EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
Among
CABLEVISION SYSTEMS CORPORATION,
CCG HOLDINGS INC.
and
CLEARVIEW CINEMA GROUP, INC.
Dated as of August 12, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of August 12, 1998, among Cablevision Systems Corporation, a Delaware
corporation ("Parent"), CCG Holdings Inc, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Clearview Cinema Group,
Inc., a Delaware corporation (the "Company" the Company and Merger Sub sometimes
being hereinafter collectively referred to as the "Constituent Corporations")
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Sub and the Company have approved the merger of the Company with Merger Sub (the
"Merger") and approved and declared advisable the Merger upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, provided that the Average Parent Share Price (as defined in
Section 4.1(a)) is greater than or equal to the Floor Price (as defined in
Section 1.1), it is intended that, for federal income tax purposes, the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, certain stockholders of the Company
(the "Selling Stockholders") who own or control the right to vote Shares and
other Company Securities (each as defined in Section 4.1(a)) representing a
majority of the outstanding Shares on a fully diluted basis are entering into
one or more voting and option agreements with Parent (the "Stockholder
Agreements"), pursuant to which each of the Selling Stockholders has agreed to
vote all of the Shares and other Company Securities currently beneficially owned
and hereinafter acquired by him, her or it in favor of the Merger (and has
agreed, if so requested by Parent, to exercise any warrants to purchase Shares
so that he, she orit may vote such Shares together with other holders of Shares
at the Stockholders Meeting);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, Midmark Capital, L.P. (the
"Warrantholder"), the holder of a warrant (the "Class A Warrant") to purchase
282,600 Shares, is entering into an agreement with the Company and Parent (the
"Warrantholder Agreement"), pursuant to which the Warrantholder and the Company
have agreed that immediately prior to the Effective Time (as defined in Section
1.3) the Warrantholder shall surrender its Class A Warrant to the Company for
cancellation in exchange for payment by the Company of $1.00; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time, the Company shall be merged with and
into Merger Sub and the separate corporate existence of the Company shall
thereupon cease. Merger Sub shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), and the
separate corporate existence of Merger Sub with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Delaware General Corporation Law,
as amended (the "DGCL"); provided, however, that if the Average Parent Share
Price is less than $72.00 (the "Floor Price"), at Parent's sole option and
discretion, at the Effective Time (as defined in Section 1.3), Merger Sub will
be merged with and into the Company, the separate corporate existence of Merger
Sub shall cease, the Company shall be the Surviving Corporation and the separate
corporate existence of the Company shall continue unaffected by the Merger.
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1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx at 9:00 A.M. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "Closing
Date").
1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the "Delaware Certificate
of Merger") to be executed, acknowledged and filed with the Secretary of State
of Delaware as provided in Section 251 of the DGCL. The Merger shall become
effective at the time when the Delaware Certificate of Merger has been duly
filed with the Secretary of State of Delaware (the "Effective Time").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of incorporation
of Merger Sub as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"),
until duly amended as provided therein or by applicable law; provided, however,
that if the Average Parent Share Price is less than the Floor Price and Parent
shall elect that Merger Sub merge with and into the Company at the Effective
Time, the Charter shall be amended and restated to be identical to the
certificate of incorporation of Merger Sub until duly amended as provided
therein or by applicable law.
2.2. The By-Laws. The by-laws of Merger Sub in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
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ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
3.2. Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Subject to Section 4.1(b) and Section 4.2,
(i) each share of the Common Stock, par value $.01 per share, of the
Company (the "Shares") issued and outstanding at the Effective Time (other
than (A) Shares owned by Parent, Merger Sub or any other direct or indirect
subsidiary of Parent (collectively, the "Parent Companies") or by the
Company or any direct or indirect subsidiary of the Company (collectively,
the "Company Entities") and in each case not held on behalf of third
parties and (B) Shares ("Dissenting Shares") that are held by stockholders
("Dissenting Common Stockholders") exercising appraisal rights pursuant to
Section 262 of the DGCL (collectively, "Excluded Shares")) shall be
converted into, and become exchangeable for, at the option of the holder
thereof (the "Share Merger Consideration"), (A) $24.25 in cash (the "Share
Cash Consideration") or (B) that number of
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shares of Class A Common Stock, par value $.01 per share, of Parent
("Parent Common Stock") (the "Share Stock Consideration") equal to the
amount (rounded to four decimal places)(the "Share Conversion Number")
derived by dividing $24.25 by the average (rounded to four decimal places)
of the average of the daily per share high and low sales prices, regular
way (the "Average Parent Share Price") of Parent Common Stock as reported
on the American Stock Exchange, Inc. (the "ASE") composite transactions
reporting system (as reported in the New York City edition of The Wall
Street Journal or, if not reported therein, another authoritative source)
on each of the ten (10) trading days (the "Averaging Period") ending on and
including the third trading day prior to the Closing Date; provided,
however, that, if the Average Parent Share Price is less than the Floor
Price, the Share Merger Consideration shall be the Share Cash Consideration
and no holder of Shares shall have the option or right to elect to receive
(and Parent shall have no obligation to issue) Share Stock Consideration;
(ii) each share of the Class A Convertible Preferred Stock, par value
$.01 per share, of the Company (the "Class A Preferred Shares") issued and
outstanding at the Effective Time (other than (A) Class A Preferred Shares
owned by the Parent Companies or by the Company Entities and in each case
not held on behalf of third parties and (B) Class A Preferred Shares
("Dissenting Class A Preferred Shares") that are held by stockholders
("Dissenting Class A Preferred Stockholders") exercising appraisal rights
pursuant to Section 262 of the DGCL (collectively, "Excluded Class A
Preferred Shares") shall be converted into, and become exchangeable for, at
the option of the holder thereof (the "Class A Preferred Share Merger
Consideration"),(A) the amount, in cash (the "Class A Preferred Share Cash
Consideration"), derived by multiplying (x) the number of Shares issuable
upon conversion of a Class A Preferred Share immediately prior to the
Effective Time (the "Class A Conversion Number") by (y) the Share Cash
Consideration or (B) the number of shares of Parent Common Stock (the
"Class A Preferred Share Stock Consideration") equal to the amount (rounded
to four decimal places) derived by multiplying the Class A Conversion
Number and the Share Conversion Number; provided, however, that, if the
Average Parent Share Price is less than the Floor
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Price, the Class A Preferred Share Merger Consideration shall be the Class
A Preferred Share Cash Consideration and no holder of Class A Preferred
Shares shall have the right or option to elect to receive (and Parent shall
have no obligation to issue) Class A Preferred Share Stock Consideration;
(iii) each share of the Class B Nonvoting Cumulative Redeemable
Preferred Stock, par value $.01 per share, of the Company (the "Class B
Preferred Shares") issued and outstanding at the Effective Time (other than
(A) Class B Preferred Shares owned by the Parent Companies or by the
Company Entities and in each case not held on behalf of third parties and
(B) Class B Preferred Shares ("Dissenting Class B Preferred Shares") that
are held by stockholders ("Dissenting Class B Preferred Stockholders")
exercising appraisal rights pursuant to Section 262 of the DGCL
(collectively, "Excluded Class B Preferred Shares") shall be converted
into, and become exchangeable for (the "Class B Preferred Share Merger
Consideration"), the amount, in cash (the "Class B Preferred Share Cash
Consideration"), equal to the redemption price per Class B Preferred Share
that would be payable by the Company in accordance with the Certificate of
Designation of the Class B Preferred Shares if the Company were to redeem
the Class B Preferred Shares immediately prior to the Effective Time; and
(iv) each share of the Class C Convertible Preferred Stock, par value
$.01 per share, of the Company (the "Class C Preferred Shares" and,
together with the Class A Preferred Shares and the Class B Preferred
Shares, the "Preferred Shares" and, the Preferred Shares together with the
Shares, the "Company Securities") issued and outstanding at the Effective
Time (other than (A) Class C Preferred Shares owned by the Parent Companies
or by the Company Entities and in each case not held on behalf of third
parties and (B) Class C Preferred Shares ("Dissenting Class C Preferred
Shares" and, together with the Dissenting Shares, the Dissenting Class A
Preferred Shares and the Dissenting Class B Preferred Shares, the
"Dissenting Securities") that are held by stockholders ("Dissenting Class C
Preferred Stockholders" and, together with the Dissenting Common
Stockholders, the Dissenting Class A Preferred Stockholders and the
Dissenting Class B Preferred Stockholders, the "Dissenting
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Securityholders") exercising appraisal rights pursuant to Section 262 of
the DGCL (collectively, "Excluded Class C Preferred Shares" and, together
with the Excluded Shares, the Excluded Class A Preferred Shares and the
Excluded Class B Preferred Shares, the "Excluded Securities") shall be
converted into, and become exchangeable for, at the option of the holder
thereof (the "Class C Preferred Share Merger Consideration" and, together
with the Share Merger Consideration, the Class A Preferred Share Merger
Consideration and the Class B Preferred Stock Merger Consideration, the
"Merger Consideration") (A) the amount, in cash (the "Class C Preferred
Share Cash Consideration" and, together with the Share Cash Consideration,
the Class A Preferred Share Cash Consideration and the Class B Preferred
Share Cash Consideration, the "Security Cash Consideration"), derived by
multiplying (x) the number of Shares issuable upon conversion of a Class C
Preferred Share based on an exchange ratio of 51 Shares per Class C
Preferred Share (the "Class C Conversion Number" and, together with the
Conversion Number and the Class A Conversion Number, the "Security
Conversion Number") by (y) the Share Cash Consideration and adding to such
amount the accrued but unpaid dividends on a Class C Preferred Share
through the Effective Time or (B) the number of shares of Parent Common
Stock (the "Class C Preferred Share Stock Consideration" and, together with
the Share Stock Consideration and the Class A Preferred Share Stock
Consideration, the "Security Stock Consideration") equal to the amount
(rounded to four decimal places) derived by multiplying the Class C
Conversion Number and the Share Conversion Number and adding to such number
of shares of Parent Common Stock, the number of shares of Parent Common
Stock derived by dividing the amount of accrued but unpaid dividends on a
Class C Preferred Share through the Effective Time by the Average Parent
Share Price; provided, however, that, if the Average Parent Share Price is
less than the Floor Price, the Class C Preferred Share Merger Consideration
shall be the Class C Preferred Share Cash Consideration and no holder of
Class C Preferred Shares shall have the right or option to elect to receive
(and Parent shall have no obligation to issue) Class C Preferred Share
Stock Consideration.
(b) Cancellation of Company Securities. Each Excluded Security issued
and outstanding immediately prior
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to the Effective Time, shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, shall be
cancelled and retired without payment of any consideration therefor and
shall cease to exist subject to the rights of the holder thereof, if such
holder is a Dissenting Securityholder, under Section 262 of the DGCL. At
the Effective Time, all Company Securities shall no longer be outstanding
and shall be cancelled and retired and shall cease to exist, and each
certificate formerly representing any of such Company Securities (other
than Excluded Securities) (a "Certificate") shall, subject to the terms and
upon the conditions of this Agreement, thereafter represent only the right
to receive the applicable Merger Consideration and the right, if any, to
receive pursuant to Section 4.2(e) cash in lieu of any fractional shares
into which such Company Securities otherwise would have been converted
pursuant to Section 4.1(a) and any distribution or dividend pursuant to
Section 4.2(c).
(c) Merger Sub. At the Effective Time, each share of Common Stock, par
value $.01 per share (the "Merger Sub Shares"), of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain
outstanding and certificates evidencing any such shares of Merger Sub shall
continue to evidence shares of Common Stock of the Surviving Corporation;
provided, however, that if the Average Parent Share Price is less than the
Floor Price and Parent shall elect that Merger Sub be merged with and into
the Company at the Effective Time, each Merger Sub Share outstanding
immediately prior to the Effective Time shall be converted into one share
of common stock of the Surviving Corporation.
4.2. Allocation of Merger Consideration; Election Procedures. For
purposes of this Agreement "Share Equivalents" shall mean (i) with respect to
Shares, the number of outstanding Shares, (ii) with respect to Class B Preferred
Shares, the amount derived by multiplying (A) the number of outstanding Class B
Preferred Shares by (B) the amount derived by dividing the Class B Preferred
Share Cash Consideration by the Share Cash Consideration, and (iii) with respect
to the Class A Preferred Shares and the Class C Preferred Shares (the
"Convertible Preferred Shares"), the number of Shares into which such
outstanding Convertible Preferred Shares could be converted immediately prior to
the Effective Time.
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(a) Allocation.(i) If the holders of Shares and Convertible Preferred
Shares have the option to elect Security Cash Consideration or Security
Stock Consideration, the number of Shares and Convertible Preferred Shares
to be converted into the right to receive the applicable Security Stock
Consideration and the applicable Security Cash Consideration in the Merger
shall be determined as follows:
(ii) Subject to Section 4.2(a)(iv), notwithstanding anything in
this Agreement to the contrary, the aggregate number of Share
Equivalents (the "Stock Election Number") represented by the Shares
and Convertible Preferred Shares to be converted into the right to
receive the applicable Security Stock Consideration shall be equal, as
closely as practicable, to forty-five percent (45%) of the sum of (A)
the aggregate number of Share Equivalents represented by outstanding
Company Securities (treating any Company Securities to be cancelled
pursuant to Section 4.1(b) as not being outstanding for this purpose)
immediately prior to the Effective Time and (B) the aggregate number
of Share Equivalents represented by any Class B Preferred Shares
redeemed by the Company prior to the Effective Time.
(iii) Subject to Section 4.2(a)(iv), notwithstanding anything in
this Agreement to the contrary, the aggregate number of Share
Equivalents (the "Cash Election Number") represented by the Shares and
Convertible Preferred Shares to be converted into the right to receive
the applicable Security Cash Consideration shall equal, as closely as
practicable, the number of Share Equivalents represented by the
difference between (A) the aggregate number of Share Equivalents
represented by outstanding Company Securities immediately prior to the
Effective Time and (B) the Stock Election Number.
(iv) Notwithstanding anything in this Agreement to the contrary,
unless the Average Parent Share Price is less than the Floor Price, if,
absent this Section 4.2(a)(iv), as of the Effective Time the aggregate
value of the Security Stock Consideration (calculated using the most
recent available price for Parent Common Stock on the ASE) would be
less than 45% of the sum of (x) the aggregate value of the Security
Cash Consideration and (y) the aggregate value of the Security Stock
Consideration (calculated using the most
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recent available price for Parent Common Stock on the ASE), then the
Stock Election Number and the Cash Election Number (but not the
Security Conversion Numbers) shall be adjusted as necessary so that, as
of the Effective Time, the aggregate value of the Security Stock
Consideration (calculated using the most recent available price for
Parent Common Stock on the ASE) shall equal, as closely as possible,
45% of the sum of (x) the aggregate value of the Security Cash
Consideration and (y) the aggregate value of the Security Stock
Consideration (calculated using the most recent available price for
Parent Common Stock on the ASE); provided, however, that if the Stock
Election Number resulting from such adjustment would be greater than
the Stock Election Number that would have resulted pursuant to Section
4.2(a)(ii) (without regard to this Section 4.2(a)(iv)) if the Average
Parent Share Price had been equal to the Floor Price, then Parent, at
its sole discretion, shall have the option of either (i) adjusting the
Stock Election Number and the Cash Election Number as set forth above
in this Section 4.2(a)(iv) or (ii) treating the Average Parent Share
Price as being less than the Floor Price for all purposes of this
Agreement, including the availability of the election set forth in
Section 1.1 and the concomitant change in the form of the Merger
Consideration to all cash as set forth in the provisos to Sections
4.1(a)(i), (ii) and (iv).
(b) Election and Proration Procedures.
(i) As of the Effective Time, Parent shall deposit, or shall
cause to be deposited, with an exchange agent selected by Parent, with
the Company's prior approval, which shall not be unreasonably withheld
or delayed (the "Exchange Agent"), for the benefit of the holders of
Certificates representing Company Securities issued and outstanding
immediately prior to the Effective Time, the shares of Parent Common
Stock, cash and any dividends or other distributions with respect to
the Parent Common Stock to be issued or paid pursuant to Section 4.1
and this Section 4.2 in exchange for such Company Securities upon due
surrender of such Certificates pursuant to the provisions of this
Article IV (such cash and certificates representing shares of Parent
Common Stock, together with any dividends or other
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distributions payable with respect thereto, being hereinafter referred
to as the "Exchange Fund").
(ii) Provided the Average Parent Share Price is greater than or
equal to the Floor Price, and subject to allocation and proration in
accordance with the provisions of this Section 4.2, each record holder
of Shares and Convertible Preferred Shares (other than Excluded
Securities) issued and outstanding immediately prior to the Election
Deadline (as defined below) shall be entitled (A) to elect to receive
in respect of each such Company Security (x) the applicable Security
Cash Consideration (a "Cash Election") or (y) the applicable Security
Stock Consideration (a "Stock Election") or (B) to indicate that such
record holder has no preference as to the receipt of the applicable
Security Cash Consideration or the applicable Security Stock
Consideration for such Shares or Convertible Preferred Shares (a
"Non-Election"). Shares and Convertible Preferred Shares in respect of
which a Non-Election is made (including Shares and Convertible
Preferred Shares in respect of which such a Non-Election is deemed to
have been made pursuant to this Section 4.2 and Section 4.3
(collectively, "Non-Election Securities") shall be deemed by Parent,
in its sole and absolute discretion, subject to Sections
4.2(b)(v)-(vii), to be, in whole or in part, Shares and Convertible
Preferred Shares in respect of which Cash Elections or Stock Elections
have been made.
(iii) Elections pursuant to Section 4.2(b)(ii) shall be made on a
form with such provisions as may be reasonably agreed upon by the
Company and Parent (a "Form of Election") to be provided by the
Exchange Agent for that purpose to record holders of Shares and
Convertible Preferred Shares (other than holders of Excluded
Securities), together with appropriate transmittal materials,
at the time of mailing to holders of record of Company Securities of
the Prospectus/Proxy Statement (as defined in Section 6.3) in
connection with the Stockholders Meeting referred to in Section
6.4. Elections shall be made by mailing to the Exchange Agent
a duly completed Form of Election. To be effective, a Form of Election
must be (x) properly completed, signed and submitted to the Exchange
Agent at its designated office by 5:00 p.m. on the business day
that is two trading days prior to the Closing Date (which date
shall be publicly announced by
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Parent as soon as practicable but in no event less than ten trading
days prior to the Closing Date) (the "Election Deadline") and (y)
accompanied by the Certificate(s) representing the Shares and
Convertible Preferred Shares as to which the election is being made
(or by an appropriate guarantee of delivery of such Certificate(s)
by a commercial bank or trust company in the United States or a
member of a registered national security exchange or of the National
Association of Securities Dealers, Inc., provided that such
Certificates are in fact delivered to the Exchange Agent within five
trading days after the date of execution of such guarantee of
delivery). The Company shall use its best efforts to make a Form of
Election available to all Persons who become holders of record of
Shares or Convertible Preferred Shares (other than Excluded
Securities) between the date of mailing described in the first
sentence of this Section 4.2(b)(iii) and the Election Deadline.
Parent shall determine, in its sole and absolute discretion, which
authority it may delegate in whole or in part to the Exchange
Agent, whether Forms of Election have been properly completed, signed
and submitted or revoked. The decision of Parent (or the Exchange
Agent, as the case may be) in such matters shall be conclusive and
binding. Neither Parent nor the Exchange Agent will be under any
obligation to notify any Person of any defect in a Form of Election
submitted to the Exchange Agent. A holder of Shares or Convertible
Preferred Shares that does not submit an effective Form of
Election prior to the Election Deadline shall be deemed to
have made a Non-Election.
(iv) An election pursuant to Section 4.2(b)(ii) may be revoked,
but only by written notice received by the Exchange Agent prior to the
Election Deadline. Any Certificate(s) representing Company Securities
that have been submitted to the Exchange Agent in connection with an
election shall be returned without charge to the holder thereof in the
event such election is revoked as aforesaid and such holder requests
in writing the return of such Certificate(s). Upon any such
revocation, unless a duly completed Form of Election is thereafter
submitted prior to the Election Deadline in accordance with paragraph
(b)(iii), such Shares and Convertible Preferred Shares shall be deemed
Non-Election Securities. In the event that this Agreement is
terminated pursuant to the provisions
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hereof and any Company Securities have been transmitted to the
Exchange Agent pursuant to the provisions hereof, such Company
Securities shall promptly be returned without charge to the Person (as
defined below) submitting the same.
(v) In the event that the aggregate number of Share Equivalents
represented by the outstanding Shares and Convertible Preferred Shares
in respect of which Cash Elections have been made exceeds the Cash
Election Number, (a) all Shares and Convertible Preferred Shares in
respect of which Stock Elections have been made or are deemed to have
been made (the "Stock Election Securities") shall be converted into
the right to receive the applicable Securities Stock Consideration,
and (b) all Non-Election Securities and Shares and Convertible
Preferred Shares in respect of which Cash Elections have been made
shall be converted into the right to receive the respective applicable
Security Stock Consideration or Security Cash Consideration in the
following order and manner:
(A) first, all Non-Election Securities shall be deemed to be
Shares and Convertible Preferred Shares in respect of which Stock
Elections have been made and treated as Stock Election
Securities;
(B) second, if necessary, an aggregate number of shares and
Convertible Preferred Shares in respect of which Cash Elections
have been made shall be deemed converted into and treated as
Stock Election Securities, (such aggregate number to be
apportioned pro-rata among record holders of such Shares and
Convertible Preferred Shares, based on the number of Share
Equivalents represented thereby), so that the number of Share
Equivalents represented by the Shares and Convertible Preferred
Shares so converted, when added to the Share Equivalents
represented by all other Stock Election Securities (including
Non- Election Securities deemed to be Stock Election Securities),
shall equal as closely as practicable, the Stock Election Number;
and
(C) third, any remaining Shares and Convertible Preferred
Shares in respect of which Cash Elections have been made and all
Class B
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Preferred Shares shall be converted into the right to receive
the applicable Security Cash Consideration.
(vi) In the event that the aggregate number of Share
Equivalents represented by the outstanding Shares and Convertible
Preferred Shares in respect of which Stock Elections have been made
exceeds the Stock Election Number, (a) all Shares and Convertible
Preferred Shares in respect of which Cash Elections have been made or
are deemed to have been made (the "Cash Election Securities") and all
Class B Preferred Shares shall be converted into the right to receive
the applicable Securities Cash Consideration, and (b) all Non-Election
Securities and Shares and Convertible Preferred Shares in respect of
which Stock Elections have been made shall be converted into the right
to receive the respective applicable Security Cash Consideration and
Security Stock Consideration in the following order and manner:
(A) first, all Non-Election Securities shall be deemed
to be Shares and Convertible Preferred Shares in respect of
which Cash Elections have been made and treated as Cash
Election Securities;
(B) second, if necessary, an aggregate number of shares
and Convertible Preferred Shares in respect of which Stock
Elections have been made shall be deemed converted into and
treated as Cash Election Securities, such aggregate number
to be apportioned pro-rata among record holders of such
Shares and Convertible Preferred Shares, based on the number
of Share Equivalents represented thereby), so that the
number of Share Equivalents represented by the Shares and
Convertible Preferred Shares so converted, when added to the
Share Equivalents represented by all Class B Preferred
Shares and all other Cash Election Securities (including
Non-Election Securities to be deemed Cash Election
Securities), shall equal as closely as practicable the Cash
Election Number; and
(C) third, any remaining Shares and Convertible
Preferred Shares in respect of which Stock Elections have
been made shall be converted
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into the right to receive the applicable Security Stock
Consideration.
(vii) In the event that clauses (v) and (vi) of this Section 4.2(b)
are not applicable, all Non-Election Securities shall be deemed by Parent,
in its sole and absolute discretion, subject to Section 4.2(a), to be, in
whole or in part, Shares and Convertible Preferred Shares in respect of
which Cash Elections or Stock Elections have been made, as applicable.
(viii) The Exchange Agent, in consultation with Parent and the
Company, shall make all computations to give effect to this Section 4.2.
(ix) Subject to this Section 4.2(b) and Section 4.2(h), upon surrender
of a Certificate representing Stock Election Securities for cancellation to
the Exchange Agent together with a duly completed Form of Election, the
holder of such Certificate shall be entitled to receive (a) a certificate
representing that number of whole shares of Parent Common Stock that such
holder is entitled to receive pursuant to this Article IV, (b) a check in
the amount (after giving effect to any required tax withholdings) of (x)
any cash in lieu of fractional shares plus (y) any unpaid non-stock
dividends and any other dividends or other distributions that such holder
has the right to receive pursuant to the provisions of this Article IV, and
the Certificate so surrendered shall forthwith be cancelled. No interest
will be paid or accrued on any amount payable upon due surrender of the
Certificates representing Stock Election Securities. In the event of a
transfer of ownership of Company Securities that is not registered in the
transfer records of the Company, the applicable Stock Merger Consideration
payable in respect of such Company Securities may be issued and/or paid to
such a transferee if the Certificate formerly representing such Company
Securities is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any certificate for
shares of Parent Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange
-15-
that the Person (as defined below) requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of
certificates for shares of Parent Common Stock in a name other than that of
the registered holder of the Certificate surrendered, or shall establish to
the satisfaction of Parent or the Exchange Agent that such tax has been
paid or is not applicable.
(x) Subject to this Section 4.2(b) and Section 4.2(h), upon surrender
of a Certificate representing Cash Election Securities (or, if the Average
Parent Share Price is less than (or pursuant to Section 4.2(a)(iv), is, at
Parent's option, treated as being less than) the Floor Price, any Company
Securities) for cancellation to the Exchange Agent together with a duly
completed Form of Election, the holder of such Certificate shall be
entitled to receive a check in the amount such holder is entitled to
receive pursuant to this Article IV, and the Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of
Company Securities that is not registered in the transfer records of the
Company, the applicable Cash Merger Consideration payable in respect of
such Company Securities may be issued and/or paid to such a transferee if
the Certificate formerly representing such Company Securities is presented
to the Exchange Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit entity), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d) or
other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Company Securities;
Voting. (i) All shares of Parent Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time and
whenever a dividend or other distribution is declared by Parent in respect of
the Parent Common Stock, the record date for which is at or after the Effective
Time, that declaration shall include dividends or other distributions in respect
of all shares issuable pursuant to this Agreement. No
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dividends or other distributions in respect of Parent Common Stock shall be paid
to any holder of any unsurrendered Certificate representing Stock Election
Securities until such Certificate is surrendered for exchange in accordance
with this Article IV. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be issued and/or paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (A) at the time of such
surrender, the dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock and not paid and (B) at the appropriate payment date, the dividends
or other distributions payable with respect to such whole shares of Parent
Common Stock with a record date after the Effective Time but with a payment date
subsequent to such surrender.
(ii) Holders of unsurrendered Certificates representing Stock Election
Securities shall be entitled to vote after the Effective Time at any
meeting of Parent stockholders the number of whole shares of Parent Common
Stock represented by such Certificates, regardless of whether such holders
have exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Company Securities that were
outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and any
holder of Company Securities entitled to receive a fractional share of Parent
Common Stock but for this Section 4.2(e) shall be entitled to receive a cash
payment in lieu thereof, which payment shall represent such holder's
proportionate interest in a share of Parent Common Stock based on the Average
Parent Share Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock)
that remains unclaimed by the stockholders of the Company for 180 days after the
Effective Time shall be paid to Parent. Any stockholders of the Company who have
not theretofore complied with this Article IV shall thereafter look only to
-17-
Parent for payment of their shares of Parent Common Stock and/or any cash,
dividends and other distributions in respect thereof payable and/or issuable
pursuant to Section 4.1 and this Section 4.2 upon due surrender of their
Certificates (or affidavits of loss in lieu thereof), in each case, without any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Company Securities for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and/or any cash payable and any unpaid dividends or other distributions in
respect thereof pursuant to Sections 4.1 and this 4.2 deliverable in respect of
the Company Securities represented by such Certificate pursuant to this
Agreement.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.8) of the Company shall not be exchanged until Parent has received
a written agreement from such Person as provided in Section 6.8.
4.3. Dissenters' Rights. No Dissenting Securityholder shall be entitled
to any Merger Consideration pursuant to this Article IV unless and until such
Person thereof shall have failed to perfect or shall have effectively withdrawn
or lost such Person's right to dissent from the Merger under the DGCL, and any
Dissenting Securityholder shall be entitled to receive only the payment provided
by Section 262 of the DGCL with respect to Company Securities owned by such
Dissenting Securityholder. If any Person who otherwise would be deemed a
Dissenting Securityholder shall have failed to perfect or shall have effectively
withdrawn or lost the right to dissent with respect to any Company Securities,
such Company Securities shall immediately become Non-Election Shares. The
Company shall give Parent (i)
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prompt notice of any written demands for appraisal, attempted withdrawals of
such demands, and any other instruments served pursuant to applicable law
received by the Company relating to stockholders' rights of appraisal and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal of Dissenting Securities, offer to settle or settle
any such demands or approve any withdrawal of any such demands.
4.4. Adjustments to Prevent Dilution. In the event that the Company
changes the number of Company Securities or securities convertible or
exchangeable into or exercisable for Company Securities, or Parent changes the
number of shares of Parent Common Stock or securities convertible or
exchangeable into or exercisable for shares of Parent Common Stock, issued and
outstanding prior to the Effective Time as a result of a reclassification, stock
split (including, without limitation, the Parent's publicly announced
two-for-one stock split or any reverse split), stock dividend or distribution,
recapitalization, merger, subdivision, issuer tender or exchange offer or other
similar transaction, the Merger Consideration and the Floor Price shall be
equitably adjusted.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. Except as set forth
in the corresponding sections or subsections of the disclosure letter delivered
to Parent by the Company on or prior to entering into this Agreement (the
"Company Disclosure Letter"), the Company hereby represents and warrants to
Parent and Merger Sub that:
(a) Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a
-19-
foreign corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with all
other such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' certificates of
incorporation and by-laws, each as amended to date. The Company's and its
Subsidiaries' certificates of incorporation and by-laws as so made available
are in full force and effect. Section 5.1(a) of the Company Disclosure Letter
contains a correct and complete list of each jurisdiction where the Company and
each of its Subsidiaries is organized and qualified to do business.
As used in this Agreement, the term (i) "Subsidiary" means, with
respect to the Company, Parent or Merger Sub, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such party or by one
or more of its respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries and (ii) "Company Material Adverse Effect" means a
material adverse effect on the financial condition, properties, business or
results of operations of the Company and its Subsidiaries taken as a whole or
a material condition, restriction or other limitation on Parent's ability
to own, operate or otherwise control the Company and its Subsidiaries or their
respective assets and businesses, taken as a whole; provided, however, that
a Company Material Adverse Effect shall not include any effect upon the
financial condition, properties, business or results of operations of the
Company, or any of its Subsidiaries, resulting or arising from (A) changes in
national economic or business conditions generally or affecting the movie
theater industry specifically, or (B) the public announcement of the execution
of the Merger Agreement and the transactions contemplated thereby.
-20-
(b) Capital Structure. The authorized capital stock of the Company
consists of 12,500,000 shares consisting of 10,000,000 Shares, of which
2,304,802 Shares were outstanding as of the close of business on August 11,
1998, and 2,500,000 shares of Preferred Stock, par value $.01 per share, of
which 779 Class A Preferred Shares, 750 Class B Preferred Shares and 3,000 Class
C Preferred Shares were outstanding as of the close of business on August 11,
1998. All of the outstanding Shares and Preferred Shares have been duly
authorized and are validly issued, fully paid and nonassessable. Other than
467,400 Shares reserved for issuance upon conversion of the outstanding Shares
of Class A Preferred Shares and 367,347 Shares reserved for issuance upon
conversion of the outstanding Shares of Class C Preferred Shares, the Company
has no Shares or Preferred Shares reserved for issuance, except for 450,000
Shares reserved for issuance pursuant to options outstanding under the Company's
1997 Stock Incentive Plan, as amended and restated on April 28, 1998 (the "Stock
Plan"), 100,000 Shares reserved for issuance pursuant to warrants (the "IPO
Warrants") held by Prime Charter Ltd. and 282,600 Shares reserved for issuance
pursuant to the Class A Warrant. The Company Disclosure Letter contains a
correct and complete list of each outstanding option to purchase Shares under
the Stock Plan (each a "Company Option"), including the holder, date of grant,
exercise price and number of Shares subject thereto. Each of the outstanding
shares of capital stock or other securities of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned by a direct or indirect wholly-owned subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other encumbrance
("Liens"). Except as set forth above, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, agreements, arrangements or commitments to issue or sell any shares of
capital stock or other securities of the Company or any of its Subsidiaries or
any securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Company or any of its Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. The Company does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter ("Voting Debt"). The Securities (as defined in the
-21-
Stockholders Agreement) represent a majority of the outstanding Shares on a
fully diluted basis, excluding Options not scheduled to vest and become
exercisable before June 30, 1999.
(c) Corporate Authority; Approval and Opinion of Financial Advisor. (i)
The Company has all requisite corporate power and authority and has taken all
corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and to consummate the Merger, subject only to
approval of this Agreement by the holders of a majority of the outstanding
Shares and Class A Preferred Shares, voting together as a single class (the
"Company Requisite Vote"). This Agreement is a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(ii) The Board of Directors of the Company (A) has unanimously
approved and declared advisable this Agreement and the Merger and the other
transactions contemplated hereby and (B) has received the opinion of its
financial advisors, Credit Suisse First Boston Corporation ("CSFB"), to the
effect that, as of the date of this Agreement, the Share Merger
Consideration to be received by the holders of Shares in the Merger is fair
to such holders from a financial point of view, a copy of the written
opinion of which will be delivered to Parent promptly after receipt thereof
by the Company. It is agreed and understood that such opinion is for the
benefit of the Company's Board of Directors and may not be relied on by
Parent or Merger Sub.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Exchange Act
and the Securities Act of 1933, as amended (the "Securities Act"), (C) to comply
with state securities or "blue-sky" laws, and (D) required to be made with the
ASE, no notices, reports or other filings are required to be made by the Company
or any of its Subsidiaries with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company or any of its
-22-
Subsidiaries from, any governmental or regulatory authority, agency,
commission, body or other governmental entity ("Governmental Entity"), in
connection with the execution and delivery of this Agreement by the Company and
the consummation by the Company of the Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent the Company from consummating the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of (A) this Agreement by
the Company and (B) the Stockholders Agreements by the Selling Stockholders
do not, and the consummation (x) by the Company of the Merger and the other
transactions contemplated hereby and (y) the Selling Stockholders of the
transactions contemplated thereby, will not, constitute or result in (A) a
breach or violation of, or a default under, the certificate of
incorporation or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, a
default under, or the acceleration of any obligations or the creation of a
Lien on the assets of the Company or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon the Company or any of its Subsidiaries or any
Law (as defined in Section 5.1(i) or governmental or non-governmental
permit or license to which the Company or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party under
any of the Contracts, except, in the case of clause (B) or (C) above, for
any breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to have a
Company Material Adverse Effect or prevent the Company from consummating
the transactions contemplated by this Agreement and the Stockholders
Agreements.
(e) Company Reports; Financial Statements. The Company has delivered to
Parent and Merger Sub each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1997 (the "Audit
Date"), including the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997, and the Company's Quarterly Report on Form 10-QSB for the
period
-23-
ended March 31, 1998, each in the form (including exhibits, annexes and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any such reports filed subsequent to the date
hereof and as amended, the "Company Reports"). As of their respective dates,
(or, if amended, as of the date of the latest of such amendments) the Company
Reports did not, and any Company Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of income and of changes in financial position
included in or incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents, or will fairly present, the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
(f) Absence of Certain Changes. Except as disclosed in the Company
Reports filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than according to, the ordinary and
usual course of such businesses (other than the capital expenditures and
transactions listed in and permitted by Section 6.1(c)(iii) of the Company
Disclosure Letter) and there has not been (i) any change in the financial
condition, properties, business or results of operations of the Company and its
Subsidiaries taken as a whole or any development or combination of developments
that, individually or in the aggregate, has had or is reasonably likely to have
a Company Material Adverse Effect; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by the Company or any of its
-24-
Subsidiaries, whether or not covered by insurance other than any such damage,
destruction or casualty loss that, individually or in the aggregate has not
had or is not reasonably likely to have a Company Material Adverse Effect; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in respect of the capital stock of the Company; or (iv) any change by the
Company in accounting principles, practices or methods. Section 5.1(f) of the
Company Disclosure Letter contains a list of the executive officers of the
Company and the annual compensation payable to each.
(g) Litigation and Liabilities. Except as disclosed in the Company
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of the Company,
threatened against the Company or any of its Subsidiaries or (ii) liabilities,
whether or not accrued, contingent or otherwise and whether or not required to
be disclosed, or any other facts or circumstances of which the executive
officers of the Company have knowledge that could result in any claims against,
or liabilities of, the Company or any of its Affiliates, except for those that,
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect or prevent the Company from consummating the
transactions contemplated by this Agreement. For purposes of this Agreement
"knowledge" shall mean actual knowledge without investigation.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other plan, agreement, policy
or arrangement that covers employees, directors, consultants, former
employees, former directors or former consultants of the Company and its
Subsidiaries and under which the Company and its Subsidiaries may have
liability (the "Compensation and Benefit Plans") and any trust agreement or
insurance contract forming a part of such Compensation and Benefit Plans
has been made available to Parent prior to the date hereof. The
Compensation and Benefit Plans are listed in Section 5.1(h) of the
-25-
Company Disclosure Letter and any "change of control" or similar provisions
therein are specifically identified in Section 5.1(h) of the Company
Disclosure Letter.
(ii) All Compensation and Benefit Plans comply in all material
respects with all applicable law, including but not limited to the Code and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Each Compensation and Benefit Plan that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (including a determination that
the related trust under such Compensation and Benefit Plan is exempt from
tax under Code Section 501(a) from the Internal Revenue Service (the "IRS")
for "TRA" (as defined in Rev. Proc. 93-39), and the Company is not aware of
any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the
executive officers of the Company, threatened litigation relating to the
Compensation and Benefit Plans other than routine claims for benefits.
Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Compensation and Benefit Plan that,
assuming the taxable period of such transaction expired as of the date
hereof, would subject the Company or any of its Subsidiaries to a material
tax or penalty imposed by either Section 4975 of the Code or Section 502 of
ERISA.
(iii) Neither the Company nor any Subsidiary or any entity (an "ERISA
Affiliate") which is considered one employer with the Company under Section
4001(b) of ERISA or Section 414 of the Code (an "ERISA Affiliate Plan")
currently maintains a "single employer plan" within the meaning of Section
4001(a)(15) of ERISA. Except as scheduled in the list under Section
5.1(h)(iii) of the Company Disclosure Letter, none of the Company, any of
its Subsidiaries or any ERISA Affiliate has contributed, or been obligated
to contribute, to a multiemployer plan (within the meaning of Section 3(37)
of ERISA) under Subtitle E of Title IV of ERISA at any time since September
26, 1980. There is no pending investigation or enforcement action by the
Department of Labor or IRS or any other
-26-
governmental agency with respect to any Compensation and Benefit Plan.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan, including any multiemployer plan (within the
meaning of Section 3(37) of ERISA), as of the date hereof have been timely
made or have been reflected on the Company's financial statements.
(v) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Compensation and Benefit Plan,
other than benefits mandated by Section 4980 B of the Code except as set
forth in the Company Disclosure Letter. The Company or its Subsidiaries may
amend or terminate any such plan under the terms of such plan at any time
without incurring any material liability thereunder.
(vi) The consummation of the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreements will not,
directly or indirectly (including, without limitation, as a result of any
termination of employment following the Effective Time) (x) entitle any
employees, consultants or directors of the Company or its Subsidiaries to
any payment (including severance pay or similar compensation) or any
increase in compensation, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans other than the Stock Plan or (z) result in
any breach or violation of, or a default under, any of the Compensation and
Benefit Plans.
(vii) The Company and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees.
(viii) With respect to each Compensation and Benefit Plan, if
applicable, the Company has provided, made available, or will make
available upon request, to Purchaser, true and complete copies of existing:
(A) two most recent Forms 5500 filed with the IRS; (B) most recent
actuarial report and financial statement; (C) the most recent summary plan
description; (D) most recent determination letter issued by the IRS; (E)
any Form 5310 or Form 5330 filed
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with the IRS; and (F) most recent nondiscrimination tests performed under
ERISA and the Code (including 401(k) and 401(m) tests).
(ix) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
(x) With respect to the Company's Deferred Compensation Plan listed as
item #2 of the Compensation and Benefit Plans listed in Section 5.1(h)(i)
of the Company Disclosure Letter, there is no liability, vested or
unvested, to any individual under said plan of deferred compensation.
(i) Compliance with Laws; Permits. Except as set forth in the Company
Reports filed prior to the date hereof, the businesses of each of the Company
and its Subsidiaries have not been, and are not being, conducted in violation of
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit (other than "Environmental Laws" as defined in Section 5.1(k))
of any Governmental Entity (collectively, "Laws"), except for violations that,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect or prevent the Company from consummating the
transactions contemplated by this Agreement. Except as set forth in the Company
Reports filed prior to the date hereof, no investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the executive officers of the Company,
threatened except for those the outcome of which are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent the Company from consummating the transactions contemplated by this
Agreement. No material change is required in the Company's or any of its
Subsidiaries' processes, properties or procedures in connection with any such
Laws except for such changes the failure to make, individually or in the
aggregate, would not be reasonably be likely to have a Company Material Adverse
Effect; and the Company has not received any notice or communication of any
material noncompliance with any such Laws that has not been cured as of the date
hereof. The Company and its Subsidiaries each has all permits, licenses,
-28-
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently conducted
other than those the absence of which has not had and is not reasonably likely
to have a Company Material Adverse Effect.
(j) Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (including
Section 203 of the DGCL) (each a "Takeover Statute") or any anti-takeover
provision in the Company's certificate of incorporation and by-laws is, or at
the Effective Time will be, applicable to the Company, the Company Securities,
the Merger or the other transactions contemplated by this Agreement and the
Stockholders Agreements. Assuming the accuracy of Parent's representations and
warranties contained in Section 5.2(j) (Ownership of Shares), the Board of
Directors of the Company has taken all action so that Parent will not be
prohibited from entering into a "business combination" with the Company as an
"interested stockholder" (in each case as such term is used in Section 203 of
the DGCL) as a result of the execution of this Agreement, the Stockholders
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(k) Environmental Matters. Except as disclosed in the Company Reports
prior to the date hereof and except for such matters that, alone or in the
aggregate, are not reasonably likely to have Company Material Adverse Effect;
(i) the Company and its Subsidiaries are in compliance with, and to the
knowledge of the executive officers of the Company have at all times been in
compliance with, all applicable Environmental Laws; (ii) the Company and its
Subsidiaries are not responsible or liable for the release or threatened release
of any Regulated Substance into the environment (including indoor and outdoor
air, soil, subsurface strata, surface water or groundwater) at any property
currently or formerly owned or operated by the Company or any of its
Subsidiaries, where such release may reasonably be expected to give rise to
claims, costs or requirements under applicable Environmental Laws for the
investigation, removal, or remediation of such Regulated Substances by the
Company or any of its Subsidiaries, or claims for personal injury or property
damage; (iii) neither the Company nor any of its Subsidiaries has received any
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries are in violation of any applicable
Environmental Law, or are
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subject to liability under any Environmental Law for the release or
threatened release of, or exposure to, any Regulated Substance at, or for the
investigation, removal or remediation of any Regulated Substance at, any
property currently or formerly owned or operated by the Company or its
Subsidiaries or at any facility owned or operated by a third party; (iv) to the
knowledge of the executive officers of the Company, neither the Company nor any
of its Subsidiaries are liable under any Environmental Law for the release or
threatened release of any Regulated Substance at any property currently or
formerly owned or operated by the Company or any of its Subsidiaries or at any
facility owned or operated by a third party; (v) neither the Company nor any of
its Subsidiaries is subject to any order, decree, injunction, consent order or
agreement with any Governmental Entity relating to liability under any
Environmental Law; (vi) neither the Company nor any of its Subsidiaries has
entered into any agreement with a third party under which the Company or any of
its Subsidiaries is obligated to indemnify such third party for liabilities
arising under applicable Environmental Laws or relating to the investigation,
removal or remediation of Regulated Substances; (vii) to the knowledge of the
executive officers of the Company, none of the properties currently owned or
leased by the Company or any of its Subsidiaries contains any underground
storage tanks or friable asbestos-containing materials requiring abatement, and
none of such properties contain any equipment containing polychlorinated
biphenyls for which the Company or any of its Subsidiaries are responsible;
(viii) to the knowledge of the executive officers of the Company, there are no
other circumstances or conditions involving the Company or any of its
Subsidiaries that could reasonably be expected to result in any claim,
liability, investigation, cost or restriction on the ownership, use, or transfer
of any property currently owned or lease by the Company or any of its
Subsidiaries pursuant to any Environmental Law; and (ix) the Company has
delivered to Parent copies of all environmental reports, studies, assessments,
sampling data, permits and other governmental approvals in its possession
relating to environmental conditions at the properties currently or formerly
owned or leased by the Company or any of its Subsidiaries, or to the compliance
of the operations of the Company and its Subsidiaries with applicable
Environmental Laws.
As used herein, the term "Environmental Law" means any applicable
federal, state, local or foreign statute, law, ordinance, regulation, order,
common law or published
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policy having the force of law relating to: (A) the protection,
investigation or restoration of the environment, health, safety, or natural
resources or (B) the generation, use, storage, treatment, processing, disposal,
release or threatened release of any Regulated Substance.
As used herein, the term "Regulated Substance" means (A) any substance,
hazardous material, pollutant, contaminant, toxic substance, toxic pollutant,
solid waste, municipal waste, industrial waste or hazardous waste that is
regulated or defined as such or otherwise regulated pursuant to any applicable
Environmental Law; and (B) any petroleum product or by-product,
asbestos-containing material, polychlorinated biphenyls, or radioactive
material.
(l) Tax Matters. As of the date hereof, neither the Company nor any of
its Affiliates has taken or agreed to take any action, nor do the executive
officers of the Company have any knowledge of any fact or circumstance, that
would prevent the Merger and the other transactions contemplated by this
Agreement from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(m) Taxes. Except as provided in Section 5.1(m) the Company Disclosure
Letter:
(i) the Company and each of its Subsidiaries have filed all Tax
Returns (as defined below) which are required by all applicable laws to be
filed by them and such Tax Returns were complete and correct in all
material respects, and have paid, or made adequate provision for the
payment of, all material Taxes (as defined below) which have or may become
due and payable pursuant to said Tax Returns and all other Taxes imposed to
date other than those Taxes being contested in good faith and for which
adequate provision has been made on the most recent balance sheet included
in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are required by
law to withhold and collect have been duly withheld and collected, and have
been paid over, in a timely manner, to the proper Taxing Authorities (as
defined below) to the extent due and payable;
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(iii) neither the Company nor any of its Subsidiaries has executed any
waiver to extend, or otherwise taken or failed to take any action that
would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for
the fiscal years prior to and including the most recent fiscal year;
(iv) the Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Code. The Company has at all times been taxable as
a Subchapter C corporation under the Code;
(v) the Company has never been a member of any consolidated group
(other than with its Subsidiaries) for Tax purposes. The Company is not a
party to any tax sharing agreement or arrangement, other than with its
Subsidiaries;
(vi) no material liens for Taxes exist with respect to any of the
assets or properties of the Company or its Subsidiaries, except for
statutory liens for Taxes not yet due or payable or that are being
contested in good faith;
(vii) all of the U.S. federal income Tax Returns filed by or on behalf
of each of the Company and its Subsidiaries have been examined by and
settled with the Internal Revenue Service, or the statute of limitations
with respect to the relevant Tax liability has expired, for all taxable
periods through and including the period ending on the date on which the
Effective Time occurs;
(viii) all Taxes due with respect to any completed and settled audit,
examination or deficiency litigation with any Taxing Authority have been
paid in full;
(ix) there is no audit, examination, deficiency, or refund litigation
pending with respect to any Taxes and during the past three years no Taxing
Authority has given written notice of the commencement of any audit,
examination, deficiency or refund litigation, with respect to any Taxes;
(x) the Company is not bound by any currently effective private
ruling, closing agreement or similar
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agreement with any Taxing Authority with respect to any material
amount of Tax;
(xi) the Company shall not be required to include in a taxable period
ending after the Effective Time any taxable income attributable to income
that economically accrued in a prior taxable period as a result of Section
481 of the Code, the installment method of accounting or any comparable
provision of state or local Tax law;
(xii) immediately following the Merger, the Company will not have any
material amount of income or gain that has been deferred under Treasury
Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by such Person,
payroll, employment, unemployment, social security, excise, severance, stamp,
occupation, premium, environmental or windfall profit tax, custom, duty or other
tax, or other like assessment or charge of any kind whatsoever, together with
any interest, levies, assessments, charges, penalties, additions to tax or
additional amounts imposed by any Taxing Authority, (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in (a) of this definition and (c) any liability of such
Person for the payment of any amounts of the type described in (a) as a result
of any express or implied obligation to indemnify any other Person; (ii) the
term "Tax Return(s)" shall mean all returns, consolidated or otherwise
(including without limitation informational returns), required to be filed with
any Taxing Authority; and (iii) the term "Taxing Authority" shall mean any
authority responsible for the imposition or collection of any Tax.
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(n) Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor,
as of the date hereof, is the Company or any of its Subsidiaries the subject of
any material proceeding asserting that the Company or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization nor is there pending or, to the
knowledge of the executive officers of the Company, threatened, nor has there
been for the past five years, any labor strike, dispute, walk-out, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries.
(o) Insurance. All material fire and casualty, director and officer,
general liability, and business interruption, and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries have
been issued by companies reasonably believed by the executive officers of the
Company to be reputable. Such policies insure the Company or such Subsidiary and
the directors and officers of the Company and its Subsidiaries (as the case may
be) for losses customarily insured against by other Persons engaged in similar
lines of business and are reasonable in both scope and amount, in light of the
risks attendant to the businesses conducted by the Company and its Subsidiaries
and except as would not, individually or in the aggregate, be reasonably likely
to have a Company Material Adverse Effect or prevent the Company from
consummating the transactions contemplated by this Agreement, are in compliance
with all requirements under any leases, mortgages or other contractual
obligations of the Company and its Subsidiaries pertaining to insurance matters.
(p) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or materials that are
used in the business of the Company and its Subsidiaries, except for any
such failures to own, be licensed or possess that, individually or in the
-34-
aggregate, are not reasonably likely to have a Company Material
Adverse Effect.
(ii) Except as disclosed in Company Reports filed prior to the date
hereof or as is not reasonably likely to have a Company Material Adverse
Effect:
(A) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any third-party patents,
trademarks, service marks, copyrights, trade secrets or computer
software (collectively, "Third-Party Intellectual Property Rights");
(B) no claims with respect to (I) the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, and any applications therefor, trade secrets
or computer software owned by the Company or any of its Subsidiaries
(collectively, the "Company Intellectual Property Rights"); or (II)
Third-Party Intellectual Property Rights are currently pending or, to
the knowledge of the executive officers of the Company, are threatened
by any Person;
(C) the executive officers of the Company do not know of any
valid grounds for any bona fide claims (I) to the effect that the
sale, licensing or use of any product as now used, sold or licensed or
proposed for use, sale or license by the Company or any of its
Subsidiaries, infringes on any copyright, patent, trademark, service
xxxx or trade secret of any Person; (II) against the use by the
Company or any of its Subsidiaries of any Company Intellectual
Property Right or Third-Party Intellectual Property Right used in the
business of the Company or any of its Subsidiaries as currently
conducted or as proposed to be conducted; (III) challenging the
ownership, validity or enforceability of any of the Company
Intellectual Property Rights; or (IV) challenging the license or
legally enforceable right to use of
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the Third-Party Intellectual Rights by the Company or any of its
Subsidiaries; and
(D) to the knowledge of the executive officers of the Company,
there is no unauthorized use, infringement or misappropriation of any
of the Company Intellectual Property Rights by any third party,
including any employee or former employee of the Company or any of its
Subsidiaries.
(q) Rights Plan. The Company has not adopted or otherwise implemented a
stockholder rights plan or other similar agreement or instrument.
(r) Brokers and Finders. Neither the Company nor any of its officers,
directors (with respect to officers and directors, in such capacity as officers
or directors) or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has engaged CSFB as its financial advisor, the arrangements
with which have been disclosed to Parent prior to the date hereof.
(s) Interested Transactions. To the knowledge of the executive officers
of the Company and except as set forth in the Company Reports prior to the date
hereof, no director or officer of the Company or any Subsidiary, (a) owns,
directly or indirectly, any 5% or greater interest in, or is a director,
officer, substantial stockholder or employee of, or consultant to, any
competitor or supplier of the Company or any Subsidiary, or is in any way
associated with or involved in the business conducted by the Company other than
in such capacity as a director or officer of the Company or a Subsidiary or a
stockholder of the Company, or (b) owns, directly or indirectly, in whole or in
part, any property, asset or right, tangible or intangible, which is associated
with any property, asset or right owned by the Company or a Subsidiary or which
the Company or a Subsidiary is presently operating.
(t) Contracts. Except as set forth in Section 5.1(t) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has or is
bound by:
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(i) except for Compensation and Benefit Plans and leases covering
the Company Leased Real Property (as defined in Section 5.1(u), any
agreement, contract or commitment that involves the payment of an
amount or value in excess of $50,000 annually, unless terminable by
the Company or its relevant Subsidiary on not more than 90 days
notice;
(ii) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(iii) any agreement, contract or commitment to be performed
relating to capital expenditures in excess of $50,000 individually or
$500,000 in the aggregate;
(iv) any agreement, indenture or instrument relating to
indebtedness for borrowed money or the deferred purchase price of
property;
(v) any loan or advance to (other than advances to employees in
the ordinary course of business in amounts of $20,000 or less to any
individual and $50,000 in the aggregate), or investment in (other than
investments in subsidiaries), any Person, or any agreement, contract
or commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving a
sharing of profits (except for bonus arrangements with employees
entered into in the ordinary course of business consistent with past
practice);
(vi) except for guarantees of Subsidiary obligations by the
Company, any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person;
(vii) any management service, consulting or any other similar
type of contract, involving payments of more than $25,000 annually,
unless terminable by the Company on not more than 90 days notice,
(viii) any agreement, contract or commitment limiting the ability
of the Company or any of its subsidiaries to engage in any line of
business or to compete with any Person;
-37-
(ix) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by the Company or any of
its subsidiaries other than in the ordinary course of business; or
(x) any material amendment, modification or supplement in respect
of any of the foregoing.
Except as otherwise set forth in Section 5.1(t) of the Company
Disclosure Letter, each contract or agreement set forth in Section 5.1(t) of the
Company Disclosure Letter is in full force and effect and (A) there exists no
default or event of default or event, occurrence, condition or act (including
consummation of the Merger) on the part of the Company or any Subsidiary which,
with the giving of notice, the lapse of time or both, would become a default or
event of default thereunder and (B) no approval or consent of, or notice to, any
person is needed in order that each such contract or agreement shall continue in
full force and effect in accordance with its terms without penalty, acceleration
or rights of early termination by reason of the consummation of the Merger and
the other transactions contemplated by this Agreement, except, in the case of
each of (A) and (B), such defaults or required approvals or consents (i) as to
which requisite waivers, consents or approvals have been obtained or (ii) which
are curable and are cured within the applicable period for cure permitted under
such contracts or agreements.
(u) Real Property. (i) Section 5.1(u)(i) of the Company Disclosure
Letter lists all real property leased, licensed or occupied under other
occupancy agreements or concession agreements by the Company or any of its
Subsidiaries (the "Company Leased Real Properties") and all real property owned
by the Company or any of its Subsidiaries (the "Company Owned Real Properties,"
and together with the Company Leased Real Properties, the "Company Real
Properties"). For each Company Leased Real Property, Section 5.1(u)(i) of the
Company Disclosure Letter sets forth the following information: (A) the address
of the property; (B) the name of the landlord, manager or payee, as appropriate;
(C) the name of the tenant; (D) the date of the lease and all amendments
thereto; (E) the current expiration date of such lease; (F) any options to
extend the term of such lease; (G) if a theater site, the number of screens at
such theater; (H) whether the theaters on such site are operating or
non-operating; (I) whether the landlord's consent is required as a result of the
Merger; (J) any
-38-
landlord right to terminate the lease (other than arising from a default,
casualty, or condemnation); (K) any tenant radius restrictions set forth
in such lease; (L) whether the landlord or the tenant has sent to the other
party under such lease a notice of default or a notice of termination of
such lease which remains uncured and, if so, specifying the alleged default; (M)
whether the tenant under such lease is obligated to purchase such property; (N)
whether such lease is required to be accounted for under GAAP as a capitalized
lease; (O) whether there are any leasehold mortgages secured by such lease and
whether the consent of the mortgagee is required in connection with the Merger;
and (P) whether the rent, common area charges, taxes or other payments due under
such lease are in arrears in excess of 30 days; (Q) the amount of any security
deposit posted with the landlord; (R) any existing guarantees given by the
Company in connection with such lease or any leasehold mortgage; (S) whether the
showing of movies is a permitted use under the lease; (T) any expansion
obligations of the tenant under the lease; (U) the amount of any brokerage
commissions owed by the tenant in connection with such lease; (V) any
obligations of the tenants under the leases to construct, remodel or expand
theaters; or (W) any material construction expected or budgeted to be undertaken
by the Company or any Subsidiary with respect to any Company Leased Property
within the next twelve months (for purposes of this item, Parent and Merger Sub
are referred to Sections 5.1(u)(i) and 6.1(c)(iii)(B) of the Company Disclosure
Letter); (X) material violations of law known to the executive officers of the
Company after inquiry of District Managers (exclusive of Environmental Laws
whare are exclusively addressed in Section 5.1(k) hereof) which the tenant is
obligated to cure; and (Z) any permits required for use or occupancy of the
leased premises which are not in full force and effect. For each Company Owned
Real Property, Section 5.1(u)(i) of the Company Disclosure Letter lists: (a) the
address for each such property and (b) whether the consent of any mortgage or
lien holder of such property is required as a result of the Merger. Except for
such exceptions as would not have a Company Material Adverse Effect and except
for (I) the items set forth in Section 5.1(u)(i) of the Company Disclosure
Letter; (II) zoning and planning restrictions, easements, permits and other
restrictions or limitations of public record affecting the use of such
properties; provided, that individually and in the aggregate, such restrictions,
easements and permits do not materially impair the use of such properties as
motion picture theaters or for such other purposes as such properties are
currently being used; (III)
-39-
mechanic's liens or other similar encumbrances arising in the ordinary
course of business and securing obligations of the Company or its Subsidiaries
not yet due and payable; and (IV) other encumbrances on the assets of the
Company or its Subsidiaries that individually and in the aggregate do not
materially impair the ability of the owner to obtain financing by using such
assets as collateral, (x) the Company or one of its Subsidiaries has good,
marketable and insurable title to the Company Owned Real Properties, (y) the
Company Owned Real Properties are free and clear of all mortgages, liens,
leases, tenancies, security interests, options to purchase or lease or rights of
first refusal and material violations of law (exclusive of Environmental Laws
whare are exclusively addressed in Section 5.1(k) hereof) and reasonably
expected by the Company to require the expenditure of in excess of $25,000 per
matter to resolve and (z) except for any matter of public record affecting the
use of such properties, such properties are free and clear of all covenants,
conditions, encumbrances, restrictions, rights-of-way, easements, servitudes,
judgments or other imperfections of title. The items listed in subsections (I)
through (IV) above are hereinafter collectively referred to as the "Company
Permitted Encumbrances." With respect to the Company Leased Real Properties, to
the knowledge of the executive officers of the Company as at the date hereof,
all such leases are in full force and effect. Except for such exceptions as
would not have a Company Material Adverse Effect, (a) all such leases are the
result of bona fide arm's-length negotiations between the parties and (b)
Company and the Company Subsidiaries are not in arrears in the payment of rents,
common area charges, real estate taxes or other amounts due under any such
leases in excess of 10 days. As at the date hereof, except for such exceptions
as would not have a Company Material Adverse Effect, with respect to each
Company Leased Real Property or as otherwise disclosed in the Company Disclosure
Letter, so long as the tenant performs all of its obligations under such lease
within applicable notice and grace periods, (a) the rights of Company or any
Company Subsidiary under such lease cannot be legally terminated by the landlord
thereof and (b) Company's or such Subsidiary's possession of such Company Leased
Real Property and the use and enjoyment thereof cannot be legally disturbed by
any landlord. Except for such exceptions as would not have a Company Material
Adverse Effect, the Company is not obligated to purchase any Company Leased Real
Property, and no Company Leased Real Property is required to be accounted for
under GAAP as a capitalized lease. To the knowledge of the executive officers of
the
-40-
Company, except for such exceptions as would not have a Company Material
Adverse Effect, there are no intended public improvements that will result
in any material charge being levied against, or in the creation of any
encumbrances upon the Company Owned Real Properties or any portion thereof, and
there are no options, rights of first refusal, rights of first offer or other
similar rights with respect to the Company Owned Real Properties. Section
5.1(u)(i) of the Company Disclosure Letter lists all mortgages affecting the
Company Owned Real Properties, indicates whether the transaction hereunder would
be an event of default or result in any acceleration of indebtedness thereunder,
and sets forth any uncured events of default thereunder or events or conditions
which may become events of default thereunder with the giving of notice, lapse
of time or both.
(ii) Except for such exceptions as would not, individually or in
the aggregate, be reasonably likely to have a Company Material Adverse
Effect:
(A) the Company or a Company Subsidiary is the owner of, and
no other person, firm or corporation has any interest as owner in
or to, or any right to occupancy in, any Company Owned Real
Property;
(B) the Company or a Company Subsidiary is the tenant or
lessee with respect to, and no other person, firm or corporation
has any interest as tenant or lessee in or to, or any right to
occupancy in, any Company Leased Real Property;
(C) there are no Persons currently in possession of the
Company Real Properties other than Company and its Subsidiaries,
nor are there any leases, subleases, licenses, concessions or
other agreements permitting anyone other than Company and its
Subsidiaries, to use, manage, occupy or possess any Company Real
Property or any part thereof other than as disclosed in Section
5.1(u)(ii) which lists all the leases affecting the Company Owned
Real Properties, and (I) all rent and additional rent payable
thereunder, (II) all security deposits held by the Company or any
of its Subsidiaries thereunder, and (III) any notices of default
given or received by the landlord thereunder which remain
uncured;
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(D) (I) neither Company nor any of its Subsidiaries has
received any written notices or notices of violation of law or
local or municipal ordinances or orders, or regulations,
presently noted in or issued by federal, state, local or
municipal departments having jurisdiction against or affecting
any of the Company Real Properties that remain uncured and (II)
to the knowledge of the executive officers of the Company the
current maintenance, operation, use and occupancy of the Company
Real Properties does not violate any building, zoning, health,
environmental, fire or similar law, ordinance, order or
regulation (including the Americans with Disabilities Act of
1990, 42 U.S.C. (S)12183, as amended (the "ADA") and comparable
state and municipal legislation), or the terms and conditions of
any of the applicable leases;
(E) (I) neither Company nor any of its Subsidiaries has
received written notice of its failure to obtain any necessary
certificate of occupancy (or similar permit) for use of each of
the theaters located on the Company Real Properties as a motion
picture theater, (II) to the knowledge of the executive officers
of the Company, either Company or one of its Subsidiaries
possesses the certificate of occupancy and all other
certificates, approvals, permits and licenses from any
Governmental Entity having jurisdiction over such theaters that
are necessary to permit the lawful use and operation of such
theaters as motion picture theaters (the "Company Permits"), and
all of the same are valid and in full force and effect, and (III)
to the knowledge of executive officers of the Company, there
exists no threatened revocation of any certificate of occupancy
or any of the Company Permits;
(F) neither Company nor any of its Subsidiaries has received
any written notice that it has failed to obtain any necessary
sign permits, illuminated sign permits, and marquee permits from
the appropriate Governmental Entity having jurisdiction over
existing signs and marquees at the Company Real Properties, and,
to the knowledge of the executive officers of the
-42-
Company, such permits are valid and in full force and effect
and there exists no threatened revocation of any such permits;
(G) to the knowledge of the executive officers of the
Company there are no actions pending or threatened to change the
zoning or building ordinances affecting any of the Company Real
Properties, or of any pending or threatened condemnation of any
of the Company Real Properties nor has there been any material
casualty damage to any of the Company Real Properties which
remains unrestored;
(H) neither the Company nor any of its Subsidiaries has
received any written notice from any insurance carrier of any
work required to be performed at any theater located on the
Company Real Properties or the Company Leased Properties (each, a
"Company Theater") that has not been performed as of the date
hereof or of any defects or inadequacies in any such theater that
have not been corrected as of the date hereof and which if not
corrected could result in termination of insurance coverage or a
material increase in the cost thereof;
(I) with respect to all Company Theaters, all water, sewer,
gas, electricity, telephone and other utilities required for the
operation of each such theater are installed and operating and
all installations and connection charges charged to Company or
any of its Subsidiaries pursuant to applicable invoices that are
not the subject of a good faith dispute have been paid in full
and any installation and connection charges that are properly
charges to Company or its Subsidiaries after the date hereof and
prior to the Closing Date shall be paid in full, except, in each
case, for payments that are current and will be paid in the
ordinary course of business;
(J) Section 5.1(u)(iii) of the Company Disclosure Letter
lists all radius restrictions or other non-competition agreements
to which the Company or any of its Subsidiaries is subject.
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(v) Operating Assets. Except for such exceptions as would not have a
Company Material Adverse Effect, (i) Company has good and marketable title or
leasehold title or a valid license to all of the personal property used, or held
for use, in connection with the theaters operated on the Company Real Properties
(other than gaming and vending machines used in the ordinary course of
business), subject to no encumbrance other than the Company Permitted
Encumbrances; (ii) no financing statement under the Uniform Commercial Code or
under the personal property securities laws and regulations of any province or
territory of Canada or any similar applicable statute has been filed in any
jurisdiction, and neither Company nor any of its Subsidiaries has signed any
such financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except in connection with the
Company Permitted Encumbrances; (iii) each theater located on a Company Real
Property and each of the items of personal property used or held for use in, or
in connection with, each such theater, including without limitation, seating,
projection equipment and screens, are in good operating condition, subject to
normal wear and tear, and are fit for the use for which they are intended and to
which they are presently devoted; (iv) each theater located on a Company Real
Property, together with the related items of personal property located therein,
constitutes a fully operable motion picture theater and is sufficient to permit
Company to operate the business as currently being conducted therein; and (v)
except as contemplated by this Agreement, since the Audit Date, neither the
Company nor any of its Subsidiaries has sold, removed or transferred any
equipment or property from any theater located on a Company Real Property,
except in the ordinary course of business and so long as such equipment or
property has been replaced prior to the date hereof.
5.2. Representations and Warranties of Parent and Merger Sub. Except as
set forth in the corresponding sections or subsections of the disclosure letter
delivered to the Company by Parent on or prior to entering into this Agreement
(the "Parent Disclosure Letter"), Parent and Merger Sub each hereby represent
and warrant to the Company that:
(a) Capitalization of Merger Sub. The authorized capital stock of
Merger Sub consists of 1000 shares of Common Stock, par value $.01 per share,
all of which are outstanding and are validly issued, fully paid and
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unassessable. All of the issued and outstanding capital stock of Merger
Sub is, and at the Effective Time will be, owned by Parent, and there are (i) no
other shares of capital stock or voting securities of Merger Sub, (ii) no
securities of Merger Sub convertible into or exchangeable for shares of capital
stock or voting securities of Merger Sub and (iii) no options, warrants or other
rights to acquire from Merger Sub, and no obligations of Merger Sub to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Merger Sub. Merger Sub
has not conducted any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this Agreement
and the Merger and the other transactions contemplated by this Agreement.
(b) Organization, Good Standing and Qualification. Each of Parent and
its "Significant Subsidiaries" (as defined in Rule 1.02(w) of Regulation S-X
promulgated pursuant to the Exchange Act) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization and has all requisite corporate or similar power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership or
operation of its properties or conduct of its business requires such quali-
fication, except where the failure to be so qualified or in such good standing,
when taken together with all other such failures, is not reasonably likely to
have a Parent Material Adverse Effect (as defined below).
As used in this Agreement, the term "Parent Material Adverse Effect"
means a material adverse effect on the financial condition, properties, business
or results of operations of the Parent and its Subsidiaries taken as a whole
provided, however, that a Parent Material Adverse Effect shall not include any
effect upon the financial condition, properties, business or results of
operations of the Company, or any of its Subsidiaries resulting from national
economic or business conditions, generally or the public announcement of the
execution of the Merger Agreement and the transactions contemplated thereby.
(c) Capital Structure. The authorized capital stock of Parent consists
of 200,000,000 shares of Parent
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Common Stock, of which 53,694,331 shares were outstanding as of the close of
business on August 10, 1998, 80,000,000 shares of Class B Common Stock, par
value $.01 per share (the "Parent Class B Common Stock") of which 21,613,418
shares were outstanding as of the close of business on August 10,1998, and
10,000,000 shares of Preferred Stock par value $.01 per share (the "Parent
Preferred Shares", and collectively with the Parent Common Stock, the Parent
Class B Common Stock, the "Parent Securities"), none of which were outstanding
as of the close of business on August 10,1998. All of the outstanding Parent
Securities have been duly authorized and are validly issued, fully paid and
nonassessable. Parent has no Parent Securities reserved for issuance, except
that, as of August 10, 1998, there were 6,045,940 shares of Parent Common Stock
reserved for issuance pursuant to the CSC 1998 Employee Stock Plan, 453,150
shares of Parent Common Stock reserved for issuance pursuant to the CSC Amended
and Restated Employee Stock Plan and 120,000 shares of Parent Common Stock
reserved for issuance pursuant to the CSC 1996 Non-Employee Director Stock
Option Plan (collectively, the "Parent Stock Plans"), the 21,613,418 shares of
Parent Common Stock subject to issuance upon conversion of the outstanding
shares of Parent Class B Common Stock, 10,231,320 shares of Parent Common Stock
subject to issuance upon conversion of the 8 1/2% Series I Cumulative
Convertible Exchangeable Preferred Stock of CSC Holdings, Inc., a wholly owned
subsidiary of Parent. In addition, in connection with a pending two-for-one
stock split of Parent Common Stock and Parent Class B Common Stock, payable on
August 21, 1998 to holders of record as of August 10,1998, Parent has, as of the
date hereof, reserved for issuance an additional 92,158,160 shares of Parent
Common Stock and 21,613,418 shares of Parent Class B Common Stock. Parent does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of Parent on any
matter ("Parent Voting Debt").
(d) Corporate Authority.
(i) No vote of holders of capital stock of Parent is necessary to
approve this Agreement and the Merger and the other transactions
contemplated hereby. Each of the Parent and Merger Sub has all requisite
corporate power and authority and has taken all corporate action necessary
in order to execute, deliver
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and perform its obligations under this Agreement and to consummate the
Merger. This Agreement is a valid and binding agreement of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance
with its terms, subject to the Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all necessary
action to permit it to issue the number of shares of Parent Common Stock
required to be issued pursuant to Article IV. The Parent Common Stock, when
issued, will be validly issued, fully paid and nonassessable, and no
stockholder of Parent will have any preemptive right of subscription or
purchase in respect thereof. The Parent Common Stock, when issued, will be
registered under the Securities Act and Exchange Act and registered or
exempt from registration under any applicable state securities or "blue
sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws, and (D) required to be made with the ASE, no notices, reports
or other filings are required to be made by Parent or Merger Sub with, nor are
any consents, registrations, approvals, permits or authorizations required to
be obtained by Parent or Merger Sub from, any Governmental Entity, in connection
with the execution and delivery of this Agreement by Parent and Merger Sub and
the consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent Parent or Merger Sub from consummating
the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under,
the certificate or by-laws of Parent or Merger Sub or the comparable
governing instruments of any of its Significant Subsidiaries, (B) a breach
or violation of, or a default under, or
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the acceleration of any obligations or the creation of a Lien on the
assets of Parent or any of its Subsidiaries (with or without notice, lapse
of time or both) pursuant to, any Contracts binding upon Parent or any of
its Subsidiaries or any Law or governmental or non-governmental permit or
license to which Parent or any of its Significant Subsidiaries is subject
or (C) any change in the rights or obligations of any party under any of
the Contracts, except, in the case of clause (B) or (C) above, for breach,
violation, default, acceleration, creation or change that, individually or
in the aggregate, is not reasonably likely to have a Parent Material
Adverse Effect or prevent Parent or Merger Sub from consummating the
transactions contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made available to
the Company each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1997 (the "Parent Audit Date"),
including (i) Parent's Annual Report on Form 10-K for the year ended December
31, 1997 and (ii) Parent's Quarterly Report on Form 10-Q for the period ended
March 31, 1998, each in the form (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed
subsequent to the date hereof, the "Parent Reports"). As of their respective
dates, (or, if amended, as of the date of the latest such amendments) the Parent
Reports did not, and any Parent Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income and of changes in financial position included
in or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents, or will fairly present, the results of
operations, retained earnings and changes in financial position, as the case may
be, of Parent and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or
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effect), in each case in accordance with GAAP consistently applied during the
periods involved, except as may be noted therein.
(g) Absence of Certain Changes. Except as disclosed in the Parent
Reports filed prior to the date hereof, since the Parent Audit Date Parent and
its Subsidiaries have conducted their respective businesses only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such businesses and there has not been (i) any change in the
financial condition, properties, business or results of operations of Parent and
its Subsidiaries taken as a whole or any development or combination of
developments, individually or in the aggregate, has had or is reasonably likely
to result in a Parent Material Adverse Effect; (ii) any damage, destruction or
other casualty loss with respect to any asset or property owned, leased or
otherwise used by Parent or any of its Subsidiaries, whether or not covered by
insurance other than any such damage, destruction or casualty loss that,
individually or in the aggregate has not had or is not reasonably likely to have
a Parent Material Adverse Effect; or (iii) any change by Parent in accounting
principles, practices or methods. Since the Parent Audit Date, except as
provided for herein or as disclosed in the Parent Reports filed prior to the
date hereof, there has not been any increase in the compensation payable or that
could become payable by the Parent or any of its Subsidiaries to officers or key
employees or any amendment of any of the Parent Compensation and Benefit Plans
other than increases or amendments in the ordinary course.
(h) Litigation and Liabilities. Except as dis closed in the Parent
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of Parent, threatened
against Parent or any of its Affiliates or (ii) liabilities, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to environmental and occupational safety and health
matters, or any other facts or circumstances of which the executive officers of
Parent has knowledge that could result in any claims against, or obligations or
liabilities of, Parent or any of its Affiliates, except for those that, if
adversely determined, would not be reasonably likely to have a Parent Material
Adverse Effect
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or prevent Parent or Merger Sub from consummating the transactions
contemplated by this Agreement.
(i) Compliance with Laws. Except as set forth in the Parent Reports
filed prior to the date hereof, the businesses of each of Parent and its
Subsidiaries have not been, and are not being, conducted in violation of any
Laws, except for violations that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect or prevent Parent or
Merger Sub from consummating the transactions contemplated by this Agreement.
Except as set forth in the Parent Reports filed prior to the date hereof, no
investigation or review by any Governmental Entity with respect to Parent or any
of its Subsidiaries is pending or, to the knowledge of the executive officers of
Parent, threatened, except for those the outcome of which are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent Parent or Merger Sub from consummating the transactions contemplated
by this Agreement.
(j) Ownership of Shares. Except as to Company Securities deemed
beneficially owned by Parent pursuant to the Stockholders Agreement, neither
Parent nor any of its Subsidiaries beneficially owns (within the meaning of such
term under Rule 13d-3 of the Exchange Act) any Company Securities.
(k) Brokers and Finders. Neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
the Merger or the other transactions contemplated by this Agreement, except
that Parent has engaged Gemini Associates Inc. ("Gemini") as its financial
advisor.
(l) Available Funds. Parent has or will have available to it all funds
necessary to satisfy all of its obligations hereunder and in connection with the
Merger and the other transactions contemplated by this Agreement.
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ARTICLE VI
Covenants
6.1. Interim Operations. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the earlier of the
termination of this Agreement in accordance with its terms and the Effective
Time (unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement):
(a) the business of it and its Subsidiaries shall be conducted in the
ordinary and usual course and, to the extent consistent therewith, it and its
Subsidiaries shall use their respective best efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees and business
associates;
(b) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its certificate
of incorporation or by-laws; (iii) split, combine or reclassify its outstanding
shares of capital stock; (iv) declare, set aside or pay any dividend payable in
cash, stock or property in respect of any capital stock other than dividends
from its direct or indirect wholly-owned Subsidiaries; or (v) except for the
repurchase of the Class A Warrant contemplated by the Warrantholder Agreement
and the repurchase of outstanding Class B Preferred Shares, repurchase, redeem
or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock;
(c) except as set forth in Section 6.1(c) of the Company Disclosure
Letter, neither it nor any of its Subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than Shares issuable pursuant to options
outstanding on the date hereof under the Stock Plan or upon conversion of the
Class A Preferred Shares and Class C Preferred Shares); (ii) transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber
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any material property or assets (including capital stock of any of its
Subsidiaries) or incur or modify any material indebtedness or other liability;
or (iii) except as set forth in Section 6.1(c)(iii) of the Company Disclosure
Letter, make or authorize or commit for any capital expenditures other than in
amounts less than $25,000 individually and $100,000 in the aggregate or, by any
means, make any acquisition of, or investment in, assets or stock of any other
Person or entity in excess of $25,000;
(d) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans or increase the salary, wage, bonus
or other compensation of any employees except increases for non-executive
employees occurring in the ordinary and usual course of business (which shall
include normal periodic performance reviews and related compensation and benefit
increases);
(e) neither it nor any of its Subsidiaries shall settle or compromise
any material claims or litigation or, except in the ordinary and usual course of
business, modify, amend or terminate any of its material Contracts or waive,
release or assign any material rights or claims;
(f) neither it nor any of its Subsidiaries shall make any Tax election
or permit any insurance policy naming it as a beneficiary or loss-payable payee
to be cancelled or terminated except in the ordinary and usual course of
business; and
(g) neither it nor any of its Subsidiaries will authorize or enter into
an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company agrees that after the date
hereof and prior to the earlier of the termination of this Agreement in
accordance with its terms and the Effective Time, neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, initiate or solicit, encourage or otherwise
knowingly facilitate any inquiries or the making of any proposal or offer with
respect to a
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merger, reorganization, share exchange, consolidation or similar transaction
involving, or any purchase of all or 15% or more of the assets or any equity
securities of, it or any of its Subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). The Company further
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidi aries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person other than Parent or Merger
Sub relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Company or its Board of
Directors from (A) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal; (B) providing information in response to
a request therefor by a Person who has made an unsolicited bona fide written
Acquisition Proposal if the Board of Directors receives from the Person so
requesting such information an executed a customary form of confidentiality
agreement; (C) engaging in any negotiations or discussions with any Person who
has made an unsolicited bona fide written Acquisition Proposal; or (D)
withdrawing, modifying or changing, in a manner adverse to Parent, its
recommendation to the stockholders of the Company with respect to this Agreement
or the Merger, if and only to the extent that, (i) in each such case referred to
in clause (B), (C) or (D) above, the Board of Directors of the Company
determines in good faith by a majority vote after consultation with outside
legal counsel that failing to take such action would be reasonably likely to
result in a breach of their fiduciary duties under applicable law and (ii) in
each case referred to in clause (C) or (D) above, the Board of Directors of the
Company determines in good faith (after consultation with its financial advisor)
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and would, if consummated,
result in a transaction more favorable to the Company's stockholders from a
financial point of view than the transaction contemplated by this Agreement (any
such more favorable Acquisition Proposal being referred to in this Agreement as
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a "Superior Proposal"). The Company agrees that it will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties other than Parent or Merger Sub conducted heretofore with
respect to any Acquisitions Proposal. The Company agrees that it will take the
necessary steps to promptly inform any individuals or entities referred to in
the preceding sentence hereof of the obligations undertaken in this Section 6.2.
The Company agrees that it will notify Parent immediately if any such inquiries,
proposals or offers are received by, any such information is requested from,
or any such discussions or negotiations are sought to be initiated or continued
with, any of its representatives indicating, in connection with such notice,
the name of such Person and the material terms and conditions of any proposals
or offers and thereafter shall keep Parent informed, on a current basis, on the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations. The Company also agrees that it will promptly
request any Person that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring it or any of its Subsidiaries to
return all confidential information heretofore furnished to such Person by or
on behalf of it or any of its Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(including the proxy statement and prospectus (the "Prospectus/Proxy Statement")
constituting a part thereof) (the "S-4 Registration Statement") will, at the
time the S-4 Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Prospectus/Proxy Statement and any amendment or supplement thereto
will, at the date of mailing to stockholders and at the times of the meetings of
stockholders of the Company to be held in connection with the Merger, contain
any untrue statement of a material fact or
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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.
6.4. Stockholders Meeting. Subject to their fiduciary obligations under
applicable law, the Company's Board of Directors shall recommend the adoption of
the Merger Agreement by holders of Shares and Class A Preferred Shares at the
meeting of such stockholders called to consider and vote upon adoption of the
Merger Agreement (the "Stockholders Meeting") and shall take all lawful action
to solicit such adoption. Whether or not the Board of Directors of the Company
determines at any time after the date hereof that this Agreement is no longer
advisable and recommends that the holders of Shares and Class A Preferred Shares
reject it, the Company is required to, and will take, in accordance with
applicable law and its certificate and by-laws, all action necessary to convene
the Stockholders Meeting as promptly as practicable after the S-4 Registration
Statement is declared effective to consider and vote upon the adoption of this
Agreement.
6.5. Filings; Other Actions; Notification. (a) The Company shall
promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. Parent and the Company each shall use all reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the stockholders of the
Company. Parent shall also use all reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state securities
law or "blue sky" permits and approvals required in connection with the Merger
and to consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all reasonable efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under this Agreement and applicable
Laws to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including
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preparing and filing as promptly as practicable all documentation to
effect all necessary notices, reports and other filings and to obtain as
promptly as practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement; provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, Parent to proffer
to, or agree to, sell or hold separate and agree to sell, before or after the
Effective Time, any assets, businesses, or interest in any assets or businesses
of Parent, the Company or any of their respective Affiliates (or to consent to
any sale, or agreement to sell, by the Company of any of its assets or
businesses) or to agree to any material changes or restriction in the operations
of any such assets or businesses. Subject to applicable laws relating to the
exchange of information, Parent and the Company shall have the right to review
in advance, and to the extent practicable each will consult the other on, all
the information relating to Parent or the Company, as the case may be, and any
of their respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Merger and the other transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Company and Parent
shall act reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the
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Merger and the other transactions contemplated by this Agreement.
6.6. Taxation. Subject to Section 6.2, neither Parent nor the Company
shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code if the Average Parent Share Price is
greater than or equal to the Floor Price.
6.7. Access. Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford the Parent's officers, employees, counsel, accountants and other
authorized representatives ("Representatives") reasonable access, during normal
business hours throughout the period prior to the earlier of termination of this
Agreement in accordance with its terms and the Effective Time, to its
properties, books, contracts and records and, during such period, each shall
(and shall cause its Subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as may reasonably
be requested, provided that no investigation pursuant to this Section shall
affect or be deemed to modify any representation or warranty made by the
Company, and provided, further, that the foregoing shall not require the Company
to permit any inspection, or to disclose any information, that would result in
the disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company shall have used its
reasonable efforts to obtain the consent of such third party to such inspection
or disclosure. All requests for information made pursuant to this Section shall
be directed to an executive officer of the Company, or such Person as may be
designated by its executive officers. All such information shall be governed by
the terms of the Confidentiality Agreement.
6.8. Affiliates. At least 30 days prior to the Stockholders Meeting,
the Company shall deliver to Parent a list of names and addresses of those
Persons who will be, in the opinion of the Company, as of the time of the
Stockholders Meeting, "affiliates" of the Company within the meaning of Rule 145
under the Securities Act. There shall be added to such list the names and
addresses of any other Person subsequently identified by either Parent or the
Company as a Person who may be deemed to be such an affiliate of the Company at
such time; provided, however,
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that no such Person identified by Parent shall be added to the list of
affiliates of the Company if Parent shall receive from the Company, on or before
the date of the Stockholders Meeting, an opinion of counsel reasonably
satisfactory to Parent to the effect that such Person is not such an affiliate.
The Company shall exercise its best efforts to deliver or cause to be delivered
to Parent, prior to the date of the Stockholders Meeting, from each affiliate of
the Company who makes a Stock Election identified in the foregoing list (as the
same may be supplemented as aforesaid), a letter dated as of the Closing Date
substantially in the form attached as Exhibit A-1 (the "Affiliates Letter").
Parent shall not be required to maintain the effectiveness of the S-4
Registration Statement or any other registration statement under the Securities
Act for the purposes of resale of Parent Common Stock by such affiliates
received in the Merger and the certificates representing Parent Common Stock
received by such affiliates shall bear a customary legend regarding applicable
Securities Act restrictions and the provisions of this Section.
6.9. Stock Exchange Listing and De-listing. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be approved for listing on the ASE subject to official notice of issuance, prior
to the Closing Date. The Surviving Corporation shall use its best efforts to
cause the Shares to be de-listed from the ASE and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
6.10. Publicity. The initial press release shall be a joint press
release and thereafter the Company and Parent each shall consult with each other
prior to issuing any press releases or otherwise making public announcements
with respect to the Merger and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange) with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities exchange.
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6.11. Benefits.
(a) Stock Options. At the Effective Time, each then outstanding option
to purchase Shares ("Option") under the Stock Plan, whether vested or unvested,
shall be cancelled and the holder thereof shall be entitled to receive an amount
of cash equal to the product of (x) the amount, if any, by which the Share Cash
Merger Consideration exceeds the exercise price per Share under such Option and
(y) the number of Shares issuable pursuant to the unexercised portion of such
Option, less any required withholding of taxes (such amount being hereinafter
referred to as the "Option Consideration"). The Option Consideration shall be
paid as soon as practicable following the Effective Time. Prior to the Effective
Time, the Company shall take such actions as may be necessary to effectuate the
foregoing, including without limitation obtaining all applicable consents. The
cancellation of an Option in exchange for the Option Consideration shall be
deemed a release of any and all rights the holder had or may have had in respect
of such Option, and any required consents received from Option holders shall so
provide.
(b) Employee Benefits.
(i) Each of Parent and Merger Sub agrees that, during the period
commencing at the Effective Time and ending on the first anniversary
thereof, the employees of the Surviving Corporation and its
Subsidiaries will continue to be provided with benefits under employee
benefit plans (other than plans involving the issuance of Shares) that
are substantially similar in the aggregate to those currently provided
by the Company and its Subsidiaries to such employees. Parent shall,
and shall cause the Surviving Corporation to, honor all employee
benefit obligations to current and former employees under the
Compensation and Benefit Plans and all employee severance plans (or
policies) in existence on the date hereof and all employment or
severance agreements entered into by the Company or adopted by the
board of directors of the Company prior to the date hereof. Parent
agrees to offer or cause Merger Sub to offer employment contracts with
the persons and on the terms set forth on Schedule I to this Agreement
immediately prior to the Effective Time. Nothing herein shall prevent
Parent from terminating any Compensation and Benefit Plan.
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(ii) Each of Parent and Merger Sub agrees that the employees of
the Surviving Corporation shall receive full credit for purposes of
eligibility and vesting under the employee benefit plans or
arrangements maintained by the Surviving Corporation for such
employees' service with the Company or any of its Subsidiaries to the
same extent recognized by the Company immediately prior to the
Effective Time.
6.12. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV, and Parent shall reimburse the
Surviving Corporation for such charges and expenses. Except as otherwise
provided in Section 8.5(b), whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the Merger and the
other transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except that expenses incurred in connection with the
filing fee for the S-4 Registration Statement and printing and mailing the
Prospectus/Proxy Statement and the S-4 Registration Statement shall be shared
equally by Parent and the Company.
6.13. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, Parent and the Surviving Corporation shall indemnify
and hold harmless each present and former director and officer of the Company,
(when acting in such capacity or when serving at the request of the Company as a
director or officer of a Subsidiary or a fiduciary of a Compensation and
Benefits Plan) determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
resulting from matters existing or occurring at or prior to the Effective Time
(including, without limitation, any claim, action, suit, proceeding or
investigation resulting from the transactions contemplated by this Agreement),
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent that the Company would have been permitted under Delaware law and
its certificate of incorporation or by-laws in effect on the date hereof to
indemnify such Person (and Parent or the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted under applicable
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law, provided, the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification), and provided, further, that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under Delaware law and
the Company's certificate of incorporation and by-laws shall be made by
independent counsel selected by the Surviving Corporation.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.13, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent and the
Surviving Corporation thereof, but the failure to so notify shall not relieve
Parent or the Surviving Corporation of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the indemnifying
party. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Parent or the
Surviving Corporation shall have the right to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connec tion with the defense thereof, (ii) Parent, the Surviving
Corporation and the Indemnified Parties will cooperate in the defense of any
such matter and (iii) Parent and the Surviving Corporation shall not be liable
for any settlement effected without its prior written consent (which consent
will not be unreasonably withheld); and provided, further, that Parent and the
Surviving Corporation shall not have any obligation hereunder to any Indemnified
Party if and when a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) Parent shall and shall cause the Surviving Corporation to maintain
the Company's existing officers' and directors' liability insurance ("D&O
Insurance") for a period of six years after the Effective Time so long as the
annual premium therefor is not in excess of 200% of the last annual premium paid
prior to the date hereof (the "Current Premium"); provided, however, that if the
existing D&O Insurance expires, is terminated or cancelled during such six-year
period, Parent shall and shall cause the Surviving Corporation to use all
reasonable efforts to obtain as much
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D&O Insurance as can be obtained for the remainder of such period for a
premium not in excess (on an annualized basis) of 200% of the Current Premium.
The Company will use all reasonable efforts to obtain officers and directors
liability insurance to become effective at the Effective Time with coverage
amounts and a term reasonably satisfactory to Parent.
(d) If Parent or the Surviving Corporation or any of their respective
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume all of the obligations set forth in this Section.
(e) The provisions of this Section 6.13 shall survive the closing of
the transactions contemplated hereby, and are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
6.14. Other Actions by the Company; Takeover Statutes; Change of
Control Offer. The Company shall repurchase the outstanding Class A Warrant
immediately prior to the Effective Time for $1.00. The Company shall use all
reasonable efforts to obtain such waivers, consents and estoppel certificates as
Parent shall reasonably request, upon terms and conditions and in a form
reasonably satisfactory to Parent with respect to any material Contracts of the
Company or its Subsidiaries, it being understood and agreed that the Company
shall not amend or agree to amend such Contracts or make any additional payments
or incur any additional obligations or grant any additional rights in order to
obtain such waivers, consents and certificates without Parent's prior written
consent. If any Takeover Statute is or may become applicable to the Merger or
the other transactions contemplated by this Agreement or the Stockholders
Agreements, the Company and its Board of Directors shall grant such approvals
and take such actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Stockholders Agreements or by the Merger and otherwise act to
eliminate
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or minimize the effects of such statute or regulation on such transactions.
The Company agrees that it will mail a notice with respect to a Change of
Control Offer (as defined in the Indenture, dated as of June 12, 1998 (the
"Indenture"), between the Company and The Bank of New York, as Trustee,
relating to the Company's outstanding 10 7/8% Senior Notes due June 12, 2008
(the "Notes")) pursuant to Section 4.19 of the Indenture, within five business
days of the date hereof and shall provide that the Change of Control Payment
Date (as defined in the Indenture) with respect to such Change of Control Offer
shall not, without Parent's written consent, be more than thirty days from the
date such notice is mailed. If the Company complies with preceding sentence and,
prior to the Change of Control Payment Date, there has been no public disclosure
of any events, conditions, circumstances or other matters relating to the
Company or its Subsidiaries the subject matter of which represents, individually
or in the aggregate (and without giving effect to any qualifications as to
"Company Material Adverse Effect," "material" or other similar qualifications),
a breach of the representations and warranties of the Company contained in this
Agreement as of the date hereof, which breaches have had or are reasonably
likely to have, a Company Material Adverse Effect or are reasonably likely to
prevent the Company from consummating the transactions contemplated by this
Agreement, on the Change of Control Payment Date, Parent will purchase any Notes
required to be purchased by the Company pursuant to such Change of Control
Offer.
6.15. Parent Vote. Parent shall vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any Company
Securities entitled to vote and any shares of common stock of Merger Sub
beneficially owned by it or any of its Affiliates or with respect to which it or
any of its Affiliates has the power (by agreement, proxy or otherwise) to cause
to be voted (or to provide a consent), in favor of the adoption and approval of
this Agreement at any meeting of stockholders of the Company or Merger Sub,
respectively, at which this Agreement shall be submitted for adoption and
approval and at all adjournments or postponements thereof (or, if applicable, by
any action of stockholders of either the Company or Merger Sub by consent in
lieu of a meeting), and shall cause a meeting of stockholders of Merger Sub to
be called for such purpose unless such action is taken by consent in lieu
thereof.
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ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly adopted
by holders of Company Securities constituting the Company Requisite Vote and
shall have been duly adopted by the sole stockholder of Merger Sub in accordance
with applicable law and the certificate and by-laws of each such corporation.
(b) ASE Listing. The shares of Parent Common Stock issuable to the
Company stockholders pursuant to this Agreement shall have been authorized for
listing on the ASE upon official notice of issuance.
(c) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents") in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company, Parent and Merger Sub shall have been made
or obtained (as the case may be).
(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (collectively, an "Order"),
and no Governmental Entity shall have
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instituted any proceeding or threatened to institute any proceeding seeking
any such Order.
(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened, by the SEC.
7.2. Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date), and Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer of
the Company to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section 7.2(a) shall be deemed to have been
satisfied even if such representations or warranties (without giving effect to
any qualifications as to "Company Material Adverse Effect," "material" or
similar qualifications) are not so true and correct unless the failure of such
representations or warranties (without giving effect to any qualifications as to
"Company Material Adverse Effect," "material" or similar qualifications) to be
so true and correct, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect or is reasonably likely to
prevent the Company from consummating the transactions contemplated by this
Agreement.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive of
the Company to such effect.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each Person whose
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consent or approval shall be required under the Contracts listed in Section
7.2(c) of the Parent Disclosure Letter and all other consents or approvals
from each Person whose consent or approval is required under any Contract except
for such consents or approvals the failure to obtain would not, individually
or in the aggregate, be reasonably likely to have a Company Material Adverse
Effect or be reasonably likely to prevent the Company from consummating the
transactions contemplated by this Agreement.
(d) Tax Opinion. If, and only if, the Average Parent Share Price is
greater than or equal to the Floor Price (and treated as being greater than or
equal to the Floor Price after giving effect to Section 4.2(a)(iv)), Parent
shall have received the opinion of Xxxxxxxx & Xxxxxxxx, counsel to Parent, dated
the Closing Date, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of Parent, Merger Sub and the Company will be a party to
that reorganization within the meaning of Section 368(b) of the Code.
(e) Resignations. Parent shall have received the resignations of each
director of the Company.
(f) Employment Agreements. Parent and/or Merger Sub shall have entered
into an Employment Agreement with A. Xxxx Xxxx, in the form attached hereto as
Schedule II.
(g) Affiliates Letters. Parent shall have received an Affiliates Letter
from each Person identified as an affiliate of the Company pursuant to Section
6.8.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date (except that the
representations and warranties of Parent and Merger Sub contained in Sections
5.2(c), (g), (h) and (i) shall not be required to be so true and correct as of
such dates if the Average Parent Price is less than the Floor Price, and in
which event neither Parent nor Merger Sub shall have any obligation or liability
(and the Company shall have no
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rights) in respect of a breach of such representations and warranties)
as though made on and as of the Closing Date, (except to the extent any such
representation and warranty expressly speaks as of an earlier date) and the
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent and an executive officer of Merger Sub to such
effect; provided, however, that notwithstanding anything herein to the contrary,
this Section 7.3(a) shall be deemed to have been satisfied even if such
representations or warranties (without giving effect to any qualifications as to
"Parent Material Adverse Effect," "material" or similar qualifications) are not
so true and correct unless the failure of such representations or warranties
(without giving effect to any qualifications as to "Parent Material Adverse
Effect," "material" or similar qualifications) to be so true and correct,
individually or in the aggregate, has had, or is reasonably likely to have, a
Parent Material Adverse Effect or is reasonably likely to prevent Parent from
consummating the transactions contemplated by this Agreement.
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent
and Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent and Merger Sub by an executive officer of Parent and an executive officer
of Merger Sub to such effect.
(c) Tax Opinion. If, and only if, the Average Parent Share Price is
greater than or equal to Floor Price (and treated as being greater than or equal
to the Floor Price after giving effect to Section 4.2(a)(iv)), the Company shall
have received the opinion of Xxxxxxxxxxx & Xxxxxxxx, counsel to the Company,
dated the Closing Date, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of Parent, Merger Sub and the Company will be
a party to that reorganization within the meaning of Section 368(b) of the Code.
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ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (i)
the Merger shall not have been consummated by February 28, 1999, whether such
date is before or after the date of approval by the stockholders of the Company;
provided, however, that if Parent determines that additional time is necessary
in order to forestall any action to restrain, enjoin or prohibit the Merger by
any Government Entity, the Termination Date may be extended by Parent to a date
not beyond April 30, 1999 (the "Termination Date"), (ii) the adoption of this
Agreement by Company's stockholders required by Section 7.1(a) shall not have
been obtained at a meeting duly convened therefor or at any adjournment or
postponement thereof, or (iii) any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after the approval by the stockholders of the
Company; provided, that the right to terminate this Agreement pursuant to clause
(i) above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately caused the event that would otherwise give rise to a right to
terminate this Agreement.
8.3. Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company if there has
been a material breach by Parent or Merger Sub of any representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 30 days after written
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notice of such breach is given by the Company to the party committing such
breach.
8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Parent if (i) the Board of Directors of the Company shall
have withdrawn or adversely modified its approval or recommendation of this
Agreement or approved or recommended a Superior Proposal or (ii) there has been
a material breach by the Company of any representation, warranty, covenant or
agreement contained in this Agreement that is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by Parent to
the party committing such breach.
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors or other representatives); provided, however, except as otherwise
provided herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement.
(b) In the event that (i) an Acquisition Proposal shall have been made
to the Company or any of its Subsidiaries or any of its stockholders or any
Person shall have publicly announced an intention (whether or not conditional)
to make an Acquisition Proposal with respect to the Company or any of its
Subsidiaries and thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 8.2(ii) or (ii) this Agreement is terminated by
Parent pursuant to Section 8.4(i), then the Company shall promptly, but in no
event later than two days after the date of such termination, pay Parent a
termination fee of $1,600,000 and shall promptly, but in no event later than two
days after being notified of such by Parent, pay all of the charges and
expenses, including those of the Exchange Agent, incurred by Parent or Merger
Sub in connection with this Agreement and the transactions contemplated by this
Agreement up to a maximum amount of $400,000, in each case payable by wire
transfer of same day funds. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the
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transactions contemplated by this Agreement, and that, without these
agreements, Parent and Merger Sub would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 8.5(b), and, in order to obtain such payment, Parent or Merger Sub
commences a suit which results in a judgment against the Company for the fee set
forth in this paragraph (b), the Company shall pay to Parent or Merger Sub its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the prime rate of The Chase
Manhattan Bank, N.A. in effect on the date such payment was required to be made.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Sections 6.6 (Taxation), 6.9 (Stock Exchange
Listing and De-listing), 6.11 (Benefits), 6.12 (Expenses) and 6.13
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Sub contained in Section 6.12 (Expenses), Section 8.5 (Effect
of Termination and Abandonment) shall survive the termination of this Agreement.
All other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination of
this Agreement.
9.2. Modification or Amendment. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. Counterparts. This Agreement may be executed in any number of
counter-parts, each such counter
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part being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of
Delaware and the Federal courts of the United States of America located in the
State of Delaware solely in respect of the interpretation and enforcement of
the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a
Delaware State or Federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
9.6 or in such other manner as may be permitted by law shall be valid and
sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND
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(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Sub:
Cablevision Systems Corporation,
Xxx Xxxxx Xxxxxxxxx,
Xxxxxxxx, Xxx Xxxx 00000.
Attention: General Counsel
fax: (000) 000-0000.
(with copies to:
Xxxx X. Xxxx, Esq.
Xxxxxx X. XxXxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx,
000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
fax: (000) 000-0000.)
if to the Company:
Clearview Cinema Group, Inc.
00 Xxxx Xxxxxx,
Xxxxxxx, Xxx Xxxxxx 00000.
Attention: Chief Executive Officer
fax: (000) 000-0000
(with a copies to:
Xxxxxx Xxxxxxxx, Esq.,
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx,
0000 Xxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000
fax: (000) 000-0000.)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
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9.7. Entire Agreement. This Agreement (including any exhibits hereto),
the Company Disclosure Letter, the Parent Disclosure Letter constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in Sections 6.13
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Transfer Taxes. Any liability arising out of the New York City
Real Property Gains Tax, if applicable and due with respect to the Merger, shall
be borne by the Company, as well as real property transfer taxes, if any,
payable in any other jurisdiction where any of the Company Real Properties is
situated. The parties shall cooperate in the allocation of the purchase price in
a fair and reasonable manner so as to determine what, if any value is being paid
for each of the Company Real Properties which may be subject to such a real
estate transfer tax, and the parties shall complete and file all required real
property transfer tax forms. All other transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including penalties and interest)
incurred in connection with the Merger shall be paid by Parent and Merger Sub
when due, and Parent and Merger Sub will indemnify the Company against liability
for any such taxes.
9.11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or
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unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
9.12. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.13. Assignment. This Agreement shall not be assignable by operation
of law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct or indirect subsidiary to be
a Constituent Corporation in lieu of Merger Sub, in which event all references
herein to Merger Sub shall be deemed references to such other subsidiary, except
that all representations and warranties made herein with respect to Merger Sub
as of the date of this Agreement shall be deemed representations and warranties
made with respect to such other subsidiary as of the date of such designation.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
CABLEVISION SYSTEMS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: Executive Vice President
CCG HOLDINGS INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: Executive Vice President
CLEARVIEW CINEMA GROUP, INC.
By: /s/ A. Xxxx Xxxx
Name: A. Xxxx Xxxx
Title: President
A-i-1
