS"). If the number of directors who are not
Purchaser Insiders is reduced below two prior to the Effective Time, the
remaining director who is not a Purchaser Insider shall be entitled to
designate a person to fill such vacancy who is not a Purchaser Insider and
who shall be a director not deemed to be a Purchaser Insider for all purposes
of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The Company shall promptly take all actions required
pursuant to such Section and Rule in order to
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fulfill its obligations under this Section 1.3, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under such Section and Rule in order to fulfill
its obligations under this Section 1.3. Parent will supply any information
with respect to itself, and its officers, directors and affiliates required
by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 1.3 and prior to the Effective Time, any amendment
or 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
Parent or the Purchaser or waiver of any of the Company's rights hereunder
will require the concurrence of a majority of the directors of the Company
then in office who are not Purchaser Insiders (or, in the case where there
are two or fewer directors who are not Purchaser Insiders, the concurrence of
one director who is not a Purchaser Insider) if such amendment, termination,
extension or waiver would have an adverse effect on the minority stockholders
of the Company.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the GCL, at the Effective Time, the
Purchaser shall be merged with and into the Company. Following the Merger,
the separate corporate existence of the Purchaser shall cease and the Company
shall continue as the surviving corporation (the "SURVIVING CORPORATION").
Parent may, upon notice to the Company, modify the structure of the Merger if
Parent determines it advisable to do so because of tax or other
considerations, and the Company shall promptly enter into any amendment to
this Agreement necessary or desirable to accomplish such structure
modification, PROVIDED that no such amendment shall reduce the Merger Price.
SECTION 2.2. EFFECTIVE TIME As soon as practicable after the
satisfaction of the conditions set forth in Sections 7.1(a) and 7.1(b), but
subject to Sections 7.1(c) and 7.1(d), the Company shall execute, in the
manner required by the GCL, and deliver to the Secretary of State of the
State of Delaware a duly executed and verified certificate of merger, and the
parties shall take such other and further actions as may be required by law
to make the Merger effective. The time the Merger becomes effective in
accordance with applicable law is referred to as the "EFFECTIVE TIME." Prior
to the filing referred to in this Section 2.2, a closing will be held at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York 10019 (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing.
SECTION 2.3. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in the GCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and the Purchaser
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the
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Company and the Purchaser shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION.
(a) The Certificate of Incorporation of the Purchaser as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 6.7, the By-Laws of the
Purchaser in effect at the Effective Time shall be the By-Laws of the
Surviving Corporation until amended in accordance with the provisions thereof
and applicable law.
SECTION 2.5. DIRECTORS. Subject to applicable law, the directors of
the Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 2.6. OFFICERS. The officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
SECTION 2.7. CONVERSION OF COMMON SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders
thereof, each Common Share issued and outstanding immediately prior to the
Effective Time (other than (i) any Common Shares held by Parent, the
Purchaser, any wholly owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly owned subsidiary of the Company,
which Common Shares, by virtue of the Merger and without any action on the
part of the holder thereof, shall be cancelled and retired and shall cease to
exist with no payment being made with respect thereto and (ii) Dissenting
Shares (as defined herein)), shall by virtue of the Merger be cancelled and
retired and shall be converted into the right to receive pursuant to Section
3.2 $19.50 in cash (the "MERGER PRICE"), payable to the holder thereof,
without interest thereon, upon surrender of the certificate formerly
representing such Common Share.
SECTION 2.8. CONVERSION OF PURCHASER COMMON STOCK. The Purchaser has
outstanding 1,000 shares of common stock, par value $.01 per share, all of
which shares are entitled to vote with respect to approval and adoption of
this Agreement. At the Effective Time, each share of common stock, par value
$.01 per share, of the Purchaser issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value $.01
per share, of the Surviving Corporation.
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SECTION 2.9. OPTIONS; STOCK PLANS.
(a) Prior to the consummation of the Offer, the Company Board (or,
if appropriate, any committee thereof) shall adopt appropriate resolutions
and take all other actions necessary to provide for the cancellation,
effective at the Effective Time (the "OPTION CANCELLATION TIME"), of all the
outstanding stock options (the "STOCK OPTIONS") (other than options
outstanding under the Company's 1996 Employee Stock Purchase Plan (the
"EMPLOYEE STOCK PURCHASE PLAN" and such options being referred to as the
"PURCHASE PLAN OPTIONS")) heretofore granted under any other stock option or
similar plan or agreement of the Company (such other stock option or similar
plans or agreements together with the Employee Stock Purchase Plan being
collectively referred to herein as the "STOCK PLANS"). Such cancellation
shall occur without any payment therefor except as otherwise provided in this
Section 2.9. At the Option Cancellation Time, all Stock Options (whether
vested or unvested) which are listed in Section 2.9 of the Company Disclosure
Schedule (as defined herein) shall, unless otherwise agreed to by Parent and
the holder of such Stock Option, be cancelled (and to the extent formerly so
exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in
cash by the Company (less any applicable withholding taxes), at the Effective
Time, equal to the product of (i) the total number of Common Shares subject
to such Stock Option (whether vested or unvested) and (ii) the excess, if
any, of the Merger Price over the exercise price per Common Share subject to
such Stock Option (the "CASH PAYMENTS").
(b) The Company shall take all actions necessary to ensure that: (i)
the Offering Period (as defined in the Employee Stock Purchase Plan)
applicable to each outstanding Purchase Plan Option is shortened so as to
have a New Purchase Date (as defined in the Employee Stock Purchase Plan)
that occurs before the date on which the Option Cancellation Time occurs;
(ii) no new Offering Period or Purchase Period (each as defined in the
Employee Stock Purchase Plan) shall begin from and after the date hereof; and
(iii) no holder of a Purchase Plan Option is permitted to increase his or her
rate of contributions under the Employee Stock Purchase Plan from and after
the date hereof.
(c) The Company shall take all actions necessary to provide that,
effective as of the Option Cancellation Time, (i) each of the Stock Plans
shall be terminated, (ii) the provisions in 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 of its Subsidiaries shall
be deleted, and (iii) no holder of Stock Options or Purchase Plan Options
(collectively "OPTIONS") will have any right to receive any shares of capital
stock of the Company or, if applicable, the Surviving Corporation, upon
exercise of any Option.
(d) Except with respect to Stock Options granted under the Company's
1997 Stock Plan and the Company's 1997 Director Option Plan, the Company has
the power and authority under the terms of each of the applicable Stock Plans
to accomplish each of the matters set forth in this Section 2.9 without the
consent of any Option holder. The Company will obtain the consent of each
holder of Stock Options issued under the Company's 1997 Stock Plan and the
Company's 1997 Director Option Plan.
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SECTION 2.10. STOCKHOLDERS' MEETING.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "SPECIAL MEETING") to be held as soon
as practicable following the acceptance for purchase of and payment for
Common Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
statement relating to this Agreement, and use reasonable best efforts
(A) to obtain and furnish the information required to be included by
the SEC in the Proxy Statement (as defined herein) and, after
consultation with Parent, to respond as soon as practicable any
comments made by the SEC with respect to the preliminary proxy
statement and cause a definitive proxy statement (the "PROXY
STATEMENT") to be mailed to its stockholders at the earliest
practicable date following expiration or termination of the Offer, and
(B) to obtain the necessary approvals of the Merger and adoption of
this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval and adoption of the Merger and of this Agreement (except as
set forth in the proviso to Section 1.2(a)) and the Fairness Opinion.
(b) Parent agrees that it will vote, or cause to be voted, all
Common Shares then owned by it, the Purchaser or any of its other
subsidiaries in favor of the approval of the Merger and of this Agreement.
SECTION 2.11. MERGER WITHOUT MEETING OF STOCKHOLDERS.
Notwithstanding Section 2.10, in the event that the Purchaser shall acquire
at least 90% of the outstanding Common Shares pursuant to the Offer, the
parties hereto agree to take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance
for payment of and payment for Common Shares by the Purchaser pursuant to the
Offer without a meeting of stockholders of the Company, in accordance with
Section 253 of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding Section 2.7, Common Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded and perfected the right, if any, for appraisal for such Common
Shares in accordance with Section 262 of the GCL ("DISSENTING SHARES") shall
not be converted into the right to receive the Merger Price, unless such
holder fails to perfect or withdraws or otherwise loses such holder's right
to appraisal. If, after the Effective
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Time, such holder fails to perfect or withdraws or loses such holder's right
to appraisal, such Common Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger Price.
The Company shall give Parent prompt notice of any demands received by the
Company for appraisal of Common Shares, and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent, make
any payment with respect to, or settle or offer to settle, or otherwise
negotiate, any such demands.
SECTION 3.2. PAYMENT FOR COMMON SHARES.
(a) Prior to the Effective Time, the Purchaser shall designate a
bank or trust company reasonably acceptable to the Company to act as paying
agent (the "PAYING AGENT") in effecting the payment of the Merger Price in
respect of certificates that, prior to the Effective Time, represented Common
Shares (the "CERTIFICATES") entitled to payment of the Merger Price pursuant
to Section 2.7. At the Effective Time, Parent or the Purchaser shall deposit,
or cause to be deposited, in trust with the Paying Agent the aggregate Merger
Price to which holders of Common Shares shall be entitled at the Effective
Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each record holder of 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 surrendering such Certificates
and receiving the Merger Price in respect thereof. Upon the surrender of each
such Certificate, together with a duly executed letter of transmittal and any
other required documents, the Paying Agent shall, as soon as practicable, pay
the holder of such Certificate the Merger Price multiplied by the number of
Common Shares formerly represented by such Certificate, in consideration
therefor, and such Certificate shall forthwith be cancelled. Until so
surrendered, each such Certificate (other than Certificates representing
Common Shares held by Parent or the Purchaser, any wholly owned subsidiary of
Parent or the Purchaser, in the treasury of the Company or by any wholly
owned subsidiary of the Company or Dissenting Shares) shall represent solely
the right to receive the aggregate Merger Price relating thereto. No interest
or dividends shall be paid or accrued on the Merger Price. If the Merger
Price (or any portion thereof) is to be delivered to any person other than
the person in whose name the Certificate surrendered is registered, it shall
be a condition to such right to receive such Merger Price that the
Certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer, that the signatures on the Certificate shall be
properly guaranteed, and that the person surrendering such Common Shares
shall pay to the Paying Agent any transfer or other taxes required by reason
of the payment of the Merger Price to a person other than the registered
holder of the Certificate surrendered, or shall establish to the satisfaction
of the Paying Agent that such taxes have been paid or are not applicable. In
the event any Certificate shall have been lost, stolen or destroyed, the
Paying Agent shall be required to pay the full Merger Price in respect of any
Common Shares represented by such Certificate; however, Parent may require
the owner of such lost, stolen or destroyed Certificate to execute and
deliver to the Paying Agent a form of affidavit claiming such Certificate to
be lost, stolen or destroyed in form and substance reasonably satisfactory to
Parent, and the posting
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by such owner of a bond in such amount as Parent may determine is reasonably
necessary as indemnity against any claim that may be made against Parent or
the Paying Agent.
(c) Promptly following the date which is 180 days after the
Effective Time, the Paying Agent shall deliver to the Surviving Corporation
all cash, Certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the
aggregate Merger Price relating thereto, without any interest or dividends
thereon. Notwithstanding the foregoing, none of Parent, the Purchaser, the
Company or the Paying Agent shall be liable to any person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered immediately prior to such date on which any payment pursuant to
this Article III would otherwise escheat to or become the property of any
Governmental Entity (as defined herein), the cash payment in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interests of any person previously entitled thereto.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any Common Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent, they shall be surrendered and cancelled in return for the
payment of the aggregate Merger Price relating thereto, as provided in this
Article III.
(e) From and after the Effective Time, the holders of Certificates
evidencing ownership of Common Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Common
Shares except as otherwise provided herein or by applicable law. Such holders
shall have no rights, after the Effective Time, with respect to such Common
Shares except to surrender such Certificates in exchange for cash pursuant to
this Agreement or to perfect any rights of appraisal as a holder of
Dissenting Shares that such holders may have pursuant to Section 262 of the
GCL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to the Purchaser prior
to the execution of this Agreement setting forth specific exceptions to the
Company's and its Subsidiaries' representations and warranties set forth
herein (the "COMPANY DISCLOSURE SCHEDULE"), the Company hereby represents and
warrants to Purchaser as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation
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and has all requisite corporate or other power, authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals, would not, individually or in the aggregate, have a
Company Material Adverse Effect (as defined below). The Company has
heretofore delivered to the Purchaser accurate and complete copies of the
Certificate of Incorporation and By-Laws, as currently in effect, of the
Company and each of its Subsidiaries. As used in this Agreement, "SUBSIDIARY"
shall mean, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated or domestic or foreign to the United
States of which (i) such party or any other Subsidiary of such party is a
general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization is, directly or indirectly, owned or
controlled by such party or by any one or more of its Subsidiaries, or by
such party and one or more of its Subsidiaries. The term "COMPANY MATERIAL
ADVERSE EFFECT" means any event, change in or effect on the business of the
Company or its Subsidiaries, taken as a whole, that is or can reasonably be
expected to be materially adverse to (i) the business, operations, properties
(including intangible properties), condition (financial or otherwise),
assets, liabilities, or prospects of the Company and its Subsidiaries, taken
as a whole, or (ii) the ability of the Company to consummate the transactions
contemplated hereby or to perform its obligations under this Agreement.
Section 4.1(a) of the Company Disclosure Schedule sets forth a complete list
of the Company's Subsidiaries.
(b) Each of the Company and its Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not, individually or in aggregate, have a Company
Material Adverse Effect.
(c) Except as set forth in Section 4.1(c) of the Company Disclosure
Schedule, the Company does not own (i) any equity interest in any corporation
or other entity, or (ii) marketable securities where the Company's equity
interest in any entity exceeds 5% of the outstanding equity of such entity on
the date hereof.
SECTION 4.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of:
20,000,000 shares of Common Stock and 1,000,000 shares of preferred stock,
par value $.001 per share ("PREFERRED STOCK"). As of November 6, 1998,
5,182,973 Common Shares were issued and outstanding and no shares of the
Preferred Stock were outstanding. All Common Shares have been validly issued,
and are fully paid, nonassessable and free of preemptive rights. As of
November 6, 1998, a total of 999,906 Common Shares are reserved for issuance
pursuant to outstanding Options under the Stock Plans, of which (i) 65,320
Common Shares are reserved for issuance pursuant to outstanding Stock Options
under the Company's 1991 Stock Option Plan, (ii) 475,032 Common
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Shares are reserved for issuance pursuant to outstanding Stock Options under
the Company's 1995 Stock Option Plan, (iii) 454,554 Common Shares are
reserved for issuance pursuant to outstanding Stock Options under the
Company's 1997 Stock Option Plan, (iv) 5,000 Common Shares are reserved for
issuance pursuant to outstanding Stock Options under the Company's 1997
Director Plan, and (v) assuming that the Option Cancellation Time were to
occur on or about November 6, 1999, approximately 1,900 Common Shares would
have been issuable upon the exercise of Purchase Plan Options under the
Employee Stock Purchase Plan at a price of $12.86 per Common Share. Since
November 6, 1998, no shares of the Company's capital stock have been issued
other than pursuant to Options already in existence on such date and no
Options have been granted. Except as set forth above and except for the
Rights to, among other things, purchase Series A Participating Preferred
Stock issued pursuant to the Rights Agreement, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or any of its
Subsidiaries, and no obligations of the Company or any of its Subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv)
no equity equivalents, interests in the ownership or earnings of the Company
or any of its Subsidiaries or other similar rights (collectively, "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of the Company, is owned by the Company,
directly or indirectly, free and clear of any Lien (as defined herein) or any
other limitation or restriction (including any restriction on the right to
vote or sell the same, except as may be provided as a matter of law). All
such shares have been validly issued, fully paid and nonassessable, and have
been issued free of preemptive rights. There are no securities of the Company
or any of its Subsidiaries convertible into or exchangeable for, no options
or other rights to acquire from the Company or any of its Subsidiaries, and
no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of
any capital stock or other ownership interests in, or any other securities
of, any Subsidiary of the Company. There are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any Subsidiary of the Company. For purposes of this
Agreement, "LIEN" means, with respect to any asset (including, without
limitation, any security) any option, claim, mortgage, lien, pledge, charge,
security interest or encumbrance or restrictions of any kind in respect of
such asset.
(c) The Common Shares and the Rights constitute the only class of
equity securities of the Company or any of its Subsidiaries registered or
required to be registered under the Exchange Act.
(d) There are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to
the voting of the capital stock of the Company or any of the Subsidiaries.
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(e) Other than as set forth on Section 4.2(e) of the Company
Disclosure Schedule, there is no outstanding material Indebtedness (as
defined herein) of the Company or any of its Subsidiaries. Except as set
forth in Section 4.2(e) of the Company Disclosure Schedule, no such
Indebtedness of the Company or its Subsidiaries contains any restriction upon
(i) the prepayment of such Indebtedness, (ii) the incurrence of Indebtedness
by the Company or its Subsidiaries, respectively, or (iii) the ability of the
Company or its Subsidiaries to grant any Liens on its properties or assets.
For purposes of this Agreement, "INDEBTEDNESS" shall include (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices, but excluding operating leases), (ii) any other indebtedness which
is evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any Lien on any
property, and (vi) all guarantee obligations.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT; CONSENTS AND
APPROVALS.
(a) The Company has all the necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof (subject to obtaining
the necessary approval and adoption of this Agreement and the Merger by the
stockholders of the Company). The execution, delivery and performance of this
Agreement by the Company and the consummation by them of the transactions
contemplated hereby have been duly and validly authorized by the Company
Board, and, except for obtaining the approval of the Company's stockholders,
no other corporate action or corporate proceedings on the part of the Company
are necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery by
each of the Purchaser and Parent, constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Company Board has duly and validly approved, and taken all
corporate actions required to be taken by it for the consummation of, the
transactions contemplated hereby, including, but not limited to, all actions
required to satisfy the provisions of Section 203(a)(1) of the GCL regarding
business combinations with "interested stockholders."
SECTION 4.4. SEC REPORTS; FINANCIAL STATEMENTS.
(a) Since January 1, 1995 the Company has filed with the SEC all
forms, reports, schedules, statements and other documents required to be
filed by it with the SEC pursuant to the Securities Act of 1933, as amended
(including the rules and regulations promulgated thereunder the "SECURITIES
ACT") and the Exchange Act (any such documents filed prior to the
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date hereof and the Preliminary Offering Memorandum dated, July 22, 1998,
relating to the issuance of Senior Notes and Senior Discount Notes of the
Company (except with respect to information relating to Fremont or the
transactions contemplated by the Amended and Restated Agreement and Plan of
Merger, dated as of June 28, 1998, by and among Fremont, GMS Acquisition
Corp. and the Company) (the "OFFERING MEMORANDUM") being collectively, the
"COMPANY SEC DOCUMENTS"). The Company SEC Documents, including, without
limitation, any financial statements or schedules included therein, at the
time filed, or in the case of registration statements on their respective
effective dates, and, in the case of the Offering Memorandum, on July 22,
1998, (i) complied in all material respects with the applicable requirements
of the Exchange Act and the Securities Act, as the case may be, and (ii) did
not at the time filed (or, in the case of registration statements, at the
time of effectiveness and, in the case of the Offering Memorandum, on July
22, 1998), contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. No Subsidiary of the Company is required to file any
form, report or other document with the SEC. The financial statements
included in the Company SEC Documents (the "FINANCIAL STATEMENTS") (i) have
been prepared from, and are in accordance with, the books and records of the
Company and its Subsidiaries, (ii) complied in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, (iii) have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and (iv) fairly present the
consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of the Company and
its Subsidiaries as of the times and for the periods referred to therein,
except that any such Financial Statements that are unaudited, interim
financial statements are subject to normal and recurring year-end adjustments.
(b) The Company has heretofore delivered to the Purchaser, in the
form filed with the SEC (including any amendments thereto), (i) its Annual
Reports on Form 10-K for each of the three fiscal years ended January 31,
1996, 1997 and 1998, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 1995, and (iii) all other reports (other than Quarterly Reports on
Form 10-Q) or registration statements filed by the Company with the SEC since
January 1, 1995.
(c) The Company has heretofore furnished the Purchaser with a
complete and correct copy of any amendments or modifications, which have not
yet been filed by the Company with the SEC, to all agreements, documents or
other instruments which previously had been filed by the Company and are
currently in effect.
SECTION 4.5. PROXY STATEMENT; OFFER DOCUMENTS. The Proxy Statement
will comply in all material respects with applicable federal securities laws,
except that no representation is made by the Company with respect to
information supplied by Parent for inclusion in the Proxy Statement. None of
the information supplied by the Company in writing for inclusion in the Offer
Documents or provided by the Company in the Schedule 14D-9 will, at the
respective times that the Offer Documents and the Schedule 14D-9 are filed
with the SEC and are first pub-
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lished or sent or given to holders of Common Shares, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.6. CONSENTS AND APPROVALS; NO VIOLATIONS. No filing with
or notice to, and no permit, authorization, consent or approval of, any court
or tribunal or administrative, governmental or regulatory body, agency or
authority (a "GOVERNMENTAL ENTITY") is required on the part of the Company or
any of its Subsidiaries for the execution, delivery and performance by the
Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), (ii) pursuant to the applicable
requirements of the Exchange Act, (iii) the filing and, if applicable,
recordation of the certificate of merger pursuant to the DGCL, or (iv) where
the failure to obtain such permits, authorizations, consents or approvals or
to make such filings or give such notice would not have a Company Material
Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (A) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or
By-Laws (or similar governing documents) of the Company or of any its
Subsidiaries, (B) except as set forth in Section 4.6 of the Company
Disclosure Schedule, result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be
bound, other than breaches or defaults under loan agreements resulting from
the existence of Indebtedness on the part of the Purchaser, or (C) violate
any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, except in the case of (B) or (C) for
violations, breaches or defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 4.7. NO DEFAULT. None of the Company or any of its
Subsidiaries is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation)
of any term, condition or provision of (i) its Certificate of Incorporation
or By-laws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is now a party or
by which any of them or any of their respective properties or assets may be
bound or (iii) any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Company, any of its Subsidiaries or any of their
respective properties or assets, except in the case of clause (ii) or (iii)
of this sentence for violations, breaches or defaults that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.8. NO UNDISCLOSED LIABILITIES. Except as set forth in the
Company's unaudited consolidated balance sheet (or the notes thereto) dated
as of July 31, 1998 contained in the Company's Form 10-Q for the three-month
period ending on July 31, 1998, since July 31, 1998, neither the Company nor
any of its Subsidiaries has incurred any liabilities or ob-
-15-
ligations of any nature, whether or not accrued, contingent or otherwise,
that have, or would reasonably be expected to have, a Company Material
Adverse Effect or that would be required by GAAP to be reflected or reserved
against on a consolidated balance sheet, or in the notes thereto, of the
Company and its Subsidiaries prepared in accordance with GAAP consistent with
past practices, other than in the ordinary course of business and consistent
with past practices. Section 4.8 of the Company Disclosure Schedule sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing indebtedness of the Company and its Subsidiaries which
will accelerate or become due or result in a right of redemption or
repurchase on the part of the holder of such indebtedness (with or without
due notice or lapse of time) as a result of this Agreement, the Merger or the
other transactions contemplated hereby or thereby.
SECTION 4.9. LITIGATION. Except as set forth in Section 4.9 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against, affecting or involving the Company or any of its Subsidiaries or any
of their respective properties or assets before any Governmental Entity.
Except as disclosed in Section 4.9 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree. Reserves reflected on the Financial
Statements are adequate for all litigation set forth in Section 4.9 of the
Company Disclosure Schedule.
SECTION 4.10. COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 4.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "COMPANY PERMITS"), except for failures to
hold such Company Permits which would not, individually or in the aggregate,
have a Company Material Adverse Effect. Except as set forth in Section 4.10
of the Company Disclosure Schedule, the Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so
to comply would not have a Company Material Adverse Effect. Except as set
forth in Section 4.10 of the Company Disclosure Schedule, the businesses of
the Company and its Subsidiaries are not being, and have not been, conducted
in violation of any law, ordinance or regulation of any Governmental Entity
except that no representation or warranty is made in this Section 4.10 with
respect to Environmental Laws (as defined herein) and except for violations
or possible violations which individually or in the aggregate will not have a
Company Material Adverse Effect. Except as set forth in Section 4.10 of the
Company Disclosure Schedule, no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or,
to the best knowledge of the Company, threatened nor, to the best knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
SECTION 4.11. EMPLOYEE BENEFIT MATTERS.
(a) All employee benefit plans and other incentive, compensation or
benefit plans, programs, contracts and arrangements covering any current or
former employee or director of the Company or any Subsidiary are listed in
Section 4.11 of the Company Disclosure Schedule ("COMPANY BENEFIT PLANS").
True and complete copies of the following items with respect to
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all Company Benefit Plans have been provided to the Purchaser : (i) each
writing constituting a part of such Company Benefit Plan, including without
limitation all plan documents, employee communications, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii)
the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); (iv) the most recent annual financial report, if any; (v)
the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service (the "IRS") or
comparable determination from any foreign taxing authority, if any. Except as
specifically provided in the foregoing documents delivered to Purchaser,
there are no amendments to any Company Benefit Plan that have been adopted or
approved nor has the Company or any of its Subsidiaries undertaken to make
any such amendments or to adopt or approve any new Company Benefit Plan.
Except as set forth in Section 4.11(a) of the Company Disclosure Schedule,
each Company Benefit Plan has been maintained and administered in all
material respects in compliance with its terms and with all applicable laws
including, but not limited to ERISA, and the Internal Revenue Code of 1986,
as amended (the "CODE"), to the extent applicable thereto. There is not now,
nor do any circumstances exist that could give rise to, any requirement for
the posting of security with respect to a Company Benefit Plan or the
imposition of any lien on the assets of the Company or any of its
Subsidiaries. No prohibited transaction has occurred with respect to any
Company Benefit Plan. Each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined by the IRS to be so
qualified, and no event has occurred that could reasonably be expected to
adversely affect the qualified status of such Company Benefit Plan. Except as
set forth in Section 4.11(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has incurred any liability or penalty
under Section 4975 of the Code or Section 502(i) of ERISA. Except as set
forth in Section 4.11(a) of the Company Disclosure Schedule, there are no
pending, nor has the Company or any of its Subsidiaries received notice of
any threatened, claims against or otherwise involving any of the Company
Benefit Plans. No Company Benefit Plan is under audit or investigation by the
IRS, the Department of Labor or the Pension Benefit Guaranty Corporation,
and, no such audit or investigation is pending or threatened. All material
contributions or other payments required to be made as of the date of this
Agreement to or pursuant to the Company Benefit Plans have been made or
accrued for in the Financial Statements. Neither the Company nor any
Subsidiary, nor any ERISA Affiliate (as defined herein) of the Company or any
Subsidiary, has at any time contributed to, or been required to contribute
to, any "pension plan" (as defined in Section 3(2) of ERISA) that is subject
to Section 302 or Title IV of ERISA or Section 412 of the Code, including,
without limitation, any "multi-employer plan" (as defined in Sections 3(37)
and 4001(a)(3) of ERISA). Neither the Company nor any Subsidiary, nor any nor
any ERISA Affiliate of the Company or any Subsidiary, has any liability as a
result of a failure to comply with the continuation coverage requirements of
section 601 ET SEQ. of ERISA and Section 4980B of the Code ERISA, which
liability has not been satisfied in full. "ERISA AFFILIATE" means, with
respect to any entity, trade or business, any other entity, trade or business
that is a member of a group described in Section 414(b), (c), (m) or (o) of
the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade
or business, or that is a member of the same "controlled group" as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
-17-
(b) Except as set forth in Section 4.11(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or
upon the occurrence of any additional or subsequent events) (i) constitute an
event under any Company Benefit Plan, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any current or former employee,
officer or director of the Company or any Subsidiary, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of
the Company or the Purchaser to amend or terminate any Company Benefit Plan
and receive the full amount of any excess assets remaining or resulting from
such amendment or termination, subject to applicable taxes. No payment or
benefit which will or may be made by the Company, any of its Subsidiaries,
the Purchaser or any of their respective affiliates with respect to any
employee, officer or director of the Company or its Subsidiaries will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code, and no amount of any such payment or benefit will
fail to be deductible by the Company by reason of Section 162(m) of the Code.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries (i) maintains or
contributes to any Company Benefit Plan which provides, or has any liability
to provide, life insurance, medical, severance or other employee welfare
benefits to any employee upon his or her retirement or termination of
employment, except as may be required by Section 4980B of the Code; or (ii)
has ever represented, promised or contracted (whether in oral or written
form) to any employee (either individually or to employees as a group) that
such employee(s) would be provided with life insurance, medical, severance or
other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code. All
amounts of deferred compensation benefits under any Company Benefit Plan have
been properly accrued on the financial statements of the Company and its
Subsidiaries.
(d) With respect to each Company Benefit Plan which is an "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA, except as
set forth in Section 4.11(d) of the Company Disclosure Schedule, all material
claims incurred (including claims incurred but not reported) by employees
thereunder for which the Company is, or will become, liable are (i) insured
pursuant to a contract of insurance whereby the insurance company bears any
risk of loss with respect to such claims; or (ii) covered under a contract
with a health maintenance organization (an "HMO") pursuant to which the HMO
bears the liability for such claims. Each such Company Benefit Plan complies
with all requirements for exclusion from the gross income of participants
pursuant to Sections 104 and 105 of the Code. No Company Benefit Plan or
trust associated with a Company Benefit Plan is intended to meet the
requirements of Section 501(c)(9) of the Code.
(e) No Company Benefit Plan is (i) maintained outside the United
States primarily for the benefit of persons substantially all of whom are
nonresident aliens with respect to the United States, or (ii) subject to the
laws of any jurisdiction outside the United States.
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(f) All liabilities of the Company and its Subsidiaries under
nonqualified deferred compensation plans have been accrued on the Financial
Statements and the total fair market value of the assets of the related
grantor trusts available to pay such liabilities are at least equal to the
aggregate amount of such liabilities. With respect to each former employee of
the Company and its Subsidiaries, Section 4.11(f) of the Company Disclosure
Schedule sets forth all amounts and benefits that are owed to such former
employee by the Company and its Subsidiaries pursuant to any employment,
severance, consulting, or other individual agreement.
SECTION 4.12. ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Except as set forth in Section 4.12(a)(i) of the Company
Disclosure Schedule, (i) the Company and each of its Subsidiaries is in
compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or emissions, discharges,
releases, disposal, or handling of any pollutants or toxic or hazardous
substances, wastes or materials (including, without limitation, petroleum,
and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon or lead or lead-based paints or materials
(collectively, "ENVIRONMENTAL LAWS"), except for non-compliance that,
individually or in the aggregate, would not have a Company Material Adverse
Effect, which compliance includes, but is not limited to, the possession by
the Company and its Subsidiaries of all permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) neither the Company nor any of
its Subsidiaries has received notice of, or is the subject of, any action,
cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law
(an "ENVIRONMENTAL CLAIM") including, without limitation, relating to any
subcontractor of the Company or for the business, or relating in any way to
any prior facilities, locations, or business of the Company or any of its
Subsidiaries; and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to result in any liability under any
Environmental Law, prevent or interfere with any such compliance thereunder
in the future, including, without limitation, relating to any subcontractor
of the Company or for the business, or relating in any way to any prior
facilities, locations or business of the Company or any of its Subsidiaries.
There are no permits or other governmental authorizations held by the Company
or required for the Company's business that are required to be transferred or
reissued, or that are otherwise prohibited from being transferred or
reissued, pursuant to any Environmental Laws as a result of the transactions
contemplated hereby. The Company has provided to the Purchaser all
environmental assessments, reports, data, results of investigations, or
compliance or other environmental audits conducted by or for the Company, or
otherwise relating to the Company's or any Subsidiary's business or
properties (owned, leased or operated). There are no matters identified in
any such materials which individually or in the aggregate, could have a
Company Material Adverse Effect.
(b) Except as set forth in Section 4.12(b) of the Company Disclosure
Schedule, there are no Environmental Claims which individually or in the
aggregate would have a Company Material Adverse Effect that are pending or,
to the best knowledge of the Company, threatened against the Company or any
of its Subsidiaries or, to the best knowledge of the Company,
-19-
against any person or entity whose liability for any Environmental Claim the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law including, without limitation, relating
to any subcontractor of the Company or for the business, or relating in any
way to any prior facilities, locations or business of the Company or any of
its Subsidiaries.
SECTION 4.13. RIGHTS AGREEMENT. The Company has taken all necessary
action so that none of the execution of this Agreement, the making of the
Offer, the acquisition of Common Shares pursuant to the Offer or the
consummation of the Merger will (i) cause the Rights to become exercisable,
(ii) cause the Purchaser or any of its affiliates to become an Acquiring
Person (as such term is defined in the Rights Agreement) or (iii) give rise
to a Distribution Date or a Triggering Event (each as defined in the Rights
Agreement). The Company has furnished to the Purchaser true and complete
copies of all amendments to the Rights Agreement that fulfill the
requirements of this Section 4.13 and such amendments are in full force and
effect.
SECTION 4.14. BROKERS. No broker, finder or investment banker (other
than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to the Purchaser) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Company. The fees to which the Financial Advisor shall be entitled to in
connection with the transactions contemplated hereby shall be $2,300,000, of
which $400,000 has already been paid to the Financial Advisor prior to the
date hereof. Except as set forth in Section 4.14 of the Company Disclosure
Schedule no material legal, accounting, consulting or other fees and expenses
are payable by or on behalf of the Company or any of its Subsidiaries in
connection with this Agreement or relating to any transaction contemplated or
proposed by Fremont or Golden Cycle involving the Company or any of its
Subsidiaries.
SECTION 4.15. ABSENCE OF CERTAIN CHANGES. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, since January 31, 1998, the
Company and each of its Subsidiaries have conducted its businesses only in
the ordinary course of business and consistent with past practice and (i)
there has not been any Company Material Adverse Effect and (ii) the Company
has not taken any of the actions set forth in paragraphs (a) through (m) of
Section 6.1.
SECTION 4.16. TAXES.
(a) Each of the Company and its Subsidiaries have timely filed (or
have had timely filed on their behalf) or will timely file or cause to be
timely filed all Tax Returns required by applicable law to be filed by any of
them prior to or as of the Effective Time. All such Tax Returns and
amendments thereto are or will be true, complete and correct in all respects.
The most recent financial statements contained in the Company SEC Documents
provide an adequate accrual for the payment of Taxes for the periods covered
by such reports.
(b) Each of the Company and its Subsidiaries have paid (or have had
paid on their behalf), or, where payment is not yet due, have established an
adequate accrual on the books and records of the Company and its Subsidiaries
for the payment of, all Taxes due with respect to any period (or portion
thereof) ending on or prior to the date of the Merger.
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(c) Except as set forth in Section 4.16(c) of the Company Disclosure
Schedule, no audit by a Tax authority is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, the Company or its
Subsidiaries. No issue has been raised by a Tax authority in any audit of the
Company or any of its Subsidiaries that if raised with respect to any other
period not so audited could be expected to result in a proposed deficiency
for any period not so audited. No deficiency or adjustment for any Taxes has
been threatened, proposed, asserted or assessed against the Company or its
Subsidiaries. There are no Liens for Taxes upon the assets of the Company or
its Subsidiaries, except Liens for current Taxes not yet due for which
adequate reserves have been established in accordance with GAAP. The federal
income Tax Returns of the Company and each of its Subsidiaries consolidated
in such returns have been examined by and settled with the IRS for all years
through 1994. The Company has made available to Parent true and complete
copies of all federal, state, local and foreign income Tax Returns, and state
and local property and sales Tax Returns and any other Tax Returns filed by
the Company or any of its Subsidiaries for any of the taxable periods that
remains open, as of the date hereof, for examination or assessment of Tax.
(d) Neither the Company nor any of its Subsidiaries has given or
been requested to give any waiver of statutes of limitations relating to the
payment of any Taxes or have executed powers of attorney with respect to any
Tax matters, which will be outstanding as of the Effective Time.
(e) Neither the Company nor any of its Subsidiaries is a party to,
or is bound by, any Tax sharing, Tax indemnity, cost sharing, or similar
agreement or policy relating to Taxes.
(f) None of the Company or any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(g) Neither the Company nor any Subsidiary has any liability for
Taxes of any person (other than the Company and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any comparable provision of state,
local or foreign law).
(h) The net operating loss carryforwards ("NOLs") of Tom's
Motorcycle Products GmbH as of December 31, 1997 equal the amounts set forth
on Section 4.16(h) of the Company Disclosure Schedule, and, except for
limitations that may apply by reason of the Merger, such NOLs are not subject
to limitation.
(i) For purposes of this Agreement, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, use, transfer,
license, payroll, withholding, export, import, customs, capital stock and
franchise taxes or duties, imposed by the United States or any state, local
or foreign government or subdivision or agency thereof, including any
interest, penalties or additions thereto. For purposes of this Agreement, the
term "TAX RETURN" means any report, return or other information or document
required to be supplied to a Tax authority in connection with Taxes.
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SECTION 4.17. INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use all intellectual
property rights used in the conduct of its business, including, without
limitation, all patents and patent applications, trademarks, trademark
registrations and applications, copyrights and copyright registrations and
applications, computer programs, technology, know-how, trade secrets,
proprietary processes and formulae (collectively, the "INTELLECTUAL
PROPERTY"), free and clear of all Liens. The Company or one of its
Subsidiaries is listed in the records of the appropriate United States, state
or foreign agency as the sole owner of record for all applications,
registrations or patents included in the Intellectual Property, and all of
the foregoing are listed on Section 4.17(a) of the Disclosure Schedule and
are validly subsisting.
(b) Section 4.17(b) of the Disclosure Schedule sets forth a list of
all license agreements under which the Company or any of its Subsidiaries has
granted or received the right to use any Intellectual Property, and the
Company is not in default under any such license.
(c) Except as set forth in Section 4.17(c) of the Disclosure
Schedule, no person has a right to receive a royalty or similar payment in
respect of any item of Intellectual Property pursuant to any contractual
arrangements entered into by the Company or otherwise. No former or present
employees, officers or directors of the Company hold any right, title or
interest, directly or indirectly, in whole or in part, in or to any
Intellectual Property.
(d) No trade secret, know-how or any other confidential information
relating to the Company has been disclosed or authorized to be disclosed to
any third party, other than pursuant to a non-disclosure agreement that fully
protects the Company's proprietary interest in and to such confidential
information.
(e) The Company has taken or caused to be taken all reasonable steps
to obtain and retain valid and enforceable rights in all Intellectual
Property owned thereby, including, but not limited to, the submission of all
necessary filings in accordance with the legal and administrative
requirements of the appropriate jurisdictions. The conduct of the business of
the Company does not violate or infringe upon any intellectual property right
of any third party, and, except as set forth in Section 4.17(e) of the
Company Disclosure Schedule, there is no pending or threatened opposition,
interference, re-examination, cancellation, claim of invalidity or other
legal or governmental proceeding in any jurisdiction involving any of the
Intellectual Property. There are no claims or suits pending or, to the best
knowledge of the Company, threatened, and the Company has received no notice
of any claim or suit (i) alleging that the conduct of the Company's business
infringes upon or constitutes the unauthorized use of the proprietary rights
of any third party or (ii) challenging the ownership, use, validity or
enforceability of the Intellectual Property. To the best knowledge of the
Company, no Intellectual Property of the Company is being violated or
infringed upon by any third party. Except as set forth in Section 4.17(e) of
the Disclosure Schedule, there are no settlements, consents, judgments,
orders or other agreements which restrict the Company's rights to use any
Intellectual Property.
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SECTION 4.18. LABOR MATTERS.
(a) (i) There is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the knowledge of the Company, threatened
against or affecting the Company, and, during the past five years from the
date of this Agreement there has not been any such action, (ii) the Company
is not a party to or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed to with any
labor organization or employee association applicable to employees of the
Company, (iii) none of the employees of the Company is represented by any
labor organization and the Company does not have any knowledge of any union
organizing activities among the employees of the Company within the past five
years, (iv) there are no written personnel policies, rules or procedures
applicable to employees of the Company, other than those set forth on Section
4.18(a) of the Company Disclosure Schedule, true and correct copies of which
have heretofore been delivered to the Purchaser, (v) the Company is, and has
at all times been, in compliance, in all material respects, with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable laws, except for such
non-compliance which has not had and would not reasonably be expected to have
a Company Material Adverse Effect, (vi) there is no unfair labor practice
charge or complaint against the Company pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or any similar
state or foreign agency, (vii) there is no material pending grievance arising
out of any collective bargaining agreement or other grievance procedure,
(viii) to the knowledge of the Company, no charges with respect to or
relating to the Company are pending before the Equal Employment Opportunity
Commission or any other Governmental Entity responsible for the prevention of
unlawful employment practices, (ix) the Company has not received notice of
the intent of any federal, state, local or foreign Governmental Entity
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company and no such
investigation is in progress, and (x) there are no complaints, lawsuits or
other proceedings pending or, to the knowledge of the Company, threatened in
any forum by or on behalf of any present or former employee of the Company,
any applicant for employment or classes of the foregoing alleging breach by
the Company or its Subsidiaries of any express or implied contract or
employment, any laws governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the
employment relationship, which, if determined adversely to the Company, could
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in Section 4.18(b) of the Company Disclosure
Schedule, since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN ACT"), (i) the Company has not effectuated a
"plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of the Company, (ii) there has not occurred a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company; nor has the Company been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or regulation, and
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(iii) none of the Company's employees has suffered an "employment loss" (as
defined in the WARN Act) during the six-month period prior to the date of
this Agreement.
SECTION 4.19. OPINIONS OF FINANCIAL ADVISORS. The Financial Advisor
has delivered its written opinion, dated the date of this Agreement, to the
Company Board to the effect that, as of such date, the consideration to be
received in the Offer and the Merger by the holders of Common Shares (other
than the Purchaser and its affiliates) is fair from a financial point of view
to such holders, and such opinion has not been withdrawn or modified prior to
consummation of the Offer or prior to the Effective Time, a copy of which
opinion has been delivered to the Purchaser.
SECTION 4.20. REAL PROPERTY AND LEASE.
(a) Section 4.20(a) of the Company Disclosure Schedule sets forth a
complete list of all real property owned by the Company or its Subsidiaries
(the "REAL PROPERTY"). Except as set forth in Section 4.20(a) of the Company
Disclosure Schedule, the Company or its Subsidiaries has good and marketable
title to the Real Property, free and clear of all Liens. Copies of (i) all
deeds, title insurance policies and surveys of the Real Property and (ii) all
documents evidencing all material Liens upon the Real Property have been
furnished to the Purchaser. Except for the matters disclosed in Section 4.20
of the Company Disclosure Schedule, there are no proceedings, claims,
disputes or, to the Company's knowledge, conditions affecting any Real
Property that might curtail or interfere with the use of such property, nor
is an action of eminent domain pending or to the knowledge of the Company
threatened for all or any portion of the Real Property. Except as disclosed
in Section 4.20(a) of the Company Disclosure Schedule, the Company is not a
party to any lease, assignment or similar arrangement under which the Company
is a lessor, assignor or otherwise makes available for use by any third party
any portion of the Real Property.
(b) The Company has not during the preceding 12 months received any
notice of or other writing referring to any requirements or recommendations
by any insurance company that has issued a policy covering any part of the
Real Property or by any board of fire underwriters or other body exercising
similar functions, requiring or recommending any repairs or work to be done
on any part of the Real Property. The plumbing, electrical, heating, air
conditioning, ventilating and all other structural or material mechanical
systems in the buildings upon the Real Property are in good working order and
working condition, so as to be adequate for the operation of the business of
the Company as heretofore conducted, and the roof, basement and foundation
walls of all buildings on the Real Property are free of leaks and other
material defects, except for any matter otherwise covered by this sentence
which does not have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) Each of the Company and its Subsidiaries has obtained all
appropriate licenses, permits, easements and rights of way, including proofs
of dedication, required to use and operate the Real Property in the manner in
which the Real Property is currently being used and operated, except for such
licenses, permits or rights of way the failure of which to have obtained does
not have, individually or in the aggregate, a Company Material Adverse Effect.
-24-
(d) The Company has not received notification that the Company or
any of its Subsidiaries is in violation in any material respect of any
applicable building, zoning, anti-pollution, health or other law, ordinance
or regulation in respect of the Real Property or structures or their
operations thereon and, to the Company's knowledge, no such violation exists.
SECTION 4.21. MATERIAL CONTRACTS.
(a) Except for contracts filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended January 31, 1998, Section 4.21(a) of
the Company Disclosure Schedule sets forth each of the following contracts
and agreements (including, without limitation, oral arrangements to the
extent legally binding) of the Company and each of its Subsidiaries (such
contracts and agreements, together with all contracts and agreements set
forth in Section 4.17(b) of the Company Disclosure Schedule, "MATERIAL
CONTRACTS"):
(i) each contract, agreement and other arrangement for the
purchase of inventory, spare parts, other materials or personal
property with any supplier or for the furnishing of services to the
Company and each of its Subsidiaries or otherwise related to the
businesses of the Company and each of its Subsidiaries under the terms
of which the Company or any of its Subsidiaries: (A) is likely to pay
or otherwise give consideration of more than $50,000 in the aggregate
during the calendar year ended December 31, 1998 or (B) is likely to
pay or otherwise give consideration of more than $100,000 in the
aggregate over the remaining term of such contract;
(ii) each contract, agreement and other arrangement for the
sale of inventory or other personal property or for the furnishing of
services by the Company or any of its Subsidiaries which: (A) is likely
to involve consideration of more than $50,000 in the aggregate during
the calendar year ended December 31, 1998 or (B) is likely to involve
consideration of more than $100,000 in the aggregate over the remaining
term of the contract;
(iii) all material broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion,
market research, marketing, consulting and advertising contracts, and
agreements to which the Company or any of its Subsidiaries is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Company or any of its Subsidiaries is a party and which are not
cancellable without penalty or further payment in excess of $50,000 and
without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness
of the Company or any of its Subsidiaries or to any direct or indirect
guaranty by the Company or any of its Subsidiaries of Indebtedness of
any other person;
(vi) all contracts, agreements, commitments, written
understandings or other arrangements with any Governmental Entity to
which the Company or any of its Subsidiaries is a party (other than
arrangements entered into in the ordinary course of
-25-
business with hospitals or other medical facilities owned or
operated by any such Governmental Entity);
(vii) all contracts and agreements that limit or purport to
limit the ability of the Company or any of its Subsidiaries to compete
in any line of business or with any person or in any geographic area or
during any period of time;
(viii) all employment, compensation, termination or severance
agreements or other obligations to which the Company or any of its
Subsidiaries is a party; and
(ix) all other contracts and agreements, whether or not made
in the ordinary course of business, which are material to the Company
and its Subsidiaries, taken as a whole, or the conduct of the business
of the Company and its Subsidiaries, taken as a whole, or the absence
of which would, in the aggregate, have a Company Material Adverse
Effect.
(b) Each Material Contract: (i) is legal, valid and binding on the
Company or its respective Subsidiary party thereto and, to the knowledge of
the Company, the other parties thereto, and is in full force and effect and
(ii) upon consummation of the Offer and/or the Merger, except to the extent
that any consents set forth in Section 4.6 of the Company Disclosure Schedule
are not obtained or notice is not given, shall continue in full force and
effect without penalty, acceleration, termination, repurchase right or other
adverse consequence. Neither the Company nor any of its Subsidiaries is in
breach of, or default under, any Material Contract.
(c) No other party to any Material Contract is, to the knowledge of
the Company, in material breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting
any person any preferential right to purchase any of the properties or assets
of the Company or any of its Subsidiaries.
SECTION 4.22. CERTAIN BUSINESS PRACTICES. Neither the Company nor
any of its Subsidiaries nor any of their respective directors, officers,
agents, representatives or employees (in their capacity as directors,
officers, agents, representatives or employees) has: (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity; (b) directly or indirectly, paid or delivered
any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent or other party acting on behalf of or
under the auspices of a governmental official, or party acting on behalf of
or under the auspices of a governmental official or Governmental Entity, in
the United States or any other country, which is in any manner related to the
business or operations of the Company or any of its Subsidiaries, that was
illegal under any federal, state or local laws of the United States or any
other country having jurisdiction; or (c) made any payment to any customer or
supplier of the Company or any of its Subsidiaries or any officer, director,
partner, employee or agent of any such customer or supplier for the unlawful
sharing of fees or to any such customer or supplier or any such officer,
director, partner, employee or agent for the unlawful rebating of charges, or
engaged in any other unlawful reciprocal practice, or made any other unlawful
payment or given
-26-
any other unlawful consideration to any such customer or supplier or any such
officer, director, partner, employee or agent, in respect of the business of
the Company and its Subsidiaries.
SECTION 4.23. PRODUCT LIABILITY.
(a) Except as set forth in Section 4.23(a) of the Company Disclosure
Schedule, there are not presently pending, or, to the knowledge of the
Company, threatened, any civil, criminal or administrative actions, suits,
demands, claims, hearings, notices of violation, investigations, proceedings
or demand letters relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including any failure to warn or
alleged breach of express or implied warranty or representation, relating to
any product manufactured, distributed or sold by or on behalf of the Company
and its Subsidiaries. Within the last five years, none of the Company or its
insurers has made any payment to or settlement with any third party relating,
or with respect to, any of the foregoing in excess of $300,000.
(b) All products are sold or licensed by the Company and its
Subsidiaries pursuant to their respective disclaimer of warranties, express
or implied of merchantability and fitness for a particular purpose.
(c) Section 4.23(c) of the Company Disclosure Schedule sets forth a
true and complete list of (i) all products manufactured, marketed or sold by
the Company or any of its Subsidiaries that have been recalled or withdrawn
(whether voluntarily or otherwise) at any time during the past four years and
(ii) all proceedings (whether completed or pending) at any time during the
past three years seeking the recall, withdrawal, suspension or seizure of any
product sold by the Company or any of its Subsidiaries.
SECTION 4.24. SUPPLIERS AND CUSTOMERS. Since January 1, 1998, no
material licensor, vendor, supplier, licensee or customer of the Company or
any of its Subsidiaries has canceled or otherwise modified (in a manner
materially adverse to the Company) its relationship with the Company or its
Subsidiaries and, to the Company's knowledge, (i) no such person has notified
the Company of its intention to do so, and (ii) the consummation of the
transactions contemplated hereby will not adversely affect any of such
relationships.
SECTION 4.25. ACCOUNTS RECEIVABLE; INVENTORY.
(a) Subject to any reserves set forth in the consolidated balance
sheet of the Company included in the Company's Annual Report on Form 10-K for
the year ended January 31, 1998 as filed with the SEC prior to the date of
this Agreement (the "COMPANY BALANCE SHEET"), the accounts receivable shown
in the Company Balance Sheet arose in the ordinary course of business, were
not, as of the date of the Company Balance Sheet, subject to any material
discount, contingency, claim of offset or recoupment or counterclaim, and
represented, as of the date of the Company Balance Sheet, BONA FIDE claims
against debtors for sales, leases, licenses and other charges. All accounts
receivable of the Company and its Subsidiaries arising after the date of the
Company Balance Sheet through the date of this Agreement arose in the
ordinary course of business and, as of the date of this Agreement, are not
subject to any material discount, contingency, claim of offset or recoupment
or counterclaim, except for normal reserves
-27-
consistent with past practice. The amount carried for doubtful accounts and
allowances disclosed in the Company Balance Sheet is believed by the Company
as of the date of this Agreement to be sufficient to provide for any losses
which may be sustained or realization of the accounts receivable shown in the
Company Balance Sheet.
(b) As of the date of the Company Balance Sheet, the inventories
shown on the Company Balance Sheet consisted in all material respects of
items of a quantity and quality usable or saleable in the ordinary course of
business. All of such inventories were acquired in the ordinary course of
business and, as of the date of this Agreement, have been replenished in all
material respects in the ordinary course of business consistent with past
practices. All such inventories are valued on the Company Balance Sheet in
accordance with GAAP, applied on a basis consistent with the Company's past
practices, and provision has been made or reserves have been established on
the Company Balance Sheet, in each case, in an amount believed by the Company
as of the date of this Agreement to be adequate, for all slow-moving,
obsolete or unusable inventories.
SECTION 4.26. INSURANCE. Section 4.26 of the Company Disclosure
Schedule lists the Company's material insurance policies. There is no
material claim pending under any of the Company's or any of its Subsidiary's
policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and
its Subsidiaries are otherwise in compliance in all material respects with
the terms of such policies and bonds. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any
such policies.
SECTION 4.27. TITLE AND CONDITION OF PROPERTIES. Except as set forth
in Section 4.27 of the Company Disclosure Schedule, the Company and its
Subsidiaries own good and marketable title, free and clear of all Liens, to
all of the personal property and assets shown on the Company Balance Sheet or
acquired after January 31, 1998, except for (i) assets which have been
disposed of to nonaffiliated third parties since January 31, 1998 in the
ordinary course of business consistent with past practice, (ii) Liens
reflected in the Company Balance Sheet, (iii) Liens or imperfections of title
which are not, individually or in the aggregate, material in character,
amount or extent and which do not materially detract from the value or
materially interfere with the present or presently contemplated use of the
assets subject thereto or affected thereby, and (iv) Liens for current Taxes
not yet due and payable. The properties and assets, including the equipment,
supplies and other consumables, owned, leased or used by the Company and its
Subsidiaries in the operation of their respective business are in good
operating condition and repair, ordinary wear and tear excepted, are
reasonably suitable for the purposes for which they are used, are reasonably
adequate and sufficient for the Company's and its Subsidiaries' current
operations and are directly related to the business of the Company and its
Subsidiaries.
SECTION 4.28. INFORMATION IN FINANCING DOCUMENTS. None of the
information supplied or to be supplied by the Company for the purpose of
inclusion or incorporation by reference in any syndication and other
materials to be delivered to potential financing sources in connection with
the transactions contemplated hereby (the "FINANCING DOCUMENTS") will, at the
date
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delivered, contain any untrue statement of 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.
SECTION 4.29. SECTION 2115. The Company is not subject to the
provisions of Section 2115 of the General Corporation Law of the State of
California, as amended.
SECTION 4.30. AFFILIATED TRANSACTIONS. Neither the Company nor any
of its Subsidiaries nor any of their respective officers, directors,
employees or affiliates (nor any individual related by blood, marriage or
adoption to any such individual) is a party to any agreement, contract,
commitment, transaction or understanding with or binding upon the Company or
any of its Subsidiaries or any of their respective assets or has engaged in
any transaction with any of the foregoing within the last 12 months, except
for customary payments to employees, officers or directors in the ordinary
course of business consistent with past practice for services rendered in
their capacity as employees, officers or directors.
SECTION 4.31. FULL DISCLOSURE. No representation or warranty by the
Company in this Agreement and no statement by the Company in any document
referred to herein (including the Schedules hereto) contains, as of the date
hereof, or will contain, as of the date given or delivered, any untrue
statements of a material fact or omits to state any material fact necessary,
in order to make the statement made herein or therein, in light of the
circumstances under which they were made, not misleading
SECTION 4.32. YEAR 2000. All Information Systems and Equipment are
in all material respects either Year 2000 Compliant or any reprogramming,
remediation, or any other corrective action, including the internal testing
of all such Information Systems and Equipment, will be completed in all
material respects by January 1, 1999. Further, to the extent that such
reprogramming/remediation and testing action is required, the cost thereof,
as well as the cost of the reasonably foreseeable consequences of failure to
become Year 2000 Compliant, to the Company and its Subsidiaries (including,
without limitation, reprogramming errors and the failure of other systems or
equipment) will not result in a Company Material Adverse Effect.
Year 2000 Compliant means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release and
exchange date data, and shall in all material respects continue to function
in the same manner as it performs today and shall not otherwise materially
impair the accuracy or functionality of Information Systems and Equipment.
Information Systems and Equipment means all computer hardware,
firmware and software, as well as other information processing systems, or
any equipment containing embedded microchips, whether directly owned,
licensed, leased, operated or otherwise controlled by the Company or any of
its Subsidiaries, including through third-party service providers, and which,
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in whole or in part, are used, operated, relied upon, or integral to, the
Company's or any of its Subsidiaries' conduct of their business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
SECTION 5.1. ORGANIZATION. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not
in the aggregate have a Purchaser Material Adverse Effect (as defined below)
on the Purchaser or Parent. When used in connection with the Purchaser or
Parent, the term "PURCHASER MATERIAL ADVERSE EFFECT" means any change or
effect that is materially adverse to the ability of each of Parent to
consummate the transactions contemplated hereby or to perform its obligations
under this Agreement.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent
and the Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of each of Parent and the Purchaser, and no other
corporate proceedings on the part of each of Parent and the Purchaser are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and the Purchaser and, assuming due and valid
authorization, execution and delivery by the Company, constitutes a valid,
legal and binding agreement of each of Parent and the Purchaser, enforceable
against each of Parent and the Purchaser in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
or other similar laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the HSR Act, and the filing and
recordation of a certificate of merger as required by the GCL, no filing with
or notice to, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution and delivery by each of
Parent and the Purchaser of this Agreement or the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a
Purchaser Material Adverse Effect.
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Neither the execution, delivery and performance of this Agreement by each of
Parent and the Purchaser nor the consummation by each of Parent and the
Purchaser of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or By-Laws (or similar governing documents) of Parent, the
Purchaser or any of their respective Subsidiaries, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent, the Purchaser or
any of their respective Subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or (iii) violate
any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent, the Purchaser or any of their respective Subsidiaries
or any of their respective properties or assets, except in the case of
clauses (ii) or (iii) for violations, breaches or defaults which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
SECTION 5.4. PROXY STATEMENT; SCHEDULE 14D-9. None of the
information supplied by Parent or the Purchaser in writing for inclusion in
the Proxy Statement or the Schedule 14D-9 will, at the respective times that
the Proxy Statement and the Schedule 14D-9 are filed with the SEC and are
first published or sent or given to holders of Common Shares, and in the case
of the Proxy Statement, at the time that it or any amendment or supplement
thereto is mailed to the Company's stockholders, at the time of the Special
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 therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.5. FINANCING. The Purchaser has or will have sufficient
funds available to purchase all of the Common Shares outstanding on a fully
diluted basis. The Purchaser has delivered to the Company true and correct
copies of commitment letters (the "FINANCING LETTERS"), which letters have
not been modified or withdrawn.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except (i) as
expressly contemplated by this Agreement, (ii) as agreed in writing by the
Purchaser, or (iii) for the consummation of the financing of the transactions
contemplated hereby pursuant to and in accordance with the terms of the
Financing Documents, during the period from the date hereof to the time
persons designated or elected by the Purchaser or any of its respective
affiliates shall constitute a majority of the Company Board, neither the
Company nor any of its Subsidiaries will conduct its operations otherwise
than in the ordinary course of business consistent with past practice.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the time persons designated or
elected by the Purchaser or any of the respective affiliates shall constitute
a majority of the Board, the Company will not, nor will it permit its
Subsidiaries, without the prior written consent of the Purchaser, to:
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(a) amend or propose to amend its Certificate of Incorporation or
By-Laws or the Rights Agreement;
(b) (i) issue, reissue or sell, or authorize the issuance,
reissuance or sale of (A) additional shares of capital stock of any class, or
securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of Common Shares (and the related Rights), in
accordance with the terms of the instruments governing such issuance on the
date hereof, pursuant to the exercise or conversion of Options outstanding on
the date hereof, or (B) any other securities in respect of, in lieu of, or in
substitution for, Common Shares or any other capital stock of any class
outstanding on the date hereof or (ii) make any other changes in its capital
structure;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any of its securities or any securities
of its Subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in
the ordinary course of business consistent with past practice and in amounts
not material to the Company and its Subsidiaries taken as a whole; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except in the ordinary course of business consistent with past practice and
in amounts not material to the Company and its Subsidiaries, taken as a
whole, and except for obligations of wholly owned Subsidiaries of the Company
to the Company or to other wholly owned Subsidiaries of the Company; (iii)
make any loans, advances or capital contributions to, or investments in, any
other person (other than to wholly owned Subsidiaries of the Company or
customary loans or advances to employees in the ordinary course of business
consistent with past practice and in amounts not material to the maker of
such loan or advance) or make any change in its existing borrowing or lending
arrangements for or on behalf of any such person, whether pursuant to an
employee benefit plan or otherwise; (iv) pledge or otherwise encumber shares
of capital stock of the Company or any of its Subsidiaries; or (v) mortgage
or pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material Lien thereupon;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its Subsidiaries;
(f) increase in any manner the compensation or fringe benefits
payable or to become payable of any director, officer or, employee, except,
in the case of employees, only for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensation expense to the Company, or
pay or award any benefit not required by any existing plan or arrangement to
any officer, director or employee (including, without limitation, the
granting of stock options, stock appreciation rights, shares of restricted
stock or performance units pursuant to the Stock Plans or other-
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wise), or grant any severance or termination pay to any officer, director or
other employee of the Company or any of its Subsidiaries (other than as
required by existing agreements or policies in Section 6.01 of the Company
Disclosure Schedule), or enter into any employment or severance agreement
with any director, officer or other employee of the Company or any of its
Subsidiaries or establish, adopt, enter into, amend, or waive any performance
or vesting criteria under any plan for the benefit or welfare of any current
or former directors, officers or employees of the Company or its Subsidiaries
or their beneficiaries or dependents (any of the foregoing being an "EMPLOYEE
BENEFIT ARRANGEMENT"), except, in each case, to the extent required by
applicable law or regulation;
(g) acquire, sell, transfer, lease, encumber or dispose of any
assets outside the ordinary course of business consistent with past practice
or any assets which in the aggregate are material to the Company and its
Subsidiaries taken as a whole, or enter into any commitment or transaction
outside the ordinary course of business consistent with past practice which
would be material to the Company and its Subsidiaries taken as a whole;
(h) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing off notes
or accounts receivable other than in the ordinary course of business
consistent with past practice;
(j) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract
or agreement other than in the ordinary course of business consistent with
past practice which would be material to the Company and its Subsidiaries
taken as a whole; (iii) authorize any new capital expenditure or expenditures
which, individually, is in excess of $50,000 or, in the aggregate, are in
excess of $100,000; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited hereunder;
(k) make any Tax election (unless required by law), settle or
compromise any Tax liability of the Company or any of its Subsidiaries or any
pending or threatened suit, action or claim relating to any potential or
actual Tax liability of the Company or any of its Subsidiaries, change any
method of accounting for Tax purposes or file (other than in a manner
consistent with past practice) any Tax Return;
(l) 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 of liabilities reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company
and its Subsidiaries or incurred in the ordinary course of business
consistent with past practice;
(m) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to the Purchaser
except in the ordinary course
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of business and consistent with past practice unless the Company shall have
obtained a comparable replacement policy;
(n) settle or compromise any pending or threatened suit, action or
claim (i) relating to the transactions contemplated hereby, (ii) involving
Fremont Acquisition Company III, LLC and/or any of its affiliates ("Fremont")
and the Company and/or any of its affiliates, (iii) involving Golden Cycle,
LLC and/or any of its affiliates ("Golden Cycle") and the Company and/or any
of its affiliates, or (iv) any other pending or threatened material suit,
action or claim other than in the ordinary course of business;
(o) enter into any agreement of a nature that would be required to
be filed as an exhibit to Form 10-K under the Exchange Act;
(p) take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.1(a) through 6.1(o) or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect as of the date when made or would result
in any of the Tender Offer Conditions not being satisfied.
SECTION 6.2. ACQUISITION PROPOSALS. The Company, its affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations, if any,
with any parties conducted heretofore with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity
interest in, the Company or any of its Subsidiaries or any recapitalization,
business combination or similar transaction with the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries shall, directly
or indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate, facilitate or encourage the submission of any proposal or
offer from any Person (as defined below) relating to any acquisition or
purchase of all or any material portion of the assets of, or any equity
interest in, the Company or any of its Subsidiaries or any recapitalization,
business combination or similar transaction (an "ACQUISITION TRANSACTION")
with the Company or any of its Subsidiaries (any communication with respect
to an Acquisition Transaction being an "ACQUISITION PROPOSAL") or participate
in any negotiations regarding, or furnish or disclose to any other Person any
information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage any effort or attempt by
any other Person to do or seek any of the foregoing or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated hereby
this Agreement; PROVIDED, HOWEVER, that the Company may furnish information
to, and negotiate or otherwise engage in discussions with, any party who
delivers a BONA FIDE written Acquisition Proposal which was not solicited or
encouraged after the date of this Agreement if the Company Board by majority
vote determines in good faith (i) after consultation with and receipt of
advice from its outside legal counsel, that failing to take such action is
reasonably determined to constitute a breach of the fiduciary duties of the
Company Board under applicable law, (ii) after consultation with and receipt
of written advice from the Financial Advisor or another nationally recognized
investment banking firm, that such proposal is more favorable to the
Company's stockholders from a financial point of view than the transactions
contemplated hereby (including any adjustment to the terms and conditions
proposed by the Purchaser in re-
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sponse to such Acquisition Proposal), (iii) that sufficient commitments have
been obtained with respect to such Acquisition Proposal that the Company
Board reasonably expects a transaction pursuant to such Acquisition Proposal
could be consummated and (iv) that such Acquisition Proposal is not subject
to any regulatory approvals that could reasonably be expected to prevent or
materially delay consummation. As a precondition to furnishing nonpublic
Company information to any party that makes an Acquisition Proposal, the
Company will enter into a confidentiality agreement with such party, which
confidentiality agreement shall have terms and conditions that will be no
less favorable to the Company than the terms and provisions contained in that
certain Confidentiality Agreement by and between Stonington Partners, Inc.
and the Company dated April 24, 1998. From and after the execution of this
Agreement, the Company shall promptly advise the Purchaser of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to an Acquisition Proposal (including the material terms
thereof and the identity of the other party or parties involved) and furnish
to the Purchaser within 48 hours of such receipt an accurate description of
all material terms (including any changes or adjustments to such terms as a
result of negotiations or otherwise) of any such written proposal. The
Company shall promptly provide to the Purchaser any material non-public
information regarding the Company provided to any other party, which
information was not previously provided to the Purchaser. In addition, the
Company shall promptly advise the Purchaser, in writing, if the Company Board
shall make any determination as to any Acquisition Proposal as contemplated
by the proviso to the first sentence of this Section 6.2. The Company agrees
that it shall keep the Purchaser informed, on a current basis, of the status
of and developments relating to any Acquisition Proposal, including the
results of any substantive discussions or negotiations. Notwithstanding the
foregoing, the Company shall be permitted to take such actions as may be
required to comply with Rule 14e-2 of the Exchange Act. "PERSON" means a
natural person, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Entity or other entity or organization.
SECTION 6.3. ACCESS TO INFORMATION.
(a) Between the date hereof and the consummation of the Offer and/or
Effective Time, as the case may be, the Company will give the Purchaser and
its authorized representatives and Persons providing or committed to provide
the Purchaser with financing for the transactions contemplated hereby and
their representatives, reasonable access to all employees, plants, offices,
warehouses and other facilities and properties and to all books and records
of the Company and its Subsidiaries, will permit the Purchaser to make such
inspections (including any physical inspections or soil or groundwater
investigations) as Purchaser reasonably request and will cause the Company's
officers and those of its Subsidiaries to furnish the Purchaser with such
financial and operating data and other information with respect to the
business and properties of the Company and any of its Subsidiaries as the
Purchaser may from time to time reasonably request, PROVIDED that, in each
case, such access will be subject to the continuing obligations of the
parties under the Confidentiality Agreement by and between Stonington
Partners, Inc. and the Company dated April 24, 1998, which agreement shall
survive until termination pursuant to the terms thereof. The Company shall
furnish promptly to Parent and the Purchaser a copy of each report, schedule,
registration statement and other document filed by it or its subsidiaries
during such period pursuant to the requirements of federal or state or
foreign securities laws.
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(b) Prior to the consummation of the Offer, the Company and its
accountants, counsel, agents and other representatives shall cooperate with
the Purchaser by providing information about the Company which is necessary
for the Purchaser and its accountants, agents, counsel and other
representatives to prepare the Financing Documents and such other documents
and other reasonable requests with respect to such documents. Notwithstanding
anything in this Agreement to the contrary, the Purchaser may disclose, or
cause its representatives to disclose, and at the request of the Purchaser,
the Company shall disclose information concerning the Company and its
Subsidiaries, and their respective businesses, assets and properties, and the
transactions contemplated hereby, in the Financing Documents and to
prospective financing sources in connection with the transactions
contemplated hereby.
SECTION 6.4. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions of this Agreement,
the Purchaser and the Company agree to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under any applicable laws to consummate
and make effective the transactions contemplated hereby as promptly as
practicable including, but not limited to, (i) the preparation and filing of
all forms, registrations and notices required to be filed to consummate the
transactions contemplated hereby and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions or
waivers by any third party or Governmental Entity, (ii) the preparation of
any Financing Documents requested by the Purchaser and (iii) the satisfaction
of the other parties' conditions to the consummation of the Offer or the
Merger. In addition, no party hereto shall take any action after the date
hereof that would reasonably be expected to materially delay the obtaining
of, or result in not obtaining, any permission, approval or consent from any
Governmental Entity necessary to be obtained prior to the consummation of the
Offer or the Merger.
(b) Each party shall promptly consult with the other parties hereto
with respect to, provide any necessary information with respect to and
provide the other (or its counsel) copies of, all filings made by such party
with any Governmental Entity or any other information supplied by such party
to a Governmental Entity in connection with this Agreement and the
transactions contemplated hereby. Each party hereto shall promptly inform the
other of any communication from any Governmental Entity regarding any of the
transactions contemplated hereby. If any party hereto or affiliate thereof
receives a request for additional information or documentary material from
any such Governmental Entity with respect to the transactions contemplated
hereby, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. To the extent
that transfers of Company Permits are required as a result of execution of
this Agreement or consummation of the transactions contemplated hereby, the
Company shall use its best efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall
be deemed to require the Purchaser to (i) enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring
the Purchaser to hold separate or divest, or to restrict the dominion or
control of the Purchaser or any of its affiliates over, any of the assets,
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properties of businesses of the Purchaser, its affiliates or the Company, in
each case, as in existence on the date hereof, or (ii) defend against any
litigation brought by any Governmental Entity seeking to prevent the
consummation of the transactions contemplated hereby.
(d) The Company agrees to use its reasonable best efforts to assist
the Purchaser in connection with structuring or obtaining any financing in
connection with consummation of the transactions contemplated hereby, and the
Purchaser shall use its reasonable best efforts to obtain such financing.
SECTION 6.5. CONSENTS. The Purchaser and the Company each will use
all reasonable efforts to obtain consents of all third parties and
Governmental Entities necessary, proper or advisable for the consummation of
the transactions contemplated hereby.
SECTION 6.6. PUBLIC ANNOUNCEMENTS. The Purchaser and the Company, as
the case may be, will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated hereby, including, without limitation, the Offer
and the Merger, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or The Nasdaq Stock Market, as determined by the
Purchaser or the Company, as the case may be.
SECTION 6.7. INDEMNIFICATION.
(a) The Purchaser agrees that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries as provided in their respective
Certificates of Incorporation or By-Laws or otherwise in effect as of the
date hereof with respect to matters occurring prior to the consummation of
the last to occur of any of the transactions contemplated hereby shall
survive such consummation and shall continue in full force and effect. To the
maximum extent permitted by the GCL, such indemnification shall be mandatory
rather than permissive, and the Company or the Surviving Corporation, as the
case may be, shall advance expenses in connection with such indemnification.
(b) The Purchaser shall cause the Company or the Surviving
Corporation, as the case may be, to maintain in effect for not less than six
(6) years from the consummation of the last to occur of any of the
transactions contemplated hereby, the policies of the directors' and
officers' liability and fiduciary insurance most recently maintained by the
Company (PROVIDED that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which
are no less advantageous to the beneficiaries thereof so long as such
substitution does not result in gaps or lapses in coverage) with respect to
matters occurring prior to the consummation of the last to occur of any of
the Transactions contemplated hereby to the extent available, PROVIDED that
in no event shall the Company or the Surviving Corporation, as the case may
be, be required to expend more than an amount per year equal to 150% of the
current annual premiums paid by the Company (the "PREMIUM AMOUNT") to
maintain or procure insurance coverage pursuant hereto, and PROVIDED,
FURTHER, that, if the Surviving Corpo-
-37-
ration is unable to obtain the insurance called for by this Section 6.7(b),
the Surviving Corporation will obtain as much comparable insurance as is
available for the Premium Amount per year.
(c) The Company agrees to indemnify and hold harmless the Purchaser
and its affiliates (as defined in the Securities Act), successors, assigns,
and the agents (including, without limitation, financing sources and their
affiliates) and employees of any of them (collectively, the "PURCHASER
INDEMNIFIED PARTIES") from and against any and all costs, expenses, losses,
damages and liabilities (including, without limitation, reasonable attorneys'
fees and expenses) suffered by any of the Purchaser Indemnified Parties
(other than with respect to (i) a claim arising directly from the gross
negligence or willful misconduct of a Purchaser Indemnified Party or (ii) a
claim of breach by the Purchaser of this Agreement or any confidentiality
with the Company to which the Purchaser is a party) to the extent resulting
from, arising out of, or incurred with respect to, any litigation, legal
action, arbitration proceeding, material demand, material claim or
investigation against any of the Purchaser Indemnified Parties in connection
with the Purchaser's proposal to acquire Common Shares as set forth in this
Agreement, or in connection with any Acquisition Proposal relating to the
Purchaser or any circumstances related thereto.
SECTION 6.8. FINANCIAL STATEMENTS. The Company shall promptly
prepare at the end of each month and promptly deliver to the Purchaser upon
completion the balance sheet, income statement and statement of cash flows
prepared in accordance with GAAP of the Company for each month ended between
the date of this Agreement and the consummation of the Offer or the Effective
Time, as the case may be. The Company shall promptly prepare all reasonably
requested financial statements required to be included in the Financing
Documents.
SECTION 6.9. EMPLOYEE BENEFIT ARRANGEMENTS. The Company will not
take any action which could prevent or impede the termination of the Stock
Plans and any other plans, programs or arrangements providing for the
issuance or grant of any other interest in respect of the capital stock of
the Company or any Subsidiary of the Company in each case effective prior to
the Effective Time. The Company will take all necessary action to (i) ensure
that none of Parent, the Company or any of their respective Subsidiaries is
or will be bound by any Options, other options, warrants, rights or
agreements which would entitle any Person, other than Parent or its
affiliates, to own any capital stock of the Surviving Corporation or any of
its subsidiaries or to receive any payment in respect thereof as of the
Effective Time and (ii) obtain all necessary consents so that after the
Effective Time, holders of Options will have no rights other than the rights
of the holders of Options to receive the Cash Payment, if any, in
cancellation and settlement thereof.
SECTION 6.10. NOTIFICATION OF CERTAIN MATTERS. The Purchaser and the
Company shall promptly notify each other of (i) the occurrence or
non-occurrence of any fact or event which would be reasonably likely (A) to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to the
Effective Time or (B) to cause any covenant, condition or agreement under
this Agreement not to be complied with or satisfied in any material respect
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 in any material respect; PROVIDED, HOWEVER,
that no
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such notification shall affect the representations or warranties of any party
or the conditions to the obligations of any party hereunder. Each of the
Company, Parent and the Purchaser shall give prompt notice to the other
parties hereof of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby by this Agreement.
SECTION 6.11. RIGHTS AGREEMENT. Except as contemplated hereby, the
Company covenants and agrees that it will not (i) redeem the Rights, (ii)
amend the Rights Agreement or (iii) take any action which would allow any
Person (as defined in the Rights Agreement) other than Parent or the
Purchaser to acquire beneficial ownership of 15% or more of the Common Shares
without causing a Distribution Date or a Triggering Event (as such terms are
defined in the Rights Agreement) to occur.
SECTION 6.12. STATE TAKEOVER LAWS. The Company shall, upon the
request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the
transactions contemplated hereby by this Agreement, including the Offer and
the Merger, of any state takeover law.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS. The respective obligations of Parent, the Purchaser
and the Company to consummate the Merger are subject to the satisfaction, at
or before the Effective Time, of each of the following conditions:
(a) STOCKHOLDER APPROVAL. The stockholders of the Company shall have
duly approved the transactions contemplated hereby by this Agreement by the
requisite vote.
(b) PURCHASE OF COMMON SHARES. The Purchaser shall have accepted for
payment and paid for Common Shares pursuant to the Offer in accordance with
the terms hereof.
(c) INJUNCTIONS; ILLEGALITY. The consummation of the Merger shall
not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity, and there shall not have been any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity which prevents the consummation of the Merger or has the effect of
making the purchase of Common Shares illegal.
(d) HSR ACT. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or terminated.
-39-
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the Offer and
the Merger may be abandoned at any time prior to the Effective Time
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of the Company (with any
termination by Parent also being an effective termination by the Purchaser):
(a) by mutual written consent duly authorized by the Company (by
action of the Company Board) and the Parent;
(b) by Parent or the Company if (i) any court or other Governmental
Entity of competent jurisdiction shall have issued a final order, decree or
ruling (which order, decree or ruling the parties hereto shall use their best
efforts to lift) or taken any other final action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling
or other action is or shall have become final and nonappealable; or (ii) the
Effective Time shall not have occurred on or before the date which is six
months from the date hereof; PROVIDED, HOWEVER, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date;
(c) by Parent upon an occurrence or circumstance which would result
in a failure to satisfy any of the Tender Offer Conditions, the Purchaser
shall have (i) failed to commence the Offer within the time period prescribed
in Section 1.1(a), (ii) terminated the Offer without having accepted any
Common Shares for payment thereunder, or (iii) failed to pay for Common
Shares pursuant to the Offer by the date which is four months from the date
hereof, unless, in each case, such failure to commence the Offer or pay for
Common Shares (whether before or after termination of the Offer) shall have
been caused by or resulted from a material breach of any of Parent's or the
Purchaser's representations, warranties or covenants, which breach cannot be
or has not been cured within thirty (30) days following receipt of written
notice of such breach;
(d) by the Company if (i) due to an occurrence or circumstance which
would result in a failure to satisfy any of the Tender Offer Conditions, the
Purchaser shall have (A) failed to commence the Offer within the time period
prescribed in Section 1.1(a), (B) terminated the Offer without having
accepted any Common Shares for payment or (C) failed to pay for Common Shares
pursuant to the Offer by the date which is four months from the date hereof,
unless, in each case, such failure to commence the Offer or pay for Common
Shares (whether before or after termination of the Offer) shall have been
caused by or resulted from a material breach of any of the Company's
representations, warranties or covenants, or (ii) prior to the purchase of
Common Shares pursuant to the Offer, a corporation, partnership, person or
other entity or group shall have made a BONA FIDE Acquisition Proposal that
the Company Board by majority vote in good faith determines (A) after
consultation with and receipt of advice from its outside legal counsel, that
failing to take such action is reasonably determined to constitute a breach
of the fi-
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duciary duties of the Company Board under applicable law, and (B) after
consultation with and receipt of written advice from the Financial Advisor or
another nationally recognized investment banking firm, that such proposal is
more favorable to the Company's stockholders from a financial point of view
than the Offer and the Merger (including any adjustment to the terms and
conditions proposed by Purchaser in response to such BONA FIDE Acquisition
Proposal), PROVIDED that such termination under this clause (ii) shall not be
effective until payment of the fee required by Section 8.3(a);
(e) by Parent prior to the purchase of Common Shares pursuant to the
Offer, if (i) there shall have been a material breach of any of the Company's
representations, warranties or covenants, which breach cannot be or has not
been cured within 30 days following receipt of written notice of such breach,
(ii) the Company Board shall withdraw, modify, or change (including by
amendment of the Schedule 14D-9) its recommendation or approval in respect of
this Agreement or the Offer in a manner adverse to Purchaser, or shall have
adopted any resolution to effect any of the foregoing, (iii) the Company
Board shall have recommended any proposal other than this Agreement in
respect of an Acquisition Proposal, (iv) the Company shall have exercised a
right with respect to an Acquisition Proposal referenced in Section 6.2 and
shall, directly or through its representatives, continue discussions with any
third party concerning an Acquisition Proposal for more than 10 business days
after the date of receipt of such Acquisition Proposal, (v) an Acquisition
Proposal that is publicly disclosed and that contains a proposal as to price
(without regard to whether such proposal specifies a specific price or a
range of potential prices) shall have been commenced, publicly proposed or
communicated to the Company and the Company shall not have rejected such
proposal within 10 business days of the earlier to occur of (A) the Company's
receipt of such Acquisition Proposal and (B) the date such Acquisition
Proposal first becomes publicly disclosed, (vi) any Person or group (as
defined in Section 13(d)(3) of the Exchange Act) other than Purchaser or any
of its subsidiaries or affiliates shall have become the beneficial owner of
more than 15% of the outstanding Common Shares (either on a primary or a
fully diluted basis); PROVIDED, HOWEVER, that this provision shall not apply
to any Person that owns more than 15% of the outstanding Common Shares on the
date hereof; PROVIDED, FURTHER, that such Person does not increase its
beneficial ownership beyond the number of Shares such Person beneficially
owns on the date hereof, or (vii) the Minimum Condition (as defined in Annex
I) shall not have been satisfied by the initially scheduled expiration date
of the Offer and on or prior to such date an entity or group (other than
Purchaser) shall have made and not withdrawn a proposal with respect to an
Acquisition Proposal; or
(f) by the Company if there shall have been a material breach of any
of Purchaser's or Parent's representations, warranties or covenants which
breach cannot be or has not been cured within 30 days of the receipt of
written notice thereof.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement pursuant to Section 8.1, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors,
officers or stockholders, other
-41-
than the provisions of this Section 8.2 and Sections 9.3 and 8.3. Nothing
contained in this Section 8.2 shall relieve any party from liability for any
breach of this Agreement.
SECTION 8.3. FEES AND EXPENSES.
(a) In the event that (i) Parent shall have terminated this
Agreement pursuant to Sections 8.1(e)(i), (vi) or (vii) and within twelve
(12) months following the date of any such termination the Company shall have
entered into a definitive agreement or agreement in principle with respect to
an Acquisition Proposal with a third party or an Acquisition Proposal with
respect to the Company shall have been consummated; or (ii) the Parent shall
have terminated this Agreement pursuant to Sections 8.1(e)(ii), (iii), (iv)
or (v); or (iii) the Company desires to terminate this Agreement pursuant to
Section 8.1(d)(ii), then the Company shall pay to Parent, (A) within one (1)
business day following the execution and delivery of such agreement, in the
case of clause (i) of this Section 8.3(a) or (B) within one (1) business day
of such termination, in the case of clause (ii) of this Section 8.3(a), or
(C) immediately prior to such termination, in the case of clause (iii) of
this Section 8.3(a), a termination fee in cash, of $3,000,000 (the
"TERMINATION FEE"), PROVIDED, HOWEVER, that the Company in no event shall be
obligated to pay more than one such Termination Fee with respect to all such
agreements and occurrences and such termination.
(b) Upon the termination of this Agreement for any reason prior to
the purchase of Common Shares by the Purchaser pursuant to the Offer (other
than termination (i) by the Company pursuant to Section 8.1(f) or (ii) by the
Parent pursuant to Section 8.1(c) solely as a result of the failure to
satisfy the condition set forth in paragraph (h) of Annex I at a time when
there is no breach of any of the Company's representations, warranties or
obligations set forth herein and all of the other conditions set forth in
Annex I are satisfied) the Company shall reimburse Parent, the Purchaser and
their respective affiliates (not later than one (1) business day after
submission of statements therefore) for all actual documented out-of-pocket
fees and expenses, not to exceed $1,000,000, actually and reasonably incurred
by any of them or on their behalf in connection with the Offer and the Merger
and the consummation of all transactions contemplated by this Agreement
(including, without limitation, fees payable to financing sources, investment
bankers, counsel to any of the foregoing, and accountants). The Purchaser has
provided the Company with an estimate of the amount of such fees and expenses
and, if the Purchaser shall have submitted a request for reimbursement
hereunder, will provide the Company in due course with invoices or other
reasonable evidence of such expenses upon request. The Company shall in any
event pay the amount requested (not to exceed $1,000,000) within one (1)
business day of such request, subject to the Company's right to demand a
return of any portion as to which invoices are not received in due course.
(c) Upon the consummation of the Offer, all costs and expenses
incurred by each party hereto in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be paid
by the Company or the Company shall promptly reimburse such party, as the
case may be.
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(d) Except as specifically provided in this Section 8.3 each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4. AMENDMENT. Subject to applicable law, this Agreement
may be amended by action taken by the Company, Parent and the Purchaser at
any time before or after approval of the Merger by the stockholders of the
Company (if required by applicable law) but, after any such approval, no
amendment shall be made which requires the approval of such stockholders
under applicable law without such approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
SECTION 8.5. WAIVER. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in
any document, certificate or writing delivered pursuant hereto, or (iii)
waive compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of either party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
consummation of the last to occur of any of the transactions contemplated
hereby.
SECTION 9.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i)
constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof, and (ii) shall not be assigned by operation of law
or otherwise; PROVIDED, HOWEVER, that the Purchaser may assign any or all of
its rights and obligations under this Agreement to any Subsidiary or
affiliate of the Purchaser, but no such assignment shall relieve the
Purchaser of its obligations hereunder if such assignee does not perform such
obligations.
SECTION 9.3. VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, such provision shall be enforced to the maximum extent
permissible in the circumstances, and the remainder of this Agreement, and
the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement
are agreed to be severable.
SECTION 9.4. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing (including by facsimile
with written confirmation thereof) and unless otherwise expressly provided
herein, shall be delivered during normal busi-
-43-
ness hours by hand, by Federal Express, United Parcel Service or other
nationally recognized overnight commercial delivery service, or by facsimile
notice, confirmation of receipt received, addressed as follows, or to such
other address as may be hereafter notified by the respective parties hereto:
(a) If to Parent or the Purchaser:
GMG Acquisition Corp.
c/o Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert F. End
Facsimile Number: 212-339-8585
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Facsimile Number: 212-403-2223
(b) If to the Company:
Global Motorsport Group, Inc.
16100 Jacqueline Court
Morgan Hill, CA 95037
Attention: James J. Kelly, Jr.
Facsimile Number: (408) 778-7001
With a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, CA 92614
Attention: Thomas D. Magill, Esq.
Facsimile Number: (949) 475-4648
SECTION 9.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of law thereof. The parties hereto
hereby agree and consent to be subject to the exclusive jurisdiction of the
federal and state courts in the State of Delaware in any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by law, (i) any objection that it may now or
hereafter have to laying venue of any suit, action or proceeding brought in
such courts, and (ii)
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any claim that any suit, action or proceeding brought in such courts has been
brought in an inconvenient forum.
SECTION 9.6. DESCRIPTIVE HEADINGS. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.7. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors
and permitted assigns, and except as provided in Sections 6.7 and 8.2,
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.
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first
above written.
STONINGTON ACQUISITION CORP.
By: /s/ Robert F. End
----------------------
Name: Robert F. End
Title: President
GMG ACQUISITION CORP.
By: /s/ Robert F. End
-----------------------
Name: Robert F. End
Title: President
GLOBAL MOTORSPORT GROUP, INC.
By: /s/ Joseph F. Keenan
------------------------
Name: Joseph F. Keenan
Title: Chairman
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ANNEX I
CONDITIONS TO THE OFFER
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX I
IS ATTACHED.
Notwithstanding any other provisions of the Offer, the Purchaser
shall not be required to accept for payment or pay for, and may delay the
acceptance for payment of, or the payment for, any Common Shares, and may
terminate or, subject to the terms of the Merger Agreement, amend the Offer,
if (i) there shall not be validly tendered and not properly withdrawn prior
to the expiration date for the Offer, as it may be extended in accordance
with the Offer (the "EXPIRATION DATE") that number of Common Shares which
represents at least a majority of the total number of outstanding Common
Shares on a fully diluted basis on the date of purchase (not taking into
account the Rights) (the "MINIMUM CONDITION"), (ii) any applicable waiting
period under the HSR Act shall not have expired or been terminated prior to
the expiration of the Offer, or (iii) at any time on or after the date of the
Merger Agreement and prior to the acceptance for payment of Common Shares,
any of the following conditions exist:
(a) there shall be threatened or pending any action, suit or
proceeding or any statute, rule, regulation, judgment, order or
injunction proposed, sought, promulgated, enacted, entered, enforced or
deemed applicable to the Offer, or any other action shall have been
taken, proposed or threatened, by any Governmental Entity or by any
court of competent jurisdiction, other than the routine application to
the Offer, the Merger or other subsequent business combination of
waiting periods under the HSR Act, (i) seeking to prohibit or impose
any material limitations on Parent's or the Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or
affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent
or the Purchaser and their respective Subsidiaries, in each case taken
as a whole, (ii) seeking to make the acceptance for payment of, or the
payment for, some or all of the Common Shares illegal or otherwise
prohibiting, restricting or significantly delaying consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, or seeking to obtain from the
Company or the Purchaser any damages that are material in relation to
the Company and its Subsidiaries as taken as a whole, (iii) seeking to
impose material limitations on the ability of the Purchaser, or render
the Purchaser unable, to acquire or hold or to exercise effectively all
rights of ownership of the Common Shares, including, without
limitation, the right to vote any Common Shares purchased by the
Purchaser on all matters properly presented to the stockholders of the
Company, or effectively to control in any material respect the
business, assets or operations of the Company, its Subsidiaries or the
Purchaser or any of their respective affiliates, (iv) seeking to impose
circumstances under which the purchase or payment
for some or all of the Common Shares pursuant to the Offer and Merger
could have a Purchaser Material Adverse Effect, or (v) which otherwise
is reasonably likely to have a Company Material Adverse Effect; or
(b) there shall have occurred any change that constitutes a Company
Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc. or The Nasdaq Stock Market for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to
market conditions), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or
not mandatory), by any U.S. governmental authority or agency, likely to
materially adversely affect, the extension of credit by banks or other
financial institutions, (v) a change in general financial, bank or
capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit
or syndicate loans, (vi) from the date of the Merger Agreement through
the date of termination or expiration of the Offer, a decline of at
least 15% in the Standard & Poor' 500 Index, or (vii) in the case of
any of the foregoing, existing at the date of the execution of the
Merger Agreement, a material acceleration or worsening thereof; or
(d) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent or the
Purchaser, any of their respective affiliates, or any group of which
any of them is a member shall have acquired beneficial ownership of
more than 15% of the outstanding Common Shares or shall have entered
into a definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Transaction involving the
Company or any of its Subsidiaries; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) (i) the Company Board shall have withdrawn, changed or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to
the Purchaser or Parent its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have recommended an
Acquisition Proposal, or shall have adopted any resolution to effect
any of the foregoing, (ii) the Company Board shall have recommended any
proposal other than this Agreement in respect of an Acquisition
Proposal, (iii) the Company shall have exercised a right with respect
to an Acquisition Proposal referenced in Section 6.2 and shall have,
directly or through its representatives, continued discussions with any
third party concerning an Acquisition Proposal
I-2
for more than ten (10) business days after the date of receipt of such
Acquisition Proposal, or (iv) an Acquisition Proposal that is publicly
disclosed and that contains a proposal as to price (without regard to
whether such proposal specifies a specific price or a range of
potential prices) shall have been commenced, publicly proposed or
communicated to the Company and the Company shall not have rejected
such proposal within ten (10) business days of the earlier to occur of
(A) the Company's receipt of such Acquisition Proposal and (B) the date
such Acquisition Proposal first becomes publicly disclosed; or
(g) all consents, permits and approvals of Governmental Entities and
other persons set forth in Section 4.6 of the Company Disclosure
Schedule and identified with an asterisk shall not have been obtained
with no material adverse conditions attached and no material expense
imposed on the Company or any of its Subsidiaries; or
(h) the Purchaser and Parent shall not have obtained the financing set
forth in the Financing Letters unless the failure to obtain such
financing is due to the Purchaser's or Parent's failure to perform any
obligation required thereunder; or
(i) the Purchaser shall have not entered into satisfactory
arrangements with senior management of the Company with respect to
their continued employment in the Company; or
(j) (i) the representations and warranties made by the Company in the
Merger Agreement shall not have been true and correct in all material
respects when made or shall have ceased to be true and correct in all
material respects as of the Expiration Date as if made as of such date,
or (ii) as of the Expiration Date the Company shall not in all material
respects have performed its material obligations and agreements and
complied with its material covenants to be performed and complied with
by it under the Merger Agreement.
The parties acknowledge that the Conditions to the Offer set forth
above in this Annex I are for the sole benefit of the Purchaser, that the
Company shall not assert failure of, or waive, any such condition without the
prior written consent of the Purchaser and that if the Purchaser elects to
waive any such condition to the Offer, the Company shall cooperate and comply
with such election.
I-3