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EXHIBIT 7(c)(ii)
SECOND AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Second
Amendment"), dated this 8th day of September, 1997, to the AGREEMENT AND PLAN
OF MERGER (the "Original Merger Agreement"), dated as of June 15, 1997, as
amended by that certain FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
(the "First Amendment"), dated as of July 28, 1997 (the Original Merger
Agreement as so amended by such First Amendment, the "Merger Agreement"), by
and among FREDERICK'S OF HOLLYWOOD, INC., a Delaware corporation (the
"Company"), ROYALTY ACQUISITION CORP., a Delaware corporation ("Buyer"), and
ROYALTY CORPORATION, a Delaware corporation ("Parent"), is entered
into by and among the Company, Buyer and Parent. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Merger Agreement.
RECITALS
WHEREAS, the Company, Buyer and Parent have entered into the Merger
Agreement providing for the merger of Buyer with and into the Company (the
"Merger"), with the Company surviving the Merger.
WHEREAS, the Company, Buyer and Parent amended the Original Merger
Agreement pursuant to the First Amendment;
WHEREAS, pursuant to the Original Merger Agreement, each issued and
outstanding share of Class A Capital Stock and Class B Capital Stock of the
Company would have been converted into the right to receive $6.14 per share;
WHEREAS, Parent and the Xxxxxxxxx X. Xxxxxxxxx Trust and the Xxxxxxx X.
Xxxxxxxxx Trust (the "Trusts") are parties to that certain Stock Purchase
Agreement made as of August 25, 1997, as amended by that certain Supplement to
Stock Purchase Agreement made as of September 3, 1997 (such Stock Purchase
Agreement, as so amended by such Supplement to Stock Purchase Agreement, the
"Stock Purchase Agreement");
WHEREAS, pursuant to the Stock Purchase Agreement, the Trusts have agreed
to sell to Parent, and Parent has agreed to purchase from the Trusts, 1,283,259
shares of the Class A Capital Stock of the Company, representing approximately
43.4% of the issued and outstanding shares of the Class A Capital Stock of the
Company, and 3,159,104 shares of the Class B Capital Stock of the Company,
representing approximately 53.5% of the issued and outstanding shares of the
Class B Capital Stock of the Company.
WHEREAS, the purchase price for such shares under the Stock Purchase
Agreement is $6.90;
WHEREAS, subsequent to the Original Merger Agreement and in connection
with the Stock Purchase Agreement, Buyer agreed to increase the Merger Price
to $6.90 per share of Class A Capital Stock and Class B capital Stock;
WHEREAS, the Company has received one or more unsolicited bids from third
parties offering to pay over $6.90 per share of Class A Capital Stock and Class
B Capital Stock;
WHEREAS, in light of such circumstances, the Company inquired whether
Parent would be willing to increase the $6.90 Merger Price for the Class A
Capital Stock and Class B Capital Stock;
WHEREAS, in order to consummate the Merger Agreement with the Company,
Parent has indicated its willingness to increase the Merger Price to $7.75 per
share of Class A Capital Stock and Class B Capital Stock if, and only if, the
Company rejects all other bids and agrees to amending the Merger Agreement in
the manner set forth herein:
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company's stockholders to agree to such
amendment in light of the following circumstances, among others: (1) the
existence of the Stock Purchase Agreement and Parent's right to aquire a near
majority of the outstanding Class A Capital Stock and a majority of the Class B
Capital Stock pursuant thereto: (2) Parent's expressed intention to acquire
such shares regardless of any action the Board of Directors may take with
respect to any third parties: (3) Parent's expressed intention to vote the
shares to be acquired by it pursuant to the Stock Purchase Agreement against
any transaction the Board of Directors of the Company may approve with any such
third party: (4) the high level of
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comfort the Board of Directors of the Company has with respect to Parent's
ability to consummate the transactions contemplated by the Merger Agreement,
including but not limited to Parent's ability to pay the Merger Price (as
increased hereby); and (5) concerns by the Board of Directors of the Company
regarding the likelihood of the consummation of any transaction with any such
third party and the resulting consequences to the stockholders of the Company;
and
WHEREAS, in light of the foregoing and other developments and
circumstances, the Company, Buyer and Parent desire to further amend the Merger
Agreement in the manner set forth herein:
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
1. Status of Merger Agreement. Except as specifically set forth herein,
the Merger Agreement shall remain in full force and effect and shall not be
waived, modified, superseded or otherwise affected by this Second Amendment.
This Second Amendment shall not be construed as a release, waiver or
modification of any of the terms, conditions, representations, warranties,
convenants, rights or remedies set forth in the Merger Agreement, except as
specifically set forth herein.
2. Amendments to Merger Agreement. The Merger Agreement is hereby amended
in the following respects:
(a) Amendment to Section 2.1. The dollar amount "$6.14" is
hereby deleted and replaced with the dollar amount "$7.75".
(b) Amendment to Section 6.2. Section 6.2 is hereby deleted in
its entirely and replaced as follows:
"(a) The Company shall cause its directors (even if any of them
should resign), officers, home office management employees, representatives, and
agents (including, without limitation, its attorneys (including, without
limitation, attorneys at Leob & Leob and attorneys at Morris, Nichols, Arsht &
Xxxxxx), accountants and investment bankers (including, without limitation, its
representatives at Xxxxxx Xxxxxxxxxx Xxxxx)) (collectively, the "Company
Representatives") not to engage in any discussions or negotiations, or
otherwise have any form of contract (whether in person, by phone, written
communication, electronically or otherwise), with any person or entity
(including, without limitation, any person or entity that has contacted the
Company prior to the date hereof) and their respective affiliated and related
entities) other than Parent and Buyer (and their agents and representatives)
with respect to any proposal (whether solicited or unsolicited, whether
previously made, currently in existence or arising in the future) with respect
to any acquisition of all or any material portion of the Company by means of a
merger, consolidation or other busines combination involving the Company or its
subsidiaries or acquisition of all or a material portion of the assets or
capital stock of the Company or any of its subsidiaries (an "Acquisition
Transaction"). In the event that the Company or any of the Company
Representatives shall receive any form of communication (whether written, oral,
electronic or otherwise) from any person (other than Parent or Buyer and their
agents and representatives) acting on behalf of any person or entity interested
in any Acquisition Transaction, the Company shall and the Company shall cause
the Company Representatives to, immediately terminate such contact upon
ascertaining that such contact involves an Acquisition Transaction. In the
event any Company Representative shall be contacted in person, whether by phone
or face-to-face or otherwise, by any person (other than Parent or Buyer and
their agents and representatives) acting on behalf of any person or entity
interested in any Acquisition Transaction, such Company Representative shall
state "I am prohibited from discussing anything with you", or words to such
effect, and shall cease all discussions and contact with such person. Any
telephone call from any such person shall not be returned, and all other
inquiries (whether in written, oral, electronic or other form) shall not be
answered, without the prior written consent of Parent. Neither Parent, nor
Buyer shall be entitled to terminate this Agreement as a result of any
inadvertent breach of the foregoing provisions by any Company Representative,
unless a reasonable possibility exists that the direct or indirect consequence
of such breach (together with any other such inadvertent breaches) may be the
inability of one or more of the parties hereto to consummate the Merger in
accordance with the terms of this Agreement. The Company shall arrange a
meeting on Monday, September 8, 1997, among all of the officers of the Company
(those officers who are not at the Company's headquarters shall attend by
telephone, if available) and at which representatives of Parent may attend in
person or by phone. At such meeting, Xxxxxx X. Xxxxxxx shall inform such
officers of the requirements set forth above in this Section 6.2(a) and shall
instruct such officers to comply with such requirements to the letter, and
shall further instruct such officers to inform the other home office management
employees of the Company of such requirements and to instruct such employees to
comply with such requirements to the letter. Notwithstanding the foregoing,
the Company Representatives may, on the date hereof and only on the date
hereof, contact any person or
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entity that has previously made a proposal for an Acquisition Transaction
solely to inform such person or entity that an agreement between the Company,
Parent and Buyer has been executed, which agreement provides for the payment of
$7.75 per share for all of the Class A and Class B Capital Stock of the Company
owned by its stockholders. The Company Representatives may not go into any
further detail.
(b) The Company shall use its best efforts immediately to advise
Parent and Buyer orally (to be confiremed in writing if requested by Parent or
Buyer) of the receipt of any inquiries or proposals (whether written, oral,
electronic or otherwise) relating to an Acquisition Transaction, including the
terms of any such inquiries or proposals, and the actions the Company or its
representatives propose to take with respect thereto, shall immediately provide
copies of any such inquiries or proposals to Parent and Buyer, and shall not
take any action with respect thereto without Parent's prior written consent."
(c) Amendment to Section 10.1. Clause (b) of Section 10.1 is hereby
deleted in its entirety and replaced as follows:
"by any party if, without any material breach by such terminating party
of its obligations under this Agreement, the Merger shall not have occurred on
or before 5:00 p.m. (Los Angeles time) on November 15, 1997 (the "Merger
Deadline"); provided, however, that Parent may, at its option, extend the
Merger Deadline up to two times, in each case for an additional six-month
period (such that, upon the exercise of the first option, the Merger Deadline
would be extended to May 15, 1998, and upon exercise of the second option, the
Merger Deadline would be extended to November 15, 1998). Any such extension
shall be exercised by delivery by Parent to the Company, at least ten (10) days
prior to the then operative Merger Deadline, of written notice exercising
Parent's option to extend the Merger Deadline; provided, however, that Parent
shall not be entitled to extend any Merger Deadline unless (i) any court of
competent jurisdiction in the United States or other governmental body in the
United States shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger, or (ii) any
administrative action, inquiry, investigation or proceeding shall have been
commenced by any court or governmental body that has requested the Merger be
delayed, and the Company, Parent or Buyer has agreed to comply with such
request; or (iii) such extension is for purposes of the Company's, Parent's or
Buyer's complying with applicable law relating to consummation of the Merger,
provided, however, that as soon as the event causing the extension under
subclause (i), (ii) or (iii) has been eliminated or complied with, the Company,
Parent and Buyer shall then consummate the Merger as soon as legally
permissible. In the written notice delivered by Parent to the Company, Parent
shall specify the basis for the extension under subclause (i), (ii) or (iii) of
the immediately preceding sentence and shall also confirm that it reasonably
believes it continues to have the necessary financing to consummate the
Merger."
(d) Amendment to Section 10.2.
(1) Clause (b) of Section 10.2 is hereby amended by adding the
following at the end thereof and before the commencement of Clause (c) thereof:
"provided, however, that the foregoing shall not apply to any breach of Section
6.2 hereof, and in the event of any breach of said Section 6.2, Parent or Buyer
may immediately terminate this Merger Agreement;"
(2) Section 10.2 is amended by adding the following sentence to the
end thereof;
"Nothing set forth in the immediately preceding sentence shall be
construed to indicate that the Board shall be entitled to take the actions
described by Clauses (e) or (f) thereof."
(e) Amendment to Section 10.3. Clause (d) of Section 10.3 is hereby
deleted in its entirety, and the word "or" shall be inserted before Clause (c)
thereof.
(f) Amendment to Section 10.6. Clause (a) of Section 10.6 is hereby
amended by replacing the words "the actual out-of-pocket fees and expenses
reasonably incurred and paid by such terminating party in connection with the
Merger and the transactions contemplated by this Agreement such amount not to
exceed $750,000" with "Four Million, Five Hundred Thousand Dollars
($4,500,000) as compensation and liquidated damages for lost opportunities and
reimbursement for out-of-pocket expenses (which out-of-pocket expenses alone
Parent and Buyer estimate exceed One Million, Two Hundred Thousand Dollars
($1,200,000))."
(g) Amendments to Section 10.7.
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(1) Clause (a) of Section 10.7 is hereby deleted in its entirety
and replaced as follows:
"In the event this Agreement is terminated by Parent or Buyer
pursuant to Section 10.2(e) or 10.2(f) hereof, or Section 10.2(b) hereof as a
result of a breach by the Company of Section 6.2 hereof, the Company shall pay
to Buyer the sum of Four Million, Five Hundred Thousand Dollars ($4,500,000)
immediately upon demand by Buyer, as compensation and liquidated damages for
lost opportunities and reimbursement of out-of-pocket expenses (which
out-of-pocket expenses alone Parent and Buyer estimate exceed One Million, Two
Hundred Thousand Dollars ($1,200,000))."
(2) Clause(b) of Section 10.7 is hereby amended by adding the
following sentences to the end of Section 10.7(b): "The Company shall not take
any position to cause the Class A or Class B Capital Stock of the Company not
to be voted in favor of the Merger. If the Company takes any such position and
the Merger is not approved, Buyer shall be entitled to a fee of Four Million,
Five Hundred Thousand Dollars ($4,500,000). Notwithstanding the foregoing, in
the event the termination of this Agreement pursuant to Section 10.2(c) is as a
result of the failure of the condition set forth in Section 7.1 to be
satisfied, Buyer shall not be entitled to any payment under this Section
10.7(b) unless Parent shall have used its best efforts to cause the shares of
Class A and Class B Capital Stock that Parent is entitled to purchase pursuant
to the Stock Purchase Agreement to be voted in favor of the Merger."
(h) Amendment to Article X. A new Section 10.9 is hereby added to the
Merger Agreement as follows:
"Section 10.9 Payment of Fees. No termination of this
Agreement by the Company shall be effective unless and until Parent and Buyer
have received payment in full of the amounts, if any, required under this
Article X. Nothing in this Agreement shall require the Company to pay Parent
and Buyer together more than Four Million, Five Hundred Thousand Dollars
($4,500,000) upon termination of this Agreement."
3. Representations and Warranties of the Company, Buyer and
Parent. Each of the Company, Buyer and Parent represents and warrants that
its execution, delivery and performance of this Second Amendment has been duly
authorized by all necessary corporate action and this Second Amendment is the
legal, valid and binding obligation of such entity, enforceable against such
entity in accordance with its terms. The Company further represents and
warrants to Buyer and Parent that (a) the Company will deliver to Parent within
three (3) business days following the date hereof true and complete copies of
resolutions adopted and approved by the Board of Directors reconfirming
approval of the Merger Agreement, including without limitation, the Merger
Agreement as amended by this Second Amendment, and the transactions
contemplated thereby; and (b) no action has been taken by the Board of
Directors of the Company subsequent to the date and time thereof that modifies
or affects such resolutions or the matters approved thereby.
4. Board Observation Right. From and after the date hereof
and until termination of the Merger Agreement in accordance with its terms, the
Company hereby grants to Parent the right to appoint, in its sole discretion,
one person to act as an observer (the "Observer") at all meetings of the Board
of Directors held on or after the date hereof (whether such meetings are held
in person, by telephone, electronically or otherwise). In connection
therewith, the Company shall (a) provide to Parent all information (including,
without limitation, notices of meetings of the Board of Directors of the
Company) that the Company shall provide to any member of the Board of
Directors, in such person's capacity as such, concurrently with the delivery of
such information to any such director and (b) permit, and make arrangements for,
a person designated by Parent in writing as the Observer to attend any such
meeting of the Board of Directors in an easily accessible manner. Until the
termination of the Merger Agreement in accordance with its terms, at least
twenty-four (24) hours prior to executing any action by written consent, the
Board of Directors shall provide a true and complete copy of such proposed
consent to the Observer. Nothing set forth in the immediately preceding
sentence shall limit the obligations of the Company under this Section 4 to
provide copies of any proposed written consent to the Observer concurrently
with the delivery thereof to members of the Board of Directors.
5. Grant of Option Upon the Occurrence of Certain Evants. In
the event that the Company shall issue or grant to any person or entity any
option, warrant or other right to purchase or acquire any other rights in any
shares of Class A Capital Stock, Class B Capital Stock, any other capital stock
or any other securities of the Company, concurrently therewith, solely by
operation of this Section 5, and with no further action on the part of the
Company or its Board of Directors, Parent shall receive an identical option,
warrant or right, as the case may be, to purchase the same securities or rights
described therein in the identical amounts, at the identical purchase price and
on the identical provisions issued or granted to such other person or entity.
Nothing set forth herein shall limit or otherwise affect any rights Parent and
Buyer may have under the Merger Agreement
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or otherwise as a result of the Company's having issued or granted any such
option, warrant or right to any such person or entity.
6. Press Release. As promptly as possible following the
execution of this Second Amendment, the Company shall issue a press release in
a form acceptable to Parent that shall include a statement announcing that the
Board has reapproved the Merger Agreement at a price of $7.75 per share, a
statement reconfirming the existence of the Stock Purchase Agreement, a
statement that the Board of Directors has rejected the most recent unsolicited
bid, and such other statements as may be requested by Parent and accepted by
the Company (which acceptance will not be unreasonably withheld).
7. Best Efforts. The parties reconfirm their intentions
and agree to use their reasonable best efforts to consummate the Merger as soon
as possible. In connection therewith, the Company agrees to contact the
Securities and Exchange Commission (the "Commission") as promptly as possible
following the execution of this Second Amendment, to apprise the Commission of
the execution of this Second Amendment, the issuance of the press release
required by Section 6 hereof, and all material developments that have happened
since the Commission was last contacted by the Company or it last contacted the
Company. One or more representatives of Parent, at Parent's election, shall be
entitled, and the Company shall cause its representatives to allow such
representative(s) of Parent to participate in such telephone conversation with
the Commission (and any future telephone or in person meetings with the
Commission of a substantive nature with respect to the Merger, other than
unexpected telephone calls from the Commission that are answered by a Company
representative at the time the Commission places such call). The Company shall
provide copies of any materials to be filed or otherwise supplied to the
Commission to Parent sufficiently in advance of such filing or submission for
Parent to comment on such materials before such filing, and shall make such
changes as Parent shall reasonably request prior to such filing or submission.
Other than the obligations and rights described in the second sentence hereof,
the Company shall have the same obligations set forth above with respect
to the Commission, and Parent shall have the same rights set forth above with
respect thereto, with respect to all other governmental authorities, the New
York Stock Exchange, the National Association of Securities Dealers and any
other similar organization that may assert jurisdiction or an interest in the
transactions contemplated by the Merger Agreement.
8. Defense of Proceedings. In the event any claim,
action, suit, hearing, arbitration, governmental investigation or other
proceeding (whether public or private) is brought or threatened by any
governmental authority or any other person or entity against the Company,
and/or director, officer, employee, representative or agent of the Company (a
"Proceeding"), in connection with the Merger Agreement (including, without
limitation, this Second Amendment) or any of the transactions contemplated by
the Merger Agreement (including, without limitation, this Second Amendment),
the Company shall immediately advise Parent of the commencement, or threat of
any such Proceeding and shall provide to Parent a summary of any orally
communicated threats, and a copy of all written materials received in
connection with any such proceeding or threat, including, without limitation,
any complaints, briefs, orders, correspondence and similar materials. Parent
shall be entitled to participate in (but not control) the defense of any such
action, with its own counsel, at its own expense. The Company shall not settle
any such Proceeding, or threatened Proceeding, without the prior written
consent of Parent, not to be unreasonably withheld.
9. Executed Merger Documents. Promptly after the date
hereof, the parties shall use their best efforts to prepare such additional
documents as may be necessary to consummate the Merger and the Company shall
execute such documents, and shall cause its directors officers and employees to
execute such socuments, as shall be reasonably requested by Parent , and shall
deposit such documents with counsel for Parent until such time as any
additional waiting period that may be imposed by the Commission expires;
provided, however, that all documents and monies relating to termination
agreements, employment, non-competition and consulting agreements, and
resignations shall be exchanged and delivered in accordance with the Merger
Agreement. The parties intend that all such documents (other than the
documents referred to in the proviso in the immediately preceding sentence) be
prepared, executed and delivered to such counsel such that no further action by
the Company's Board of Directors, officers or other representatives shall be
necessary upon the expiration of any such additional waiting period for the
Merger to be consummated, except for such actions as may be required in
connection with the documents referred to in the proviso in the immediately
preceding sentence. Nothing set forth herein shall limit or affect the
Company's obligations under Section 7 hereof or Section 6.4 of the Merger
Agreement even after delivery of such executed documents.
10. Counterparts. This Second Amendment may be executed in
any number of counterparts, each of which shall be deemed an original and all
of which taken together shall constitute one and the same instrument.
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11. Governing Law. This Second Amendment shall be governed by
the laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable Delaware principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
[SIGNATURE PAGE FOLLOWS THIS PAGE]
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IN WITNESS, WHEREOF, the Company, Buyer and Parent have caused this Second
Amendment to be signed by their respective duly authorized officers as of the
date first written above.
COMPANY: BUYER:
FREDERICK'S OF HOLLYWOOD, INC. ROYALTY ACQUISITION CORP.
By: _________________________ By: _________________________
_____________________________ _____________________________
Title: President Title: Chairman and President
PARENT:
ROYALTY CORPORATION
By: _________________________
Title: Chairman and President
