Execution Copy
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AGREEMENT AND PLAN OF MERGER
among
TEFRON U.S. HOLDINGS CORP.,
AWS ACQUISITION CORP.
and
ALBA-WALDENSIAN, INC.
Dated as of November 8, 1999
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Table Of Contents
ARTICLE I THE OFFER......................................................................................1
Section 1.1. The Offer...............................................................................1
Section 1.2. Company Actions.........................................................................3
Section 1.3. Directors...............................................................................4
ARTICLE II THE MERGER....................................................................................5
Section 2.1. The Merger..............................................................................5
Section 2.2. Effective Time..........................................................................6
Section 2.3. Certificate of Incorporation and By-laws................................................6
Section 2.4. Directors and Officers..................................................................6
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES.............................................................................................6
Section 3.1. Effect on Capital Stock.................................................................6
Section 3.2. Exchange of Certificates................................................................7
Section 3.3. Company Stock Options...................................................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................10
Section 4.1. Organization...........................................................................10
Section 4.2. Capitalization.........................................................................10
Section 4.3. Authority..............................................................................11
Section 4.4. Consents and Approvals; No Violations..................................................11
Section 4.5. SEC Reports and Financial Statements...................................................12
Section 4.6. Absence of Certain Changes or Events...................................................12
Section 4.7. No Undisclosed Liabilities.............................................................13
Section 4.8. Information Supplied...................................................................13
Section 4.9. Company Plans; Employees and Employment Practices......................................13
Section 4.10. Labor Matters..........................................................................15
Section 4.11. Contracts..............................................................................15
Section 4.12. Litigation; Insurance..................................................................16
Section 4.13. Compliance with Applicable Law.........................................................16
Section 4.14. Product Warranties and Liabilities; Relationships......................................17
Section 4.15. Tax Matters............................................................................17
Section 4.16. Environmental..........................................................................19
Section 4.17. Title to and Condition of Properties...................................................21
Section 4.18. Proprietary Rights.....................................................................21
Section 4.19. Opinion of Financial Advisor...........................................................22
Section 4.20. Brokers and Finders....................................................................22
Section 4.21. Year 2000..............................................................................22
Section 4.22. Copies of Documents....................................................................23
Section 4.23. Related Party Transactions.............................................................23
Section 4.24. State Takeover Statutes; Charter.......................................................23
Section 4.25. Accuracy of Information................................................................23
ii
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........................................24
Section 5.1. Organization...........................................................................24
Section 5.2. Authority..............................................................................24
Section 5.3. Consents and Approvals; No Violations..................................................24
Section 5.4. Information Supplied...................................................................25
Section 5.5. Interim Operations of Purchaser........................................................25
Section 5.6. Brokers and Finders....................................................................25
Section 5.7. No Knowledge of Certain Matters........................................................25
ARTICLE VI COVENANTS....................................................................................25
Section 6.1. Covenants of the Company...............................................................25
Section 6.2. No Solicitation........................................................................28
Section 6.3. Stockholder Approval; Preparation of Proxy Statement...................................29
Section 6.4. Access to Information..................................................................30
Section 6.5. Disclosure Supplements.................................................................30
Section 6.6. Reasonable Efforts.....................................................................31
Section 6.7. Indemnification; Insurance.............................................................31
Section 6.8. Certain Litigation.....................................................................32
Section 6.9. Takeover Statute.......................................................................32
Section 6.10. Tefron Undertaking.....................................................................32
Section 6.11. HSR Filing by the Company..............................................................33
Section 6.12. HSR Filing by the Parent...............................................................33
ARTICLE VII CONDITIONS..................................................................................33
Section 7.1. Conditions to Each Party's Obligation To Effect the Merger.............................33
Section 7.2. Conditions to Parent's and Purchaser's Obligation to Effect the Merger.................33
ARTICLE VIII TERMINATION AND AMENDMENT..................................................................34
Section 8.1. Termination............................................................................34
Section 8.2. Effect of Termination..................................................................35
Section 8.3. Amendment..............................................................................35
Section 8.4. Extension; Waiver......................................................................35
Section 8.5. Expenses...............................................................................35
ARTICLE IX MISCELLANEOUS................................................................................36
Section 9.1. Nonsurvival of Representations and Warranties..........................................36
Section 9.2. Notices................................................................................36
Section 9.3. Interpretation.........................................................................37
Section 9.4. Counterparts...........................................................................38
Section 9.5. Entire Agreement; No Third Party Beneficiaries.........................................38
Section 9.6. Governing Law..........................................................................38
Section 9.7. Publicity..............................................................................39
Section 9.8. Assignment.............................................................................39
Section 9.9. Enforcement............................................................................39
Section 9.10. Severability...........................................................................39
iii
Exhibits
Conditions to the Offer Exhibit A
iv
Schedules
Schedule 4.2(b) Outstanding Options
Schedule 4.2(c) Subsidiaries and Stock Ownership
Schedule 4.4(b) Consents and Approvals
Schedule 4.5 Company SEC Document
Schedule 4.6 Certain Changes and Events
Schedule 4.9(a) Employment Agreements and Plans
Schedule 4.9(c) Unfunded Pension Plans
Schedule 4.9(h) Acceleration of Benefits
Schedule 4.11 Material Contracts
Schedule 4.12 Litigation
Schedule 4.13 Compliance with Applicable Laws
Schedule 4.14 Product Warranties, Relationships
Schedule 4.15(b) Tax Audit
Schedule 4.15(e) Tax Agreements
Schedule 4.16(a) Environmental
Schedule 4.17 Liens on Title
Schedule 4.18 Proprietary Rights
Schedule 4.23 Related Party Transactions
Schedule 4.24 State Takeover Statues
Schedule 6.1 Negative Covenant Exceptions
v
Defined Term.........................................................Page Number
Antitrust Division............................................................33
Certificate of Merger..........................................................6
Certificates...................................................................7
Charter........................................................................1
Closing........................................................................6
Closing Date...................................................................6
Code..........................................................................14
Company........................................................................1
Company Disclosure Schedule...................................................11
Company Filed SEC Documents...................................................12
Company Financial Advisor.....................................................22
Company Notification and Report Form..........................................33
Company Option Plans...........................................................9
Company Permits...............................................................16
Company Personnel.............................................................13
Company Plans.................................................................13
Company Rights................................................................22
Company SEC Documents.........................................................12
Company Stockholder Approval..................................................11
contract......................................................................12
DGCL...........................................................................1
Dissenting Shares..............................................................7
Dissenting Stockholder.........................................................7
Effective Time.................................................................6
Environmental Law.............................................................20
Environmental Permit..........................................................21
Environmental Violation........................................................2
ERISA.........................................................................13
Exchange Act...................................................................3
Exchange Agent.................................................................7
Expiration Date................................................................1
FTC...........................................................................33
GAAP..........................................................................12
Governmental Entities.........................................................11
Hazardous Substance...........................................................21
HSR Act.......................................................................11
Indemnified Parties...........................................................31
Independent Directors..........................................................5
Information Statement.........................................................13
Initial Extension Period.......................................................2
Law...........................................................................12
Liens.........................................................................11
Litigation....................................................................16
Loss..........................................................................19
Material Adverse Change.......................................................10
Material Adverse Effect.......................................................10
Material Contract.............................................................15
Merger.........................................................................1
Merger Consideration...........................................................6
Minimum Condition..............................................................1
No Takedown Period............................................................29
Notice Period.................................................................28
Offer..........................................................................1
Offer Conditions...............................................................2
vi
Offer Documents................................................................3
Offer Price....................................................................1
Options.......................................................................10
Order.........................................................................12
Parent.........................................................................1
Parent Notification and Report Form...........................................33
Parent's Costs................................................................36
PBGC..........................................................................14
Proprietary Rights............................................................22
Proxy Statement...............................................................30
Purchaser......................................................................1
Release.......................................................................21
Schedule 14D-1.................................................................2
Schedule 14D-9.................................................................3
SEC............................................................................2
Shares.........................................................................1
Stockholders Meeting..........................................................29
subsidiary....................................................................38
Superior Proposal.............................................................29
Superior Transaction..........................................................36
Support Agreement..............................................................1
Surviving Corporation..........................................................5
Takedown Date..................................................................2
Takeover Proposal.............................................................28
taxes.........................................................................18
Tefron.........................................................................1
Year 2000 Problem.............................................................23
vii
AGREEMENT AND PLAN OF MERGER dated as of November 8, 1999, among Tefron
U.S. Holdings Corp. ("Parent"), a Delaware corporation and wholly-owned
subsidiary of Tefron, Ltd., a corporation organized under the laws of Israel
("Tefron"), AWS Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and Alba-Waldensian, Inc., a Delaware
corporation (the "Company").
WHEREAS, Parent proposes to cause Purchaser to make a tender offer (as
it may be amended from time to time as permitted under this Agreement, the
"Offer") to purchase all the outstanding shares of Common Stock, par value $2.50
per share (the "Shares"), of the Company at a purchase price (the "Offer Price")
of $18.50 per Share, net to each seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in this Agreement; and the
Board of Directors of the Company has adopted resolutions approving the Offer
and recommending that holders of Shares accept the Offer;
WHEREAS, the merger of Purchaser with and into the Company (the
"Merger") upon the terms and subject to the conditions set forth in this
Agreement has been authorized by all necessary corporate action on behalf of
Parent and Purchaser and has been adopted by the Board of Directors of the
Company; and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent and Purchaser to enter into this Agreement, Parent,
Purchaser and certain stockholders of the Company are entering into a Support
Agreement (the "Support Agreement") pursuant to which such stockholders have,
among other things, agreed to sell all such stockholders' Shares to Purchaser at
the price per Share paid in the Offer, upon the terms and subject to the
conditions set forth in the Support Agreement; and the Support Agreement has
been approved by the Board of Directors of the Company; and
WHEREAS, the Board of Directors of the Company has taken such actions
as are necessary to render the provisions of Section 203 of the Delaware General
Corporation Law ("DGCL") and Article 13 of the Certificate of Incorporation of
the Company (the "Charter") inapplicable to the transactions contemplated hereby
and by the Support Agreement.
NOW, THEREFORE, Parent, Purchaser and the Company hereby agree as
follows:
ARTICLE I
THE OFFER
Section 1.1. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of this
Agreement, Purchaser shall commence the Offer, with the initial scheduled
expiration date of the Offer (subject to the extensions permitted by this
Agreement) being the 20th business day after
commencement. The obligation of Purchaser to, and of Parent to cause Purchaser
to, commence the Offer and accept for payment, and pay for, any Shares tendered
pursuant to the Offer shall be subject only to the conditions set forth in
Exhibit A (the "Offer Conditions") (any of which may be waived in whole or in
part by Purchaser in its sole discretion, except that Purchaser shall not waive
the Minimum Condition (as defined in Exhibit A) without the consent of the
Company) and to the terms and conditions of this Agreement. Purchaser expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Purchaser shall not (i) reduce the number of Shares
subject to the Offer, (ii) reduce the Offer Price, (iii) increase or reduce the
dealer's soliciting fee, (iv) amend or add to the Offer Conditions, (v) except
as provided in the last sentence of this paragraph, extend the Offer, (vi)
change the form of consideration payable in the Offer or (vii) amend any other
term of the Offer in any manner adverse to the holders of the Shares. Subject to
the terms and conditions of the Offer and this Agreement, Purchaser shall accept
for payment, and pay for, all Shares validly tendered pursuant to the Offer that
Purchaser becomes obligated to accept for payment, and pay for, pursuant to the
Offer as promptly as practicable after the expiration of the Offer (such date,
the "Takedown Date"). Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (i) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer as a result
of an increase in the Offer Price by Purchaser in light of a bona fide competing
offer from a third party for some or all of the Shares and (ii) (A) extend the
Offer for a period, in the aggregate, of not more than five business days if, at
the initial scheduled expiration date of the Offer, the Shares validly tendered
and not withdrawn pursuant to the Offer are less than 90% of the outstanding
Shares and (B) following the period contemplated by clause (ii) (A) (the
"Initial Extension Period") if any of the Offer Conditions have not been waived
or satisfied, extend the Offer on one or more occasions for periods not to
exceed five business days until January 31, 2000; provided that, (x) if at the
expiration date of the Offer, as so extended, the Offer Conditions have been
satisfied or waived (including the deemed waivers described in clauses (y) and
(z) below), Purchaser shall not continue to extend the Offer (unless required by
clause (i), above), (y) following the Initial Extension Period, Purchaser shall
be deemed to have waived satisfaction of the conditions set forth in paragraphs
(b), (e), (f) and (h) of Exhibit A hereto with respect to matters existing on or
before the last day of the Initial Extension Period and (z) in the event
Purchaser extends the Offer after the Initial Extension Period following written
notice from the Company of an event constituting a Material Adverse Change,
Purchaser shall be deemed to have waived satisfaction of the conditions set
forth in paragraph (c) of Exhibit A hereto with respect, and only with respect,
to the event for which it has received such written notice; provided further,
that all time periods set forth above in this sentence shall be tolled, at the
election of Purchaser, during the pendency of the No Takedown Period (as defined
in Section 6.2(b) below).
(a) On the date of commencement of the Offer, Parent and Purchaser
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal (such Schedule 14D-1 and the
documents included therein pursuant to which
2
the Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). Parent and Purchaser agree that the Offer Documents shall
comply in all material respects with the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules and regulations promulgated thereunder and the
Offer Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no covenant is made by Parent or
Purchaser with respect to information supplied by the Company or any of its
stockholders specifically for inclusion or incorporation by reference in the
Offer Documents. Each of Parent, Purchaser and the Company agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to the
Company's stockholders, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the stockholders of the Company. Parent and
Purchaser agree to provide the Company and its counsel any comments Parent,
Purchaser or their counsel may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments.
(b) Parent shall provide or cause to be provided to Purchaser on a
timely basis the funds necessary to accept for payment, and pay for, any Shares
that Purchaser becomes obligated to accept for payment, and pay for, pursuant to
the Offer.
Section 1.2. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, (ii) approving the Offer and the Merger (and effecting
the other actions referred to in Section 4.24), (iii) determining that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company and its stockholders, (iv) recommending that the Company's stockholders
accept the Offer, tender their shares pursuant to the Offer and approve this
Agreement (if required) and (v) approving the acquisition of Shares by Purchaser
pursuant to the Offer, the Support Agreement and the other transactions
contemplated by this Agreement and the Support Agreement. The Company has been
advised by each of its directors and executive officers that each such person
intends to tender all Shares owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, and the documents included
therein, together with any supplements or amendments thereto, the "Schedule
14D-9") containing the recommendation described in paragraph (a) and shall mail
the Schedule 14D-9 to the stockholders of the Company. The Company agrees that
the Schedule 14D-9
3
shall comply in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no covenant is made by the Company with
respect to information supplied by Parent or Purchaser specifically for
inclusion in the Schedule 14D-9. Each of the Company, Parent and Purchaser
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given reasonable opportunity to review and comment upon the Schedule 14D-9 prior
to its filing with the SEC or dissemination to stockholders of the Company. The
Company agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Purchaser promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Purchaser such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Purchaser and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will, upon request, deliver, and will use
their reasonable efforts to cause their agents to deliver, to the Company all
copies and any extracts or summaries from such information then in their
possession or control.
Section 1.3. Directors. (a) Promptly upon the acceptance for payment of
Shares by Purchaser pursuant to the Offer, Purchaser shall be entitled to
designate such number of directors on the Board of Directors of (i) the Company
as will give Purchaser, subject to compliance with Section 14(f) of the Exchange
Act, a majority of such directors, and the Company shall, at such time, cause
Purchaser's designees to be so elected by its existing Board of Directors and
(ii) each subsidiary of the Company and each committee of the Board of Directors
of the Company and each such subsidiary as will give Purchaser a majority of
such directors or committee, and the Company shall, at such
4
time, cause Purchaser's designees to be so elected. In the event that
Purchaser's designees are elected to the Board of Directors of the Company,
until the Effective Time such Board of Directors shall have at least two
directors who are directors on the date of this Agreement and who are not
officers of the Company (the "Independent Directors"); and provided that, in
such event, if the number of Independent Directors shall be reduced below two
for any reason whatsoever, the remaining Independent Director shall designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company, or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement.
(b) Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Purchaser shall have provided to the Company on a timely basis
all information required to be included in the Information Statement with
respect to Purchaser's designees). In connection with the foregoing, the Company
will promptly, at the option of Parent, either increase the size of the
Company's and each subsidiary's Board of Directors (and each committee thereof)
and/or obtain the resignation of such number of its current directors as is
necessary to enable Purchaser's designees to be elected or appointed to, and to
constitute a majority of the Company's and each subsidiary's Board of Directors
(and each committee thereof) as provided above.
(c) Subject to the foregoing provisions of this Agreement, following
the election or appointment of Purchaser's designees pursuant to this Section
1.3 and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement or (iii) extend the time
for performance of Parent's and Purchaser's respective obligations under this
Agreement.
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the conditions
set forth herein and in accordance with the DGCL, at the Effective Time
Purchaser shall be merged with and into the Company, the separate existence of
Purchaser shall thereupon cease and the Company shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation")
and a wholly owned subsidiary of Parent. The Merger shall have the effects set
forth in the DGCL.
5
Section 2.2. Effective Time. As promptly as practicable (but in no
event more than two business days) after the satisfaction or waiver of the
conditions to the Merger (other than conditions which by their nature are to be
satisfied at the closing, but subject to such conditions) the parties shall (a)
file a certificate of merger or, if applicable, a certificate of ownership and
merger (the "Certificate of Merger") in such form as is required by and executed
in accordance with the relevant provisions of the DGCL and (b) make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State or at such subsequent time as Parent and the Company shall
agree and as shall be specified in the Certificate of Merger (the date and time
the Merger becomes effective being the "Effective Time"). Prior to such filing,
a closing (the "Closing") shall be held at the offices of Xxxxx Xxxxxxxxxx LLP,
New York, New York. The date of the Closing is sometimes referred to as the
"Closing Date."
Section 2.3. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of Purchaser as in effect immediately prior to the
Effective Time shall be the initial certificate of incorporation of the
Surviving Corporation, provided that Article I shall read in its entirety, "The
name of the Corporation is "Alba-Waldensian, Inc.."
(b) The by-laws of Purchaser as in effect immediately prior to
the Effective Time, shall be the initial by-laws of the Surviving Corporation.
Section 2.4. Directors and Officers. (a) The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation.
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder thereof:
(a) Conversion of Shares. Subject to Section 3.1(d), each
issued and outstanding Share (other than Shares to be canceled in accordance
with Section 3.1(b) hereof) shall be converted into the right to receive in
cash, without interest, the price per share paid in the Offer (the "Merger
Consideration"). As of the Effective Time, all such Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration.
(b) Cancellation of Treasury Stock and Parent Owned Stock.
Each Share that is owned by the Company or any subsidiary of the Company and
each Share that is
6
owned by Parent or Purchaser shall be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Capital Stock of Purchaser. Each issued and outstanding
share of common stock of Purchaser shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any Shares held by a person (a "Dissenting
Stockholder") who does not vote to approve the Merger and complies with all the
provisions of the DGCL concerning the right of holders of Shares to dissent from
the Merger and require payment of fair value (as defined in the DGCL) for their
Shares ("Dissenting Shares") shall not be converted as described in Section
3.1(a), but shall be converted into the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the DGCL.
If, after the Effective Time, such Dissenting Stockholder withdraws his demand
or fails to perfect or otherwise loses his rights as a Dissenting Stockholder to
payment of fair value, in any case pursuant to the DGCL, his Shares shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice of any
demands for fair value for Shares received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such demands.
Section 3.2. Exchange of Certificates. (a) Exchange Agent. Prior to the
Effective Time, Parent shall designate a bank or trust company to act as
Exchange Agent in the Merger which shall be reasonably satisfactory to the
Company (the "Exchange Agent"), and, from time to time on, prior to or after the
Effective Time, Parent shall make available, or cause the Surviving Corporation
to make available, to the Exchange Agent cash in amounts and at the times
necessary for the prompt payment of the Merger Consideration upon surrender of
certificates that immediately prior to the Effective Time represented
outstanding Shares ("Certificates").
(b) Exchange Procedure. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate to the Exchange Agent, together
with a duly executed letter of transmittal and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each Share theretofore represented by such Certificate, and the Certificate so
surrendered shall forthwith be canceled.
(c) No Further Ownership Rights in Shares. All Merger
Consideration
7
delivered upon the surrender of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
Until surrendered as contemplated by this Section 3.2, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
(d) Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article III.
(e) Lost Certificates. If 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 the Exchange Agent, the posting by such person of a bond or other
surety in such amount as the Exchange Agent may reasonable direct as indemnity
against any claim that may be made with respect to such Certificate and subject
to such other reasonable conditions as the Exchange Agent may impose, the
Exchange Agent shall deliver in exchange for such Certificate the Merger
Consideration into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 3.1.
(f) Transferred Certificates. If any payment under this
Article III is to be made to a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered or such person shall establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
(g) Investment. The Exchange Agent shall invest any funds held
by it for purposes of this Section 3.2 as directed by Parent, on a daily basis.
Any interest and other income or loss resulting from such investments shall be
paid to or, in the case of any loss, paid by, Parent.
(h) Withholding Tax. The right of any stockholder to receive
the Merger Consideration shall be subject to and reduced by the amount of any
required tax withholding obligation.
(i) No Liability. None of Parent, Purchaser, the Company or
the Exchange Agent shall be liable to any person in respect of any cash
delivered to a public
8
official pursuant to any applicable abandoned property, escheat or similar law.
Any portion of the cash that has been made available to the Exchange Agent
pursuant to this Section 3.2 that remains unclaimed by the holder of any
Certificate six months after the Effective Time, shall be returned to Parent and
any such holder who has not exchanged such holder's Certificate prior to such
time shall thereafter look only to the Surviving Corporation for any claim for
Merger Consideration hereunder.
Section 3.3. Company Stock Options. (a) Section 4.2(b) of the Company
Disclosure Schedule (as defined herein) sets forth the numbers of shares and
exercise prices of all outstanding employee and director stock options
("Options") to purchase the Shares, including those granted under the Company's
1993 Long Term Performance Plan, 1992 Nonqualified Stock Option Plan for
Non-employee Directors, 1997 Nonqualified Stock Option Plan for Directors and
all other stock option or other equity based plans (collectively, the "Company
Option Plans").
(b) Prior to the Takedown Date, the Company shall use
commercially reasonable efforts to cause, as of the Effective Time or, if the
provisions of paragraph (d) below shall be applicable, the Takedown Date, (i)
each Option for which the exercise price is less than the Offer Price, whether
or not then vested or exercisable, to be cancelled in consideration for a
payment by the Company to each holder thereof of an amount equal to the product
of (A) the excess of the Offer Price over the exercise price of each such Option
and (B) the number of Shares subject to the Option immediately prior to its
cancellation and (ii) each Option for which the exercise price is equal to or
greater than the Offer Price, whether or not then vested or exercisable, to be
cancelled in consideration for a payment by the Company to each holder thereof
in an amount equal to the product of (A) $.50 and (B) the number of Shares
subject to the Option. All payments to be made hereunder shall be net of
required withholding taxes.
(c) The Company shall use commercially reasonable efforts to
cause (i) all Company Option Plans to terminate as of the Effective Time or, if
the provisions of paragraph (d) below shall be applicable, the Takedown Date,
(ii) no holder of an Option to have any rights thereunder other than to receive
the cash payment contemplated by this Section and (iii) no person to have any
right to acquire any security of the Company, the Surviving Corporation (or any
parent subsidiary thereof) as a result of any agreement or obligation of the
Company or any subsidiary. Prior to the Takedown Date, the Company shall use
commercially reasonable efforts to obtain all necessary consents (in a form
acceptable to Parent) from holders of Options and take all other lawful action
as is necessary to give effect to the provisions of this Section. The Company
further agrees to cause the Board of Directors of the Company to adopt any
resolutions necessary to effectuate the foregoing.
(d) If Purchaser and Parent so elect, Purchaser will take such
action as may be reasonably necessary to allow the Company to take all actions
contemplated by paragraphs (b) and (c) above promptly following the Takedown
Date rather than at the Effective Date as contemplated by such paragraphs.
9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
Section 4.1. Organization. Each of the Company and its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate
power and authority to own, lease or operate its properties and to carry on its
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect on the
Company. For purposes of this Agreement, a "Material Adverse Effect" means, with
respect to any person, a fact, event or effect which has had, or is reasonably
likely to have, together with all similar or related facts, events and effects,
a material adverse effect on the financial condition, business, assets or
results of operations of such person and its subsidiaries taken as a whole or on
the ability of such person to perform its obligations hereunder or which would
prevent or delay the consummation of the transactions contemplated hereby. For
purposes of this Agreement, a "Material Adverse Change" means, with respect to
any person, any change which has had, or is reasonably likely to have, a
material adverse effect on the financial condition, business, assets or results
of operations of such person and its subsidiaries taken as a whole or on the
ability of such person to perform its obligations hereunder or which would
prevent or delay the consummation of the transactions contemplated hereby. The
Company has made available to Parent complete and correct copies of its Charter
and by-laws and the certificate of incorporation and by-laws (or similar
organizational documents) of each of its subsidiaries.
Section 4.2. Capitalization. (a) The authorized capital stock of the
Company consists of 5,000,000 Shares and no shares of preferred stock. At the
close of business on November 5, 1999, (i) 3,246,045 Shares were issued and
outstanding, (ii) 526,955 Shares were held in treasury, and (iii) 187,753 Shares
were issuable upon the exercise of Options to purchase Shares under the Company
Option Plans. All outstanding shares of capital stock of Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth above, and for changes since such date resulting from the exercise of
outstanding employee or director stock options ("Options") outstanding on such
date in accordance with their terms, there are outstanding (x) no shares of
capital stock or other voting securities of the Company, (y) no securities of
the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, and (z) no options or other rights to acquire
from the Company, and no obligation of the Company to issue, any capital stock
or other securities. There are no outstanding obligations of the Company or any
subsidiary to repurchase, redeem or
10
otherwise acquire any securities of the Company or to vote or to dispose of any
shares of the capital stock of any of the Company's subsidiaries.
(b) Section 4.2(b) of the disclosure schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), which Company Disclosure Schedule throughout this
Agreement identifies the Section (or, if applicable, subsection to which such
exception relates), lists each outstanding Option, the holder thereof, the
number of Shares issuable thereunder and the exercise price thereof.
(c) Section 4.2(c) of the Company Disclosure Schedule lists
each subsidiary of the Company. All the outstanding shares of capital stock of
each such subsidiary are owned by the Company, by another wholly owned
subsidiary of the Company or by the Company and another wholly owned subsidiary
of the Company, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature (collectively,
"Liens"), and are duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 4.2(c) of the Company Disclosure Schedule and
except for the capital stock of its subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
entity.
Section 4.3. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by the Company of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate such transactions, other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the outstanding
Shares (the "Company Stockholder Approval"). This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
Section 4.4. Consents and Approvals; No Violations. (a) The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated by this Agreement do not and
will not require any filing or registration with, notification to, or
authorization, permit, consent or approval of, or other action by or in respect
of, any governmental body, court, agency, official or regulatory or other
authority (collectively, "Governmental Entities") other than (i) the filing of
the Certificate of Merger as contemplated by Article II hereof, (ii) compliance
with any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (iii) compliance with any
applicable requirements of the Exchange Act.
(b) Except as set forth in Section 4.4(b) of the Company
Disclosure Schedule, the execution, delivery and performance by the Company of
this Agreement
11
and the consummation by the Company of the transactions contemplated by this
Agreement do not and will not (i) conflict with or result in any breach of any
provision of the Charter or by-laws of the Company or any similar organizational
documents of any of its subsidiaries, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
under, or give rise to any right of termination, amendment, cancellation,
acceleration or loss of benefits under, or result in the creation of any Lien
upon any of the properties or assets of the Company or any of its subsidiaries
under, or require consent pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, permit,
concession, franchise, contract, agreement or other instrument or obligation (a
"contract") to which the Company or any of its subsidiaries is a party or by
which any of its properties or assets may be bound or (iii) violate any
judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a "Law") applicable to the Company, any of its subsidiaries or any of
their properties or assets, except in the case of clauses (ii) or (iii) for
violations, breaches or defaults that would not have a Material Adverse Effect
on the Company.
Section 4.5. SEC Reports and Financial Statements. (a) Except as set
forth in Section 4.5 of the Company Disclosure Schedule, the Company has filed
with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1997 (collectively, the "Company SEC
Documents"). The Company SEC Documents as from time to time amended,
supplemented or superceded by subsequent Company SEC Documents which were filed
prior to the date hereof (a) do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (b) comply in all material respects
with the applicable requirements of the Exchange Act and the Securities Act, as
the case may be, and the applicable rules and regulations of the SEC thereunder.
No subsidiary of the Company is required to make any filings with the SEC.
(b) The financial statements of the Company included in the
Company SEC Documents comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments not material in amount) the consolidated financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section 4.6. Absence of Certain Changes or Events. Except as set forth
in Section 4.6 of the Company Disclosure Schedule or as disclosed in the Company
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Company Filed SEC Documents"), since January 1, 1999, (i) the Company and
its subsidiaries have conducted their respective business only in the ordinary
course, (ii) there has not occurred any Material Adverse Change with respect to
the Company and
12
(iii) neither the Company nor any subsidiary has taken any action contemplated
by Section 6.1.
Section 4.7. No Undisclosed Liabilities. Except as and to the extent
set forth in the Company Filed SEC Documents, neither the Company nor any of its
subsidiaries has any liabilities of any nature, whether or not accrued,
contingent or otherwise, that would have a Material Adverse Effect on the
Company.
Section 4.8. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed
by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement") or (iv) the Proxy
Statement, will, in the case of the Offer Documents, the Schedule 14D-9 and the
Information Statement, at the respective times the Offer Documents, the Schedule
14D-9 and the Information Statement are filed with the SEC or first published,
sent or given to the Company's stockholders, or, in the case of the Proxy
Statement, at the time the Proxy Statement is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in Section
7.1), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Purchaser for inclusion or incorporation by reference therein.
Section 4.9. Company Plans; Employees and Employment Practices. (a)
Section 4.9(a) of the Company Disclosure Schedule lists each plan, agreement,
arrangement or commitment which is an employment or consulting agreement,
executive or incentive compensation plan, bonus plan, deferred compensation
agreement, employee pension, profit sharing, savings or retirement plan,
employee stock option or stock purchase plan, group life, health, or accident
insurance or other employee benefit plan, agreement, arrangement or commitment,
including, without limitation, any commitment arising under the laws of any
jurisdiction, severance, holiday, vacation, Christmas or other bonus plans
(including, but not limited to, "employee benefit plans", as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company or any of its subsidiaries for any of
their present or former employees, consultants, independent contractors,
officers or directors ("Company Personnel") or with respect to which the Company
or any of its subsidiaries has liability, makes or has an obligation to make
contributions ("Company Plans").
(b) The Company has provided Parent with or made available to
Parent (i) true and correct copies of all Company Plans or in the case of an
unwritten plan, a written description thereof, (ii) true and correct copies of
any annual, financial or
13
actuarial reports and Internal Revenue Service determination letters relating to
such Company Plans and (iii) true and correct copies of all summary plan
descriptions (whether or not required to be furnished under ERISA) and employee
communications relating to such Company Plans and distributed to Company
Personnel, in each case under this subsection (b), existing or in effect during
or within the past five years.
(c) Except as set forth on Section 4.9(c) of the Company
Disclosure Schedule, there are no Company Personnel who are entitled to (i) any
pension benefit that is unfunded or (ii) any pension or other benefit to be paid
after termination of employment other than required by Section 601 of ERISA or
pursuant to plans intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and listed on Section 4.9(a) of
the Company Disclosure Schedule, and no other benefits whatsoever are payable to
any Company Personnel after termination of employment (including retiree medical
and death benefits).
(d) Each Company Plan that is an employee welfare benefit plan
under Section 3(l) of ERISA is either (i) funded through an insurance company
contract and is not a "welfare benefit fund" within the meaning of Section 419
of the Code or (ii) is unfunded. All contributions or payments owed with respect
to any periods prior to the Closing under any Company Plan have been made or
accrued. Each Company Plan by its terms and operation is in material compliance
with all applicable laws (including, but not limited to, ERISA, the Code and the
Age Discrimination in Employment Act of 1967, as amended). There are no actions,
suits or claims pending or threatened (other than routine noncontested claims
for benefits) or, to the Company's knowledge, no set of circumstances exist
which may reasonably give rise to such a claim against any Company Plan or
administrator or fiduciary of any such Company Plan. As to each Company Plan for
which an annual report is required to be filed under ERISA or the Code, all such
filings, including schedules, have been made on a timely basis and with respect
to the most recent report regarding each such Company Plan liabilities do not
exceed assets, and no material adverse change has occurred with respect to the
financial matters covered thereby. To the knowledge of the Company, the Company
Plans are not the subject of any investigation, audit or action by the Internal
Revenue Service, the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC").
(e) Neither the Company nor any entity required to be
aggregated with the Company pursuant to Sections 414(b), (c), (m) or (o) of the
Code (i) contributes to, maintains or has any liability with respect to a plan
subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA,
or (ii) contributes to, or has ever contributed to, a "multiemployer plan" as
defined in Section 3(37) of ERISA.
(f) Each Company Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service stating that such plan is so qualified and, to the
Company's knowledge, nothing has occurred since the date of such letter to cause
the letter to be no longer valid or effective.
14
(g) Neither the Company, any of its subsidiaries nor any other
person, including any fiduciary, has engaged in any "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA), which could
subject any of the Company Plans (or their trusts), the Company, any of its
subsidiaries, or any person who the Company or any of its subsidiaries has an
obligation to indemnify, to any tax or penalty imposed under Section 4975 of the
Code or Section 502 of ERISA.
(h) Except as set forth in Section 4.9(h) of the Company
Disclosure Schedule, the events contemplated by this Agreement (either alone or
together with any other event) will not (i) entitle any Company Personnel to
severance pay, unemployment compensation, or other similar payments under any
Company Plan or law, (ii) accelerate the time of payment or vesting or increase
the amount of benefits due under any Company Plan or compensation to any Company
Personnel, (iii) result in any payments under any Company Plan or law becoming
due to any Company Personnel, or (iv) terminate or modify or give a third party
a right to terminate or modify the provisions or terms of any Company Plan.
Section 4.10. Labor Matters. Neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. To the knowledge of the Company, there are no organizational
efforts with respect to the formation of a collective bargaining unit currently
being made or threatened involving employees of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries, nor their
respective representatives or employees, has committed any unfair labor
practices in connection with the operation of the respective businesses of the
Company or any of its subsidiaries, and there is no pending or, to the knowledge
of the Company, threatened charge, complaint, decision, order, notice-posting
requirement, settlement agreement or injunctive action or order against the
Company or any of its subsidiaries by the National Labor Relations Board or any
similar governmental or adjudicatory agency or court. The Company and its
subsidiaries have in the past been and are in compliance in all respects with
all applicable collective bargaining agreements and laws respecting employment,
employment practices, employee classification, labor relations, safety and
health, wages, hours and terms and conditions of employment except for any
failure to so comply that would not have a Material Adverse Effect on the
Company. Neither the Company nor any of its subsidiaries has experienced within
the past 12 months a "plant closing" or "mass layoff" within the meaning of the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. xx.xx. 2101 et seq.
Section 4.11. Contracts. Except as set forth in Section 4.11 of the
Company Disclosure Schedule or as disclosed in the Company Filed SEC Documents,
there are no contracts that are material to the financial condition, business,
assets or results of operations of the Company or any of its subsidiaries (each
a "Material Contract"). Neither the Company nor any of its subsidiaries, or to
the best knowledge of the Company, any other party, is in violation or breach of
or in default (nor does there exist any condition which upon the passage of time
or the giving of notice would result in a violation or breach of, or constitute
a default under, or give rise to any right of
15
termination, amendment, cancellation, acceleration or loss of benefits, or
result in the creation of any Lien upon any of the properties or assets of the
Company or any of its subsidiaries) under any contract to which it is a party or
by which it or any of its properties or assets is bound, except for violations,
breaches or defaults that would not have a Material Adverse Effect on the
Company. No other party to any such Material Contract has, to the best knowledge
of the Company, alleged that the Company or any subsidiary is in violation or
breach of or in default under any such Material Contract or has notified the
Company or any subsidiary of an intention to modify any material terms of or not
to renew any such Material Contract, where such events would have a Material
Adverse Effect on the Company. Section 4.11 of the Company Disclosure Schedule
sets forth all Material Contracts which require any consent, waiver or approval
for such contracts to remain in effect without material modification after the
Effective Time. Following the Effective Time and assuming all consents, waivers
and approvals disclosed in Section 4.11 of the Company Disclosure Schedule are
obtained, the Company and each of its subsidiaries will be permitted to exercise
all of their respective rights under each Material Contract then in effect
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or its subsidiaries would
otherwise be required to pay had the transactions contemplated by this Agreement
not occurred. To the knowledge of the Company, there are no facts, circumstances
or conditions which would reasonably be expected to result in the loss of any
customer that would have a Material Adverse Effect on the Company.
Section 4.12. Litigation; Insurance. Except as set forth in Section
4.12 of the Company Disclosure Schedule or as disclosed in the Company Filed SEC
Documents, there is no suit, claim, action, proceeding or investigation
(collectively, "Litigation") pending before any Governmental Entity or, to the
best knowledge of the Company, threatened against the Company or any of its
subsidiaries. Except as disclosed in the Company Filed SEC Documents, neither
the Company nor any of its subsidiaries is subject to any outstanding Order that
would have a Material Adverse Effect on the Company. The Company maintains fire
and casualty, general liability, product liability, business interruption and
professional liability insurance policies with reputable insurance carriers as
are adequate to cover all normal activities incident or relating to the business
of the Company and its subsidiaries and their respective properties and assets.
Section 4.13. Compliance with Applicable Law. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
Company Permits that would not have a Material Adverse Effect on the Company.
The Company and its subsidiaries are in material compliance with the terms of
the Company Permits. The businesses of the Company and its subsidiaries have not
been, and are not being, conducted in violation of any Law, except for
violations that would not have a Material Adverse Effect on the Company. Except
as set forth in Section 4.13. of the Company Disclosure Schedule no
investigation or review by any Governmental Entity with respect to the Company
or any of its subsidiaries is pending or, to the best knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to conduct
any such investigation or
16
review, other than, in each case, where the outcome would not have a Material
Adverse Effect on the Company.
Section 4.14. Product Warranties and Liabilities; Relationships. Except
as listed in Section 4.14 of the Company Disclosure Schedule, (a) the Company
has no forms of warranties or guarantees of its products and services that are
in effect or proposed to be used by it, (b) the relationships of the Company
with its customers, distributors and suppliers are good and (c) no product
produced by the Company or any of subsidiaries or produced for the Company or
any of its subsidiaries by a third party and bearing a Company trademark or
other Proprietary Right (as defined) of the Company has been recalled
voluntarily or involuntarily since January 1, 1995, no such recall is being
considered by the Company, and, to the knowledge of the Company, no such recall
is being considered by or has been requested or ordered by any Governmental
Authority.
Section 4.15. Tax Matters.
(a) The Company and each of its subsidiaries has timely filed
all federal, state and local, domestic and foreign, income and franchise tax
returns and reports and all other material tax returns and reports required to
be filed by it, except for any failure to so file any tax returns and reports
which would not have a Material Adverse Effect on the Company. All such returns
and reports are complete and correct in all material respects. The Company and
each of its subsidiaries has timely paid (or the Company has paid on its
subsidiaries' behalf) all taxes due with respect to the taxable periods covered
by such returns and reports and all other material taxes (as defined below),
except for any failure to so pay any taxes which would not have a Material
Adverse Effect on the Company, and the most recent financial statements
contained in the Company Filed SEC Documents reflect an adequate reserve for all
taxes payable by the Company and its subsidiaries for all taxable periods and
portions thereof through the date of such financial statements.
(b) Except as set forth in Section 4.15(b) of the Company
Disclosure Schedule, no federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report of the
Company or any of its subsidiaries is under audit or examination by any taxing
authority, and no written or unwritten notice of such an audit or examination
has been received by the Company. Each material deficiency resulting from any
audit or examination relating to taxes by any taxing authority has been timely
paid. No material issues relating to taxes were raised by the relevant taxing
authority during any presently pending audit or examination, and no material
issues relating to taxes were raised by the relevant taxing authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. Except as set forth in Section 4.15(b) of the Company
Disclosure Schedule, since 1993, no federal, state or local, domestic or foreign
tax return or report of the Company or any of its subsidiaries has been under
audit or examination by the Internal Revenue Service or other relevant taxing
authority resulting in the incurrence of a material tax liability. The relevant
statute of limitations is closed with respect to the U.S. federal tax returns of
the Company and its subsidiaries for all years through 1993.
17
(c) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
taxes and no power of attorney with respect to any taxes has been executed or
filed with any taxing authority.
(d) No material liens for taxes exist with respect to any
assets or properties of the Company or any of its subsidiaries, except for
statutory liens for taxes not yet due.
(e) Except as set forth in Section 4.15(e) of the Company
Disclosure Schedule neither the Company nor any of its subsidiaries is a party
to or bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any advance
pricing agreement, closing agreement or other agreement relating to taxes with
any taxing authority) or otherwise is liable for the taxes of any other person
under Treasury Regulation Section 1.1502-6, as a successor or transferee, by
contract or otherwise.
(f) Neither the Company nor any of its subsidiaries will be
required to include in a taxable period ending after the Effective Time taxable
income attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of the Code
or comparable provisions of state or local tax law, domestic or foreign, or for
any other reason.
(g) The disallowance of a deduction under Section 162(m) of
the Code for employee remuneration will not apply to any amount paid or payable
by the Company or any of its subsidiaries under any Company Plan or other
compensation arrangement currently in effect.
(h) Any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement by any employee, officer or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Company Plan or other compensation arrangement currently in
effect would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code).
(i) The Company has complied in all respects with all
applicable laws, rules and regulations relating to the payment and withholding
of taxes (including, without limitation, withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
foreign federal laws or any state or local laws, domestic and foreign) and has,
within the time and the manner prescribed by law, withheld from and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under applicable laws.
(j) As used in this Agreement, "taxes" shall include all
federal, state and
18
local, domestic and foreign, income, franchise, property, sales, excise,
employment, payroll, social security, value-added, ad valorem, transfer,
withholding and other taxes, including taxes based on or measured by gross
receipts, profits, sales, use or occupation, tariffs, levies, impositions,
assessments or governmental charges of any nature whatsoever, including any
interest, penalties or additions with respect thereto.
Section 4.16. Environmental.
(a) Except as disclosed in Section 4.16(a) of the Company
Disclosure Schedule:
(i) the Company and its subsidiaries comply, and at
all times have complied in all respects, with all applicable Environmental Laws,
except for any such lack of compliance which would not have a Material Adverse
Effect on the Company;
(ii) the Company and its subsidiaries have obtained
and are in compliance with all Environmental Permits necessary for the operation
of the properties currently owned, leased, operated or controlled by the Company
and its subsidiaries and the conduct of the business of the Company and its
subsidiaries, except for any failure to so comply which would not have a
Material Adverse Effect on the Company; there are no proceedings against the
Company pending or, to the knowledge of the Company or any of its subsidiaries,
threatened which would jeopardize the validity of any such Environmental
Permits;
(iii) there are no facts, conditions or circumstances
that form the basis for the Company or any of its subsidiaries to be subject to
any liability, loss, damage, penalty, fine, obligation, lien, cost or expense of
any nature whatsoever ("Loss") pursuant to any Environmental Law in connection
with the presence, Release or threatened Release by the Company of any Hazardous
Substance at any property (including soils, groundwater, surface water,
buildings and other structures, and equipment) currently or formerly owned,
leased, operated or controlled by the Company or its subsidiaries or any other
property for which the Company bears liability under Environmental Laws
(including, without limitation, any location at which any Hazardous Substances
generated, stored, treated or disposed by or on behalf of the Company or any of
its subsidiaries have come to be located), except for any facts, conditions or
circumstances which would not result in a Material Adverse Effect on the
Company;
(iv) neither the Company nor any of its subsidiaries
has received any written notice, demand, letter, claim or request for
information alleging that the Company or any of its subsidiaries is or may be in
violation of or liable under any Environmental Law and the Company has no
knowledge of the foregoing;
(v) neither the Company nor any of its subsidiaries
is subject to any written Orders, decrees, injunctions, consent agreements or
other similar arrangements with any Governmental Authority or is subject to any
indemnity or contribution agreement with any person relating to liability under
any Environmental
19
Law or relating to Hazardous Substances and the Company has no knowledge of the
foregoing;
(vi) there is no material proceeding pending or, to
the knowledge of the Company and its subsidiaries, threatened, before any
Governmental Authority by or against the Company or its subsidiaries arising
under or relating to any Environmental Law;
(vii) there are no facts, conditions or circumstances
that would result in a Material Adverse Effect on the Company pursuant to any
Environmental Law in connection any predecessor of the Company or any of its
subsidiaries;
(viii) there are (a) no Environmental Laws,
including, without limitation, to the knowledge of the Company any Environmental
Laws compliance with which is not required until after the date hereof, or any
orders, decrees, injunctions, consent agreements or other similar arrangements
with any Governmental Authority, or any indemnity or contribution agreements
with any person, and (b) to the knowledge of the Company, no proposals to amend,
supplement or supplant any existing Environmental Laws or to create any new
Environmental Laws or amend, supplement or supplant any orders, decrees,
injunctions, consent agreements or other similar arrangements with any
Governmental Authority or any indemnity or contribution agreements with any
person, compliance with which could (in the case of clause (a) or (b) above) be
reasonably expected to require that the Company or any of its subsidiaries
install or modify any facilities, structures or equipment or make any other
material capital improvements or incur operating costs in excess of current
operating costs in order to operate any property owned, leased, operated or
controlled by the Company or any of its subsidiaries in substantially the same
manner such property is currently operated or operate the business of the
Company and its subsidiaries in substantially the same manner in which it is
currently conducted if the effects thereof would have a Material Adverse Effect
on the Company.
(b) Except for transfers of permits issued pursuant to
Environmental Laws and notifications required pursuant to Environmental Laws,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not impose any obligation on the Company,
any of its subsidiaries, Parent or Purchaser to take any action pursuant to any
Environmental Law (including, without limitation, any so-called environmental
property transfer act), any order, decree, injunction, consent agreement or
other similar arrangement with any Governmental Authority, or any indemnity or
contribution agreement with any person.
(c) As used herein, the term "Environmental Law" means any
international, national, Native American, provincial, regional, federal, state,
municipal or local law, ordinance, rule, order, statute, decree, judgment,
injunction, directive, Environmental Permit, code, regulation, common or
decisional law (including, without limitation, principles of tort, negligence,
trespass, nuisance, strict liability, contribution and indemnification) or other
requirement of any Governmental Authority, relating to:
20
(A) the protection, investigation or restoration of the environment (including,
without limitation, natural resources) or the health or safety of humans or
other living organisms; (B) the manufacture, introduction into commerce, export,
import, handling, use, presence, disposal, release or threatened release of any
Hazardous Substance; or (C) noise, odor, wetlands, pollution, or contamination;
or (D) any injury or threat of injury to persons or property arising out of or
relating to Hazardous Substances.
(d) As used herein, the term "Environmental Permit" means any
permit, consent, license, or other approval or authorization of or by any
Governmental Authority required under any Environmental Law.
(e) As used herein, the term "Hazardous Substance" means any
element, compound, substance or material of any nature whatsoever (including,
without limitation, any product) that is listed, classified or regulated
pursuant to any Environmental Law or the subject of regulatory action by any
Governmental Authority pursuant to any Environmental Law, including, without
limitation, any petroleum product, by-product or additive, asbestos-containing
material, polychlorinated biphenyl, radioactive materials, volatile organic
compound, or hazardous air pollutant.
(f) As used herein, the term "Release" means any release,
spill, emission, leaking, pumping, pouring, injecting, deposit, disposal,
discharge, dispersal, escape, leaching or migrating into the indoor or outdoor
environment, including, without limitation, air, soil, groundwater and surface
water.
Section 4.17. Title to and Condition of Properties. Except as set forth
in Section 4.17 to the Company Disclosure Schedule, the Company and its
subsidiaries have good, valid and marketable title to, or a valid leasehold
interest in, all of its properties and assets (real, personal and mixed,
tangible and intangible), including, without limitation, all the properties and
assets reflected in the consolidated balance sheet of the Company at December
31, 1998 included in the Company Filed SEC Documents (except for properties and
assets disposed of in the ordinary course of business and consistent with past
practices since such date). Such properties or assets (a) are in good operating
condition and repair free, in the case of real property, of material structural
or engineering defects and (b) are not subject to any liability, obligation,
claim, lien, mortgage, pledge, security interest, conditional sale agreement,
charge or encumbrance of any kind (whether absolute, accrued, contingent or
otherwise) which would have a Material Adverse Effect on the Company.
Section 4.18. Proprietary Rights. (a) Except as set forth on Section
4.18 of the Company Disclosure Schedule: (i) the Company is the sole owner, free
and clear of any lien or encumbrance, of, or has a valid license, without the
payment of any royalty except with respect to off-the-shelf software and
otherwise on commercially reasonable terms, to, all U.S. and foreign patents,
registered designs, mask works, copyrights, computer software and databases,
trademarks, service marks and trade names, whether or not registered, and other
trade secrets, research and development, formulae, know-how, proprietary and
intellectual property rights and information, including all grants,
21
registrations and applications relating thereto (collectively, the "Proprietary
Rights") necessary or advisable for the conduct of its and its subsidiaries'
business as now conducted or as contemplated to be conducted, except for such
Proprietary Rights the absence of which would not have a Material Adverse Effect
on the Company (such Proprietary Rights owned by or licensed to the Company,
subject to such exception, collectively, the "Company Rights"); (ii) the Company
has taken, and will continue to take, all actions which are necessary or
advisable in order to protect the Company Rights, and to acquire Proprietary
Rights, consistent with prudent commercial practices in the Company's industry;
(iii) the Company's rights in the Company Rights are valid and enforceable; (iv)
the Company has received no demand, claim, notice or inquiry from any person in
respect of the Company Rights which challenges, threatens to challenge or
inquires as to whether there is any basis to challenge, the validity of, or the
rights of the Company in, any such Company Rights, and the Company knows of no
basis for any such challenge; (v) the Company is not in violation or
infringement of, and has not violated or infringed, any Proprietary Rights of
any other person, except for any such violation or infringement which would not
have a Material Adverse Effect on the Company; (vi) to the knowledge of the
Company, no person is infringing any Company Rights; and (vii) except on an
arm's-length basis for value and other commercially reasonable terms, the
Company has not granted any license with respect to any Company Rights to any
person.
(b) Section 4.18 of the Company Disclosure Schedule contains a
complete and accurate list of the Company Rights and all license and other
agreements relating thereto.
Section 4.19. Opinion of Financial Advisor. The Company has received
the opinion of Xxxxxxx Xxxxx and Company, L.L.C. (the "Company Financial
Advisor"), dated the date of this Agreement, to the effect that, as of the date
of this Agreement, the consideration to be received in the Offer and the Merger
by the Company's stockholders is fair to the Company's stockholders other than
Tefron, Xxxxxx X Xxxxxxx and Xxxxx Xx. Xxxxx from a financial point of view, and
a complete and correct signed copy of such opinion has been, or promptly upon
receipt thereof will be, delivered to Parent.
Section 4.20. Brokers and Finders. No broker, investment banker,
financial advisor or other person, other than the Company Financial Advisor, the
fees and expenses of which will be paid by the Company (as reflected in an
agreement between such firm and the Company, a copy of which has been delivered
to Parent), is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 4.21. Year 2000. The Company has reviewed its operations and
that of its subsidiaries and has made inquiries of any third parties with which
the Company or any of its subsidiaries has a material relationship, including,
without limitation, vendors or suppliers of software which is material to the
Company's business, to evaluate the extent to which the business or operations
of the Company and any of its subsidiaries will be
22
affected by the Year 2000 Problem (as defined below). As a result of such review
and such inquiries, the Company has concluded and hereby represents and warrants
that the Year 2000 Problem will not have a Material Adverse Effect on the
Company. As used herein with respect to the Company, its subsidiaries or such
third parties, the "Year 2000 Problem" means any material failure of computer
hardware or software to function as effectively with dates or time periods
occurring after December 31, 1999 as with dates or time periods occurring prior
to January 1, 2000, whether used in the receipt, transmission, processing,
manipulation, storage retrieval, retransmission or other utilization of data or
in the operation of mechanical or electrical systems of any kind and all
expenditures in connection therewith, including, without limitation,
prophylactic measures.
Section 4.22. Copies of Documents. The Company and its subsidiaries
have provided Purchaser, Parent or their respective representatives with true,
accurate and complete copies of all documents listed or described in the Company
Disclosure Schedule
Section 4.23. Related Party Transactions. Except as set forth in
Section 4.23 of the Company Disclosure Schedule and excluding transactions
between the Company and its subsidiaries, no director, officer, partner,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or its subsidiaries or any "associate" of such
director or officer of the Company and its subsidiaries (a) has been involved in
any material business arrangement or relationship with the Company within the
past thirty-six months, (b) owns any material asset, tangible or intangible,
which is used in the business of the Company or (c) is or was engaged in
competition with the Company; other than ownership as a passive investment of
securities of an entity if such securities are publicly traded and do not
constitute more than 5% of the outstanding equity securities of such entity.
Section 4.24. State Takeover Statutes; Charter. The Board of Directors
of the Company has adopted this Agreement and approved the Offer, the Support
Agreement, the acquisition of Shares by Purchaser pursuant to the Offer and the
Support Agreement and the other transactions contemplated by this Agreement and
the Support Agreement and such adoptions and approvals are sufficient to render
inapplicable to the Offer, the Merger, this Agreement, the Support Agreement,
the acquisition of Shares by Purchaser pursuant to the Offer and the Support
Agreement and the other transactions contemplated by this Agreement and the
Support Agreement the provisions of (a) Section 203 of the DGCL and (b) Article
13 of the Charter. Except as set forth in Section 4.24 of the Company Disclosure
Schedule, no other state takeover statute or similar Law or provision of the
Charter or the Company's by-laws applies to the Offer, the Merger, this
Agreement, the Support Agreement, the acquisition of Shares by Purchaser
pursuant to the Offer and the Support Agreement or any of the transactions
contemplated by this Agreement or the Support Agreement. The Company will take
all reasonable actions to prevent the application of any of the foregoing.
Section 4.25. Accuracy of Information. The representations made by the
Company herein or in the Company Disclosure Schedule, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in
23
order to make the statements made or information contained therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company as follows:
Section 5.1. Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not be reasonably expected to prevent or materially delay
the consummation of the Offer or the Merger.
Section 5.2. Authority. Each of Parent and Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Purchaser and no other corporate proceedings on the
part of Parent and Purchaser are necessary to authorize this Agreement or to
consummate such transactions. No vote of Parent stockholders is required to
approve this Agreement or the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and Purchaser, as the case may
be, and constitutes a valid and binding obligation of each of Parent and
Purchaser enforceable against them in accordance with its terms.
Section 5.3. Consents and Approvals; No Violations. (a) The execution,
delivery and performance by Parent and Purchaser of this Agreement and the
consummation by Parent and Purchaser of the transactions contemplated by this
Agreement do not and will not require any filing or registration with,
notification to, or authorization, permit, consent or approval of, or other
action by or in respect of, any Governmental Entities other than (i) the filing
of the Certificate of Merger as contemplated by Article I hereof, (ii)
compliance with any applicable requirements of the HSR Act, and (iii) compliance
with any applicable requirements of the Exchange Act.
(b) The execution, delivery and performance by Parent and
Purchaser of this Agreement and the consummation by Parent and Purchaser of the
transactions contemplated by this Agreement do not and will not (i) conflict
with or result in any breach of any provision of the organizational documents of
the Parent or Purchaser, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default under, or give
rise to any right of termination, amendment, cancellation, acceleration or loss
of benefits under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Purchaser or any of their subsidiaries under,
any of the terms, conditions or provisions of contract to which Parent or
Purchaser or any of their
24
subsidiaries is a party or by which any of its properties or assets may be bound
or (iii) violate any Order or Law applicable to Parent or Purchaser, any of
their subsidiaries or any of their properties or assets, except in the case of
clauses (ii) or (iii) for violations, breaches or defaults that would not
reasonably be expected to prevent or materially delay the consummation of the
Offer or the Merger.
Section 5.4. Information Supplied. None of the information supplied or
to be supplied by Parent or Purchaser specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the Information Statement or (iv) the Proxy Statement will, in the case of
the Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy Statement, at the time the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Parent or
Purchaser with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
Section 5.5. Interim Operations of Purchaser. Purchaser was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
Section 5.6. Brokers and Finders. No broker, investment banker,
financial advisor or other person, other than Credit Suisse First Boston, the
fees and expenses of which will be paid by the Parent, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Parent.
Section 5.7. No Knowledge of Certain Matters. Neither Purchaser nor
Parent has actual knowledge of any (i) Environmental Violation (as defined on
Exhibit A hereto) at any of the properties of the Company as of the date hereof
or (ii) any material breach by the Company of any of its representations or
warranties set forth herein (other than as set forth in the Company Disclosure
Schedule).
ARTICLE VI
COVENANTS
Section 6.1. Covenants of the Company. Until such time as Parent's
designees shall constitute a majority of the members of the Board of Directors
of the Company, except as provided in the Company Disclosure Schedule, the
Company shall, and shall cause its subsidiaries to, conduct their business in
the ordinary course and use all
25
reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with the Company and its
subsidiaries. Without limiting the generality of the foregoing, except as
expressly permitted in this Agreement, as provided in Section 6.1 of the Company
Disclosure Schedule or as agreed in writing by Parent, from the date hereof
until such time as Parent's designees shall constitute a majority of the members
of the Board of Directors of the Company, the Company shall not, and shall cause
its subsidiaries not to:
(a) Dividends; Changes in Stock. (i) Declare or pay any
dividends on or make other distributions in respect of any of its capital stock
(except for dividends by a wholly owned subsidiary of the Company to its
parent), (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (iii) repurchase,
redeem or otherwise acquire, or modify or amend, any shares of capital stock of
the Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
except as otherwise required by Section 3.3 of this Agreement.
(b) Issuance of Securities. Issue, deliver, sell, pledge or
encumber, or authorize, propose or agree to the issuance, delivery, sale, pledge
or encumbrance of, any shares of its capital stock or any other security (or any
right to acquire such capital stock or other security) other than the issuance
of Shares upon the exercise of Company Stock Options outstanding on the date of
this Agreement and in accordance with the terms of such Company Stock Options.
(c) Governing Documents. Amend or propose to amend its Charter
or by-laws (or similar organizational documents).
(d) Acquisitions. Acquire or agree to acquire any material
assets (including securities) or merge or consolidate with any person or engage
in any similar transaction.
(e) Dispositions. Sell, lease, license, encumber or otherwise
dispose of any of its assets or any interest therein, other than in the ordinary
course.
(f) Indebtedness. (i) Incur or suffer to exist any
indebtedness for borrowed money or guarantee any such indebtedness, guarantee
any debt of others, enter into any "keep-well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
working capital borrowings incurred in the ordinary course of business, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any wholly owned subsidiary of the
Company.
26
(g) Tax Matters. Make, revoke or change any tax election,
change any method of accounting or reporting for tax purposes or settle or
compromise any tax liability of the Company or any of its subsidiaries.
(h) Capital Expenditures. Make or agree to make any capital
expenditures out of the ordinary course of business.
(i) Discharge of Liabilities. Pay, discharge, settle or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business or in accordance
with their terms, of claims, liabilities or obligations recognized or disclosed
in the most recent financial statements (or the notes thereto) of the Company
included in the Company Filed SEC Documents or incurred since the date of such
financial statements in the ordinary course of business.
(j) Material Contracts. (i) Modify, amend or terminate any
material contract, (ii) waive, release or assign any material rights or claims,
(iii) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement or (iv) except in the ordinary
course of business, enter into any material contracts or transactions.
(k) Benefits Changes. (i) Increase the compensation or
benefits of any director, officer, employee or consultant, (ii) adopt any new
employee benefit plan or any amendment to an existing Benefit Plan that
increases the cost thereof, (iii) enter into any employment, consulting or
severance agreement with any director, officer, employee or consultant or (iv)
accelerate the payment of compensation or benefits to any director, officer,
employee or consultant.
(l) Company Option Plans. Take any action that would prevent
or is inconsistent with the provision of Section 3.3, grant any options or other
awards pursuant to any Company Option Plans, or make any amendments in respect
of options, awards or Company Option Plans except as to further the purposes of
this Section and Section 3.3.
(m) Insurance. Permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated, except in the
ordinary course of business consistent with past practice.
(n) Accounting. Except as may be required as a result of a
change in law or in GAAP, make any change in its methods of accounting.
(o) General. Authorize any of, or announce an intention,
commit or agree to take any of, the foregoing actions or any action which would
result in a breach of any representation or warranty of the Company contained in
this Agreement as of the date when made or as of any future date or would result
in any of the Offer Conditions not being satisfied.
27
Section 6.2. No Solicitation. (a) The Company shall, and shall cause
its officers, directors, employees, representatives and agents to, immediately
cease any discussions or negotiations with any parties that may be ongoing with
respect to a Takeover Proposal (as hereinafter defined). The Company shall not,
and shall cause its officers, directors, employees, representatives and agents
not to, directly or indirectly, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action designed or reasonably
likely to facilitate or encourage, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Takeover
Proposal or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal, provided, however, that if, at any time prior to the
acceptance for payment of Shares pursuant to the Offer, the Board of Directors
of the Company determines in good faith, after consultation with outside counsel
and the Company Financial Advisor, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to a Takeover Proposal that was not solicited
subsequent to the date hereof, and subject to compliance with this Section 6.2,
(x) furnish information with respect to the Company to any person pursuant to a
confidentiality agreement in a form approved by Parent (such approval not to be
unreasonably withheld) and (y) participate in discussions or negotiations
regarding such Takeover Proposal. For purposes of this Agreement, "Takeover
Proposal" means any inquiry, proposal, offer or expression of interest by any
third party relating a merger, consolidation or other business combination
involving all or substantially all of the Company's consolidated assets or 100%
of the outstanding voting power of the Company's securities that is not subject
to any financing condition. Any material modification of a Takeover Proposal
shall constitute a new Takeover Proposal.
(b) Except as set forth in this Section 6.2, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, the approval or recommendation by such
Board of Directors or such committee of the Offer, the Merger or this Agreement,
(ii) approve or recommend or take no position with respect to, or propose to
approve or recommend or take no position with respect to, any Takeover Proposal
or (iii) cause the Company to enter into any agreement related to any Takeover
Proposal (other than a confidentiality agreement contemplated by paragraph (a)
above). Notwithstanding the foregoing, in the event that prior to the acceptance
for payment of Shares pursuant to the Offer the Board of Directors of the
Company determines in good faith, after consultation with outside counsel and
the Company Financial Advisor, that it is necessary to do so in order to comply
with its fiduciary duties to the Company's stockholders under applicable law,
the Board of Directors of the Company may, in response to a Superior Proposal
(as defined below) that was not solicited subsequent to the date hereof, (x)
withdraw or modify its approval or recommendation of the Offer, the Merger or
this Agreement or (y) subject to the provisions of Section 8.1(e) hereof,
terminate this Agreement, but in each such case, only at a time that is after
the fifth business day following Parent's receipt of written notice (such
five-day period, the "Notice Period") advising Parent that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal and only if the Company is in compliance
with this Section 6.2. Parent and
28
Purchaser agree that Purchaser shall not accept for payment, or pay for any
Shares tendered pursuant to the Offer until 5 P.M. (New York City time) on the
business day immediately following the end of the Notice Period (the "No
Takedown Period"); provided, that either of Parent or Purchaser, in its sole
discretion, may elect to shorten or waive the Notice Period and immediately
terminate this Agreement and the Offer at any time after commencement of the
Notice Period in which case the amounts due Parent under Section 8.5(b) below
shall be immediately due and payable. For purposes of this Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal made by a third party
on terms which the Board of Directors of the Company determines in its good
faith judgment (based on the advice of the Company Financial Advisor or other
financial advisor of nationally recognized reputation) to be more favorable to
the Company's stockholders than the Offer and the Merger and which is reasonably
capable of being consummated in a timely fashion.
(c) The Company shall immediately advise Parent orally and in
writing of any request for information or of any Takeover Proposal, the material
terms and conditions of such request or Takeover Proposal and the identity of
the person making such request or Takeover Proposal. The Company will
immediately inform Parent of any material change in the details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with applicable law, provided,
however, neither the Company nor its Board of Directors nor any committee
thereof shall, except as specifically permitted by Section 6.2(b), withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Offer, the Merger or this Agreement or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
Section 6.3. Stockholder Approval; Preparation of Proxy Statement. (a)
If the Company Stockholder Approval is required by law, the Company shall, as
promptly as practicable following the expiration of the Offer, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of obtaining the Company Stockholder Approval. The
Company shall, through its Board of Directors, recommend to its stockholders
that the Company Stockholder Approval be given. Notwithstanding the foregoing,
if Purchaser or any other subsidiary of Parent shall acquire at least 90% of the
outstanding Shares, the parties shall, at the option and request of Parent, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a Stockholders
Meeting in accordance with the short form merger provisions of the DGCL. Without
limiting the generality of the foregoing, except as specifically permitted by
Section 6.2(b) the Company agrees that its obligations pursuant to the first
sentence of this Section 6.3(a) shall not be affected by (i) the commencement,
public proposal, public disclosure
29
or communication to the Company of any Takeover Proposal or (ii) the withdrawal
or modification by the Board of Directors of the Company of its approval or
recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law,
the Company shall, as soon as practicable following the expiration of the Offer,
prepare and file a preliminary proxy statement ("Proxy Statement") with the SEC
and shall use all reasonable efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. The Company shall give Parent an opportunity to comment
on any correspondence with the SEC or its staff or any proposed material to be
included in the Proxy Statement prior to transmission to the SEC or its staff
and shall not transmit any such material to which Parent reasonably objects. If
at any time prior to the Stockholders Meeting there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Company shall promptly prepare and mail to its stockholders such an amendment or
supplement. The Company shall not mail any Proxy Statement, or any amendment or
supplement thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all Shares owned by Parent or any
subsidiary of Parent to be voted in favor of the Company Stockholder Approval.
Section 6.4. Access to Information. The Company shall, and shall cause
each of its subsidiaries to, afford to Parent and its officers, employees,
accountants, counsel, agents and other representatives reasonable access to all
of the properties, personnel, books and records of the Company and its
subsidiaries, and shall furnish promptly all information concerning the
business, properties and personnel of Company and its subsidiaries as Parent may
reasonably request (including, without limitation, allowing Parent and its
consultants to complete such environmental review and testing as it shall deem
to be reasonably necessary). All such information shall be kept confidential in
accordance with the terms of the Confidentiality Agreement, dated as of August
25, 1999, between Parent and the Company. It is understood by the parties hereto
that the Company may withhold information that would be unlawful to disclose to
a competitor, or the disclosure of which the Company reasonably believes may
result in a competitive disadvantage to the Company, if it provides Parent in
writing with a description in reasonable detail of the nature of the information
withheld and the reason for withholding it.
Section 6.5. Disclosure Supplements. From time to time prior to the
Effective Time, the Company shall supplement or amend the Company Disclosure
Schedule with respect to any matter hereafter arising or any information
obtained after the date hereof of which, if existing, occurring or known at or
prior to the date of this Agreement, would
30
have been required to be set forth or described in the Company Disclosure
Schedule or which is necessary to complete or correct any information in such
schedule or in any representation and warranty of the Company which has been
rendered inaccurate thereby. The Company shall promptly inform Parent of any
claim by a third party that a contract has been breached, is in default, may not
be renewed or that a consent would be required as a result of the transactions
contemplated by this Agreement. For purposes of determining the satisfaction of
the conditions to the consummation of the transactions contemplated hereby, no
such supplement, amendment or information shall be considered.
Section 6.6. Reasonable Efforts. (a) Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
including, but not limited to, (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such commercially reasonable
actions as are necessary to obtain any requisite approvals, consents, orders,
exemptions or waivers by any third party or Governmental Entity, including
filings pursuant to the HSR Act and (ii) using all reasonable efforts to cause
the satisfaction of all conditions to Closing. Each party shall promptly consult
with the others with respect to, provide any necessary information with respect
to and provide the others (or their respective counsel) copies of, all filings
made by such party with any Governmental Entity or any other information
supplied by such party to a Governmental Entity in connection with this
Agreement and the transactions contemplated by this Agreement.
(b) Each party hereto shall promptly inform the others of any
communication from any Governmental Entity regarding any of the transactions
contemplated by this Agreement. If any party or affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. Nothing herein
shall require any party to waive any substantial rights or agree to any
substantial limitation on its (or the Surviving Corporation's) operations or to
dispose of any assets.
(c) Parent shall cause Purchaser to comply with its
obligations under this Agreement.
Section 6.7. Indemnification; Insurance. (a) Parent and Purchaser agree
that all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of the Company and its subsidiaries as
provided in their respective articles of incorporation or by-laws (or similar
organizational documents), shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
31
(b) For five years from the Effective Time, Parent shall
maintain in effect the Company's current directors' and officers' liability
insurance and fiduciary liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy and fiduciary liability insurance (copies of which has been heretofore
delivered to Parent) (or, in lieu of maintaining such insurance, cause coverage
to be provided under any policy maintained for the benefit of Parent or any of
its subsidiaries or otherwise obtained by Parent, so long as the terms thereof
are no less advantageous to the intended beneficiaries thereof than those of the
Company's policy), provided, however, that in no event shall Parent be required
to expend in excess of 150% of the annual premiums currently paid by the Company
for such insurance, which annual premiums the Company represents are $48,200,
and, provided further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) This Section 6.7 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Indemnified Parties,
and shall be binding on all successors and assigns of Parent and the Surviving
Corporation.
(d) Each of Parent and Purchaser agrees, that they will take
no action, the primary purpose of which is intended to avoid liability pursuant
to this Section 6.7.
Section 6.8. Certain Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against the Company or any
of its directors by any stockholder of the Company relating to the Offer, the
Merger, this Agreement or the Support Agreement, without the prior written
consent of Parent, with such consent not to be unreasonably withheld. In
addition, subject to its rights under Section 6.2(b) hereof, the Company shall
not voluntarily cooperate with any third party that may hereafter seek to
restrain or prohibit or otherwise oppose the Offer or the Merger and shall
cooperate with Parent and Purchaser to resist any such effort to restrain or
prohibit or otherwise oppose the Offer or the Merger.
Section 6.9. Takeover Statute. If any state anti-takeover law or state
law that purports to limit or restrict business combination or the ability to
acquire voting shares become applicable to the transactions contemplated by the
Offer or this Agreement, the Company and Parent and their respective Boards of
Directors shall grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effect of such law on the transactions contemplated hereby.
Section 6.10. Tefron Undertaking. Tefron hereby undertakes and agrees
to (i) provide or cause to be provided sufficient funds to Parent and Purchaser
so that Parent and Purchaser can meet their payment obligations under Articles I
and II hereof and (ii) otherwise take such action as may be required to cause
Parent and Purchaser to meet their other obligations under Articles I, II, III,
Section 6.6 and Section 8.5(a) hereof. Tefron
32
agrees that the Company may seek remedies directly from Tefron with respect to
this undertaking without first exhausting its remedies against Purchaser or
Parent.
Section 6.11. HSR Filing by the Company. The Company will promptly
file, and will cause its direct and indirect shareholders (to the extent
required by the HSR Act) to file, with the Federal Trade Commission ("FTC") and
the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") a Notification and Report Form (collectively, the "Company
Notification and Report Form") and related material required to be filed under
the HSR Act, which will, at the time of filing, comply in all material respects
with the requirements of the HSR Act. The Company will make all reasonable
effort to ensure that, at the time of such filing, all information relating to
the Company and its subsidiaries as set forth in the Company Notification and
Report Form will be true and correct in all material respects.
Section 6.12. HSR Filing by the Parent. The Parent will promptly file,
and will cause its direct or indirect shareholders (to the extent required by
the HSR Act) to file, with the FTC and the Antitrust Division a Notification and
Report Form (collectively, the "Parent Notification and Report Form") and
related material required to be filed under the HSR Act, which will, at the time
of filing, comply in all material respects with the requirements of the HSR Act.
Parent will make all reasonable effort to ensure that at the time of such
filing, all information relating to the Parent as set forth in the Parent
Notification and Report Form was true and correct in all material respects.
ARTICLE VII
CONDITIONS
Section 7.1. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction of the following conditions:
(a) Company Stockholder Approval. If required by applicable
law, the Company Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No Law or Order issued by
any court of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, provided, however, that each of the parties shall have used reasonable
efforts to prevent the entry of any such Order and to appeal as promptly as
possible any Order that may be entered.
(c) Purchase of Shares. Purchaser shall have previously
accepted for payment and paid for Shares pursuant to the Offer.
Section 7.2. Conditions to Parent's and Purchaser's Obligation to
Effect the Merger. The obligation of each of Parent and Purchaser to effect the
Merger shall be subject to the satisfaction of the following condition:
33
(a) FIRPTA Certificate. Parent and Purchaser shall have been
provided with a certified statement of the Company, pursuant to Section
1.1445-2(c)(3) of the Treasury Regulations, that the Company is not, and has not
been within the last five years, a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Code
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) the Offer shall have expired without the
acceptance for payment of Shares thereunder or (y) Purchaser shall not have
accepted for payment any Shares pursuant to the Offer prior to January 31, 2000,
provided, however, that the right to terminate this Agreement pursuant to this
(b)(i) shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of any such condition or
if the failure of such condition results from facts or circumstances that
constitute a breach of representation or warranty under this Agreement by such
party; or
(ii) if any Governmental Entity shall have issued an
Order or taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant to
the Offer or the Merger and such Order or other action shall have become final
and nonappealable;
(c) by Parent prior to the purchase of Shares pursuant to the
Offer if the Company shall have breached or failed to perform in any material
respect any representation, warranty, covenant or other agreement contained in
this Agreement that (i) would give rise to the failure of a condition set forth
in paragraph (e) or (f) of Exhibit A and (ii) cannot be or has not been cured
within five business days after the giving of written notice to the Company;
(d) by Parent or Purchaser if either Parent or Purchaser is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (d) of Exhibit A to this Agreement;
(e) by the Company in accordance with Section 6.2(b), provided
that it has complied with all provisions thereof, including the notice
provisions therein, and that it has paid Parent the Termination Fee in
accordance with the terms of this Agreement;
34
(f) by the Company prior to the purchase of Shares pursuant to
the Offer if Parent or Purchaser shall have breached or failed to perform in any
material respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform is incapable of being cured or has not been cured within five business
days after the giving of written notice to Parent or Purchaser, as applicable,
except, in any case, such breaches and failures which are not reasonably likely
to materially and adversely affect Parent's or Purchaser's ability to consummate
the Offer or the Merger; or
(g) by the Parent or Purchaser if either Parent or Purchaser
is entitled to terminate the Offer as a result of the occurrence of any event
set forth in paragraph (h) of Exhibit A to this Agreement.
Section 8.2. Effect of Termination. Subject to Section 8.5 below, in
the event of a termination of this Agreement by either the Company or Parent as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Purchaser or the
Company or their respective officers or directors, provided, however, that
nothing herein shall relieve any party for liability for any willful breach
hereof.
Section 8.3. Amendment. This Agreement may be amended by the parties
hereto, by duly authorized action taken, at any time before or after obtaining
the Company Stockholder Approval, but, after the purchase of Shares pursuant to
the Offer, no amendment shall be made which decreases the Merger Consideration
and, after the Company Stockholder Approval, no amendment shall be made which by
law requires further approval by such stockholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.4. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, subject to Section
8.3, (i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 8.5. Expenses. (a) Except as otherwise provided in this Section
8.5, each party shall bear its own expenses in connection with the transactions
contemplated by this Agreement.
(b) If this Agreement is terminated pursuant to (i) Section
8.1(c), and either (x) such termination is the result of an intentional breach
or failure to perform by
35
the Company or (y) the Company enters into a definitive agreement with respect
to a Superior Transaction within 12 months of the date of such termination, (ii)
Section 8.1(d) or (e) or (iii) if the Company has knowledge of an Environmental
Violation, Section 8.1(g), then the Company shall pay to Parent, as liquidated
damages, (A) a fee of $3,000,000 plus (B) an amount equal to Parent's Costs (as
defined below) by wire transfer of immediately available funds. If this
Agreement is terminated pursuant to Section 8.1(c) and such termination did not
result from an intentional breach or failure to perform by the Company, the
Company shall pay to Parent, as liquidated damages (in the manner set forth in
this paragraph), an amount equal to Parent's Costs. If this Agreement is
terminated pursuant to Section 8.1(g) and the Company does not have knowledge of
an Environmental Violation, the Company shall pay to Parent, as liquidated
damages (in the manner set forth in this paragraph), an amount equal to Parent's
Costs incurred from and after the date hereof. Such fee and /or costs shall be
paid prior to termination in the case of Section 8.1(e) and within one business
day of termination otherwise; provided that, in the case of a Superior
Transaction contemplated by clause (i)(y) above, the fee shall be paid at the
time of the execution of the definitive agreement contemplated thereby . For
purposes hereof, a "Superior Transaction" shall mean a merger, consolidation,
reorganization, recapitalization, asset or share purchase or other acquisition
or sale transaction made at any time (i) involving a per Share purchase price or
consideration in excess of $18.50 per Share and (ii) involving (A) 50% or more
of the assets of the Company or the outstanding Shares or (B) a change of
control of the Company. The Company acknowledges that the agreements contained
in this Section 8.5(b) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement. Accordingly, if the Company fails to pay the amount due pursuant
to this Section 8.5(b) when it is required to be paid, and, in order to obtain
such payment, Parent commences a suit which results in a judgment against the
Company for the fee set forth in this Section 8.5(b), the Company shall pay to
Parent its costs and expenses (including attorneys' fees) in connection with
such suit, including any costs of collection, together with interest on the
amount of the fee at the rate of 12% per annum from the date such fee was
required to be paid. "Parent's Costs" shall mean Parent's and Purchaser's
reasonable and documented out-of-pocket costs, fees and expenses of their
counsel, accountants, financial advisors and other experts and advisors as well
as fees and expenses incident to negotiation, preparation and execution of this
Agreement and related documentation and shareholders' meetings and consents up
to an aggregate amount of $1,800,000.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
Section 9.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt by the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
36
(a) if to Parent or Purchaser, to
x/x Xxxxxx Xxx.
00 Xxxxx Xxxxxx
Xxxx-Xxxx 00000
Xxxxxx
Attention: Xxxx Xxxxxxx,
Chief Executive Officer
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
and
(b) if to the Company, to
Alba-Waldensian, Inc.
X.X. Xxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Chief Financial Officer
with a copy to:
Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: X. Xxxxxxxx Xxxxxx, III
Telefax: (000) 000-0000
Section 9.3. Interpretation.
(a) When a reference is made in this Agreement to an Article
or a Section, such reference shall be to an Article or a Section of this
Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
37
(c) This Agreement is the result of the joint efforts of
Parent, Purchaser and the Company, and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any party based on any presumption of that
party's involvement in the drafting thereof.
(d) The words "include", "includes" or "including" shall be
deemed to be followed by the words "without limitation."
(e) A "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person.
(f) The term "ordinary course of business" (or similar terms)
shall be deemed to be followed by the words "consistent with past practice."
(g) The term "knowledge" or "actual knowledge" with respect to
any person that is not a natural person shall mean the knowledge of the senior
officers of that person.
Section 9.4. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 9.5. Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.7, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 9.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York. Each of the parties hereto
(including Tefron) irrevocably submits to the exclusive jurisdiction of the
United States District Court for the Southern District of New York, for the
purpose of any action or proceeding arising out of or relating to this Agreement
and each of the parties hereto irrevocably agrees that all claims in respect to
such action or proceeding may be heard and determined exclusively in any New
York state or federal court sitting in the City of New York. Each of the parties
hereto (including Tefron) irrevocably consents to the service of any summons and
complaint and any other process in any other action or proceeding relating to
the Offer or Merger, on
38
behalf of itself or its property, by the personal delivery of copies of such
process to such party. Nothing in this Section 9.6 shall affect the right of any
party hereto to serve legal process in any other manner permitted by law.
Section 9.7. Publicity. Except as otherwise required by law, court
process or the rules of any applicable securities exchange or as contemplated or
provided elsewhere herein, no party hereto shall issue any press release or
otherwise make any public statement with respect to the transactions
contemplated by this Agreement without prior consultation with the other parties
hereto. The parties hereto agree that a mutually acceptable joint press release
shall be made promptly upon execution of this Agreement and, unless otherwise
agreed by the parties, in no event shall such press release be made later than
the date hereof.
Section 9.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any affiliate of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 9.9. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, in addition to any other remedy to
which they are entitled at law or in equity.
Section 9.10. Severability. This Agreement shall be deemed severable;
the invalidity or unenforceability of any term or provision of this Agreement
shall not affect the validity or enforceability of the balance of this Agreement
or of any other term hereof, which shall remain in full force and effect. If of
any of the provisions hereof are determined to be invalid or unenforceable, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible.
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
TEFRON U.S. HOLDINGS CORP.
By:
-------------------------------
Name:
Title:
AWS ACQUISITION CORP.
By:
-------------------------------
Name:
Title:
ALBA-WALDENSIAN, INC.
By:
-------------------------------
Name:
Title:
For purposes of agreeing to be legally bound by the provisions of
Sections 6.10 and 9.6 hereof, the undersigned hereby executes and delivers this
Agreement as of the date first written above:
TEFRON , LTD.
By:
-------------------------------
Name:
Title:
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless prior to the expiration date for the Offer (the "Expiration
Date") (i) there shall have been validly tendered and not properly withdrawn
prior to the Expiration Date a majority of the outstanding Shares (determined on
a fully diluted basis) (the "Minimum Condition") and (ii) any waiting period
under the HSR Act applicable to the purchase of Shares pursuant to the Offer
shall have expired or been terminated. Furthermore, notwithstanding any other
term of the Offer or this Agreement, Purchaser shall not be required to accept
for payment or, subject as aforesaid, to pay for any Shares not theretofore
accepted for payment or paid for, and may terminate the Offer if, at any time on
or after the date of this Agreement and prior to the Expiration Date, any of the
following conditions exists (other than as a result of any action or inaction of
Parent or any of its subsidiaries that constitutes a breach of this Agreement):
(a) there shall be threatened, instituted or pending by any
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by Parent or Purchaser of any Shares under the Offer, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
seeking to obtain from the Company, Parent or Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole, (ii)
seeking to prohibit or materially limit the ownership or operation by the
Company, Parent or any of their respective subsidiaries of a material portion of
the business or assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, or to compel the Company and its
subsidiaries, taken as a whole or Parent to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and its
subsidiaries, taken as a whole, in each case as a result of the Offer or any of
the other transactions contemplated by this Agreement, (iii) seeking to impose
material limitations on the ability of Parent or Purchaser to acquire or hold,
or exercise full rights of ownership of, any Shares to be accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
Shares on all matters properly presented to the stockholders of the Company,
(iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company or its subsidiaries or (v) which otherwise is
reasonably likely to have a Material Adverse Effect on the Company;
(b) there shall be any Law or Order enacted, entered, first
enforced, promulgated or first deemed applicable to the Offer or the Merger, by
any Governmental Entity, other than the routine application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) there shall exist any Material Adverse Effect with respect
to the Company other than as disclosed in this Agreement or the Company
Disclosure Schedule;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have (x) withdrawn or modified in a manner adverse to Parent or
Purchaser its approval or recommendation of the Offer or the Merger or its
adoption of this Agreement, (y) approved or recommended or taken a neutral
position with respect to any Takeover Proposal, (z) failed to reaffirm its
recommendation of the Offer or the Merger or its adoption of this Agreement
within five business days of being requested by Parent to do so or (ii) the
Board of Directors of the Company or any committee thereof shall have resolved
to take any of the foregoing actions;
(e) any of the representations and warranties of the Company
set forth in this Agreement shall not be true and correct in any material
respect in each case at the date of the Agreement and at the scheduled or
extended expiration of the Offer;
(f) the Company shall have failed to perform or comply, in all
material respects, with any agreement, obligation or covenant to be performed or
complied with by it under the Agreement, which failure to perform or comply has
not been cured within five business days after the giving of written notice to
the Company;
(g) the Agreement shall have been terminated in accordance
with its terms;
(h) the Purchaser and Parent shall have reasonably determined
that there are Losses (as defined in Section 4.16(a) (iii) of the Agreement) to
the Company with respect to any environmental matter or violation of
Environmental Law or any litigation or litigations relating thereto (which are
not otherwise disclosed in Schedule 4.16(a) of the Company Disclosure Schedule),
which individually or in the aggregate exceed $500,000 (an "Environmental
Violation"); or
(i) Parent or Purchaser shall not have been provided with a
certified statement of the Company, pursuant to Section 1.1445-2(c)(3) of the
Treasury Regulations, that the Company is not, and has not been within the last
five years, a "United States real property holding corporation" as defined in
Section 897(c)(2) of the Code.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and
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may, subject to the terms of this Agreement, be waived by Parent and Purchaser
in whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Agreement to which this Exhibit A is a part.
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