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SECURITIES PURCHASE AGREEMENT
Dated as of September 1, 1999
By and Between
OVERSEAS TOYS, L.P.
And
CYRK, INC.
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TABLE OF CONTENTS
PAGE
RECITALS 1
ARTICLE 1 DEFINITIONS 2
1.1 Certain Defined Terms 2
ARTICLE 2 SALE AND TRANSFER OF SECURITIES; CLOSING 2
2.1 Sale and Purchase of Securities 2
2.2 Purchase Price; Payment 2
2.3 Closing 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3
3.1 Disclosure Schedule 3
3.2 Representations and Warranties of the Company 3
(a) Organization, Standing and Corporate Power 3
(b) Subsidiaries 4
(c) Capitalization; Valid Issuance of Shares 4
(d) Authority; Noncontravention 5
(e) SEC Documents; Undisclosed Liabilities 6
(f) Information Supplied 7
(g) Absence of Certain Changes or Events 7
(h) Litigation; Labor Matters; Compliance with Laws 7
(i) Employee Matters 8
(j) Tax Returns and Tax Payments 9
(k) State Antitakeover Laws Not Applicable;
No Other Restrictions 10
(l) Environmental Matters 10
(m) Properties 11
(n) Intellectual Property 11
(o) Brokers 12
(p) Opinion of Financial Advisor 12
(q) Board and Special Committee Recommendations 12
(r) Common Shares Listing 12
(s) Required Vote 12
(t) Termination of Shareholders Agreement 12
(u) Year 2000 Compliance 13
3.3 Representations and Warranties of the Investor 13
(a) Organization, Standing and Power 13
(b) Authority; Noncontravention 13
(c) Information Supplied 14
(d) Litigation 14
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TABLE OF CONTENTS
(continued)
Page
(e) Brokers 14
(f) Investor Status 14
(g) Accredited Investor 14
(h) Financial Ability 15
(i) No Other Agreements 15
ARTICLE 4 COVENANTS OF THE COMPANY 15
4.1 Affirmative Covenants 15
4.2 Restrictions 16
4.3 No Solicitation 17
4.4 Certain Agreements 18
4.5 Continuing Covenants 18
ARTICLE 5 ADDITIONAL AGREEMENTS 20
5.1 Preparation of the Proxy Statement; Stockholder Meeting 20
5.2 Best Efforts 21
5.3 Public Announcements 21
5.4 Takeover Statutes 21
5.5 Restriction on Investor 22
5.6 Restrictive Legend 22
5.7 Standstill 22
5.8 Resignation of Investor Directors 24
ARTICLE 6 CONDITIONS PRECEDENT 24
6.1 Conditions to Each Party's Obligation To Effect the Closing 24
(a) HSR Act 24
(b) No Injunctions or Restraints 24
(c) Company Stockholder Approval 24
6.2 Conditions to Obligation of the Investor 24
(a) Representations and Warranties 25
(b) Performance of Obligations of the Company 25
(c) Consents, etc. 25
(d) No Material Adverse Change 25
(e) Delivery of Certain Documents 25
6.3 Conditions to Obligation of the Company 26
(a) Representations and Warranties 26
(b) Performance of Obligations of the Investor 26
(c) Delivery of Certain Documents 26
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TABLE OF CONTENTS
(continued)
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ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 27
7.1 Termination 27
7.2 Effect of Termination 27
7.3 Amendment 28
7.4 Extension; Waiver 28
ARTICLE 8 INDEMNIFICATION; REMEDIES 29
8.1 Survival; Right To Indemnification Not Affected By Knowledge 29
8.2 Indemnification and Payment of Damages By the Company 29
8.3 Indemnification and Payment of Damages By the Investor 30
8.4 Limitation on Amount 30
8.5 Procedure for Indemnification -- Third Party Claims 30
8.6 Procedure for Indemnification -- Other Claims 31
8.7 Remedies Exclusive 32
ARTICLE 9 GENERAL PROVISIONS 32
9.1 Notices 32
9.2 Interpretation 33
9.3 Counterparts 33
9.4 Entire Agreement; No Third-Party Beneficiaries 33
9.5 Costs and Expenses 33
9.6 Governing Law 34
9.7 Assignment 34
9.8 Enforcement 34
9.9 Severability 34
9.10 Further Assurances 35
9.11 Construction 35
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Certificate of Designation
EXHIBIT C Form of Warrant
EXHIBIT D Registration Rights Agreement
EXHIBIT E Management Agreement
EXHIBIT F Form of Opinion of Company Counsel
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is
entered into as of September 1, 1999 by and between OVERSEAS TOYS, L.P., a
Delaware limited partnership (the "Investor"), and CYRK, INC., a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the
Investor desires to purchase from the Company, (i) a total of 25,000 shares of
Series A Senior Cumulative Participating Convertible Preferred Stock of the
Company, the Certificate of Designation of which is attached hereto as Exhibit B
(the "Series A Preferred Stock"), and (ii) a warrant, in the form attached
hereto as Exhibit C, to purchase an additional 15,000 shares of Series A
Preferred Stock (the "Warrant"), pursuant to the terms and conditions set forth
in this Agreement;
WHEREAS, the Board of Directors of the Company has approved,
and deemed it advisable, that the Company (i) execute and deliver this Agreement
and consummate the Contemplated Transactions, and (ii) issue and sell to the
Investor such shares of Series A Preferred Stock and the Warrant on the terms
and conditions set forth herein;
WHEREAS, concurrently with the closing of the transactions
contemplated by this Agreement, the Company will enter into a registration
rights agreement with the Investor with respect to the shares of Series A
Preferred Stock and the Warrant being acquired by the Investor herein (the
"Registration Rights Agreement"), in the form attached hereto as Exhibit D;
WHEREAS, concurrently with the closing of the transactions
contemplated by this Agreement, the Company will enter into a management
agreement with The Yucaipa Companies, in the form attached hereto as Exhibit E
(the "Management Agreement"), to provide management and consulting services to
the Company;
WHEREAS, concurrently with the execution of this Agreement,
certain shareholders of the Company are entering into a voting agreement with
the Investor (the "Voting Agreement") whereby such shareholders have agreed to
vote their shares in favor (a) of the Company Stockholder Approval (as defined
in Section 3.2(s)) and any other vote, consent or action as required of the
stockholders of the Company to approve the Contemplated Transactions and (b) the
election of certain nominees selected by Investor to the Board of Directors of
the Company; and
WHEREAS, concurrently with the execution of this Agreement and
in order to
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induce the Investor to agree to the transactions contemplated hereby, the
Company has entered into Employment Agreements with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇ to serve as Co-Chief Executive Officers and Co-Presidents of the
Company (collectively, the "Employment Agreements"), such Employment Agreements
to be effective only as of the Closing.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants, restrictions and agreements contained in this Agreement,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Capitalized words and phrases used in this
Agreement and not otherwise defined herein have the meanings ascribed to them in
Exhibit A hereto.
ARTICLE 2
SALE AND TRANSFER OF SECURITIES; CLOSING
2.1 SALE AND PURCHASE OF SECURITIES. At the Closing provided for in
Section 2.3, and on the terms and subject to the conditions herein set forth,
the Company shall sell, transfer, assign, convey, and deliver to the Investor,
and the Investor shall purchase, accept, and acquire from the Company, a total
of 25,000 shares of Series A Preferred Stock (the "Series A Preferred Shares")
and the Warrant (together with the Series A Preferred Shares, the "Purchased
Securities").
2.2 PURCHASE PRICE; PAYMENT. In consideration of the sale, transfer,
assignment, conveyance and delivery to the Investor of the Purchased Securities,
the Investor agrees to pay to the Company on the Closing Date, by wire transfer
of immediately available funds to an account specified by the Company, an
aggregate purchase price of Twenty-Five Million Dollars ($25,000,000) (the
"Purchase Price").
2.3 CLOSING.
(a) The closing of the transactions contemplated by Sections 2.1 and
2.2 shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m., Pacific Time,
or at such other time and place as the Company and the Investor may mutually
agree in writing, as soon as practicable and in any event within two (2)
Business Days following, and subject to, the prior fulfillment or waiver of all
conditions (other than conditions to be satisfied at the Closing, but subject to
those conditions) set forth in Article 6 hereof (such event being called the
"Closing" and such date,
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the "Closing Date"). All transactions required to occur at the Closing shall be
deemed to have occurred simultaneously, and no such transaction shall be deemed
to have occurred until all have occurred.
(b) At the Closing, the Company will deliver the following to the
Investor:
(i) A duly executed stock certificate evidencing the
Series A Preferred Shares registered in the name of the Investor;
(ii) The duly executed Warrant registered in the name
of the Investor;
(iii) The Registration Rights Agreement and the
Management Agreement, each duly executed and delivered by the Company;
and
(iv) The documents, instruments and writings
contemplated or required to be delivered by the Company at the Closing
pursuant to Section 6.2 or otherwise contemplated or required under
this Agreement.
(c) At the Closing, the Investor will deliver to the Company:
(i) The Purchase Price;
(ii) The Registration Rights Agreement duly executed
and delivered by the Investor, and the Management Agreement duly
executed and delivered by The Yucaipa Companies; and
(iii) The documents, instruments and writings
contemplated or required to be delivered by the Investor at the Closing
pursuant to Section 6.3 or otherwise contemplated or required under
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 DISCLOSURE SCHEDULE. On the date hereof, the Company has delivered to
the Investor a schedule (the "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more representations or warranties contained in
Section 3.2, or to one or more of its covenants contained herein.
3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Investor, except as set forth in the Disclosure Schedule, as
follows:
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(a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company and each
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect. Section 3.2(a) of the
Disclosure Schedule contains complete and correct copies of the Certificate of
Incorporation and Bylaws of the Company and the comparable Organizational
Documents of each of its Subsidiaries.
(b) SUBSIDIARIES. The only direct or indirect Subsidiaries of the
Company and other ownership interests held by the Company in any other Person
are those listed in Section 3.2(b) of the Disclosure Schedule or in Exhibit 21.1
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and other than such listed Subsidiaries and Persons, the Company does
not own (directly or indirectly) any stock, securities or equity interests in
any Person. All the outstanding shares of capital stock or other ownership
interests of each such listed Subsidiary and Person have been validly issued and
are fully paid and nonassessable and are owned (of record and beneficially) by
the Company, by another Subsidiary (wholly owned) of the Company or by the
Company and another such Subsidiary (wholly owned), free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens").
(c) CAPITALIZATION; VALID ISSUANCE OF SHARES. The authorized capital
stock of the Company consists of 50,000,000 shares of common stock, $0.01 par
value per share (the "Common Shares"), and 1,000,000 shares of "blank-check"
preferred stock, $0.01 par value per share (the "Preferred Shares"). As of the
date of this Agreement, there are (i) 15,740,857 Common Shares issued and
outstanding, (ii) no Common Shares held in the treasury of the Company or held
by any Subsidiary of the Company; (iii) 1,319,276 Common Shares reserved for
issuance upon exercise of authorized but unissued Company Stock Options pursuant
to the Option Plans; (iv) 2,313,155 Common Shares issuable upon exercise of
outstanding Company Stock Options; (v) 300,000 Common Shares issuable upon
exercise of the warrants listed in Section 3.2(c) of the Disclosure Schedule,
and (vi) no Preferred Shares issued or outstanding. Section 3.2(c) of the
Disclosure Schedule contains a complete and accurate list of all Company Stock
Options outstanding pursuant to the Option Plans including the date of grant,
name of option holder, exercise price and expiration date. Except as set forth
in this Section 3.2(c), no shares of capital stock or other equity securities of
the Company are issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. The
Series A Preferred Shares and the Warrant, when issued, paid for and delivered
in accordance with the terms of this Agreement, and the Series A Preferred
Shares to be issued pursuant to the Warrant, will be duly authorized, validly
issued, fully paid and nonassessable and not subject
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to preemptive rights. Except as set forth in Section 3.2(c) of the Disclosure
Schedule, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of the Company or any of its Subsidiaries
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of the Company or
such Subsidiary may vote. Except as set forth in Section 3.2(c) of the
Disclosure Schedule, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities of the Company or of any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Other than the Company Stock
Options or the warrants set forth in Section 3.2(c) of the Disclosure Schedule
or as otherwise set forth in Section 3.2(c) of the Disclosure Schedule, (x)
there are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of or measured or determined
based on the value or market price of any shares of capital stock of the Company
or any of its Subsidiaries and (y) to the Knowledge of the Company, there are no
irrevocable proxies with respect to shares of capital stock of the Company or
any Subsidiary of the Company. Except as set forth in Section 3.2(c) of the
Disclosure Schedule, there are no agreements or arrangements pursuant to which
the Company or any of its Subsidiaries is or would be required to register
Common Shares, Preferred Shares or other securities under the Securities Act of
1933, as amended.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to enter into this Agreement and to consummate the
Contemplated Transactions. The execution and delivery of this Agreement, the
Management Agreement and the Registration Rights Agreement by the Company and
the consummation by the Company of the Contemplated Transactions have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the approval of the Company's stockholders of the issuance and sale of the
Purchased Securities to the Investor and the election to the Board of Directors
of the Company of the Investor's nominees pursuant to Section 5.1(b). 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. When duly executed and delivered by the Company at
Closing, each of the Management Agreement, the Registration Rights Agreement and
the Warrant shall constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Except as
disclosed in Section 3.2(d) of the Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the Contemplated
Transactions and compliance with the provisions hereof will not, conflict with,
or result in any breach or violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, payment or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon
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any of the properties or assets of the Company or any of its Subsidiaries under,
(i) the Certificate of Incorporation or Bylaws of the Company or the comparable
Organizational Documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, contract or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or their respective properties or assets which is
material to the Company and its Subsidiaries taken as a whole ("Material
Contracts") or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule, regulation or arbitration award applicable to the Company
or any of its Subsidiaries or their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate would
not have a Material Adverse Effect or would not prevent or materially hinder or
delay the ability of the Company to consummate the Contemplated Transactions. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign, (each a "Governmental Entity" and collectively,
"Governmental Entities") or any other Person, is required by or with respect to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the Contemplated Transactions, except for (i) the filing of a premerger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing
with the Securities and Exchange Commission (the "SEC") of (x) the Proxy
Statement, and (y) such reports or schedules under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the Contemplated Transactions, (iii) the Company Stockholder
Approval, and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices for which the absence of such
would not, individually or in the aggregate, have a Material Adverse Effect or
as are set forth in Section 3.2(d) of the Disclosure Schedule.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. The Company has filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1996 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "Company
SEC Documents"). As of their respective dates (or, if amended, at the time of
such amended filing or, in the case of Securities Act registration statements,
on their respective effective dates), the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents (including any and all financial statements included therein) as of
such dates and as of the date hereof (except as set forth in subsequent filings
with the SEC prior to the date hereof and, only with respect to Company SEC
Documents filed after the date hereof, except as set forth in subsequent filings
with the SEC prior to the Closing Date) contained or contain any untrue
statement of a material fact or omitted 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
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they were made, not misleading. The consolidated financial statements of the
Company included in the Company SEC Documents (the "Company SEC Financial
Statements") comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments).
Since December 31, 1998, neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations required to be reflected in its balance
sheet (whether accrued, absolute, contingent or otherwise) except (i) as and to
the extent set forth on the audited balance sheet of the Company and its
Subsidiaries as of December 31, 1998 (including the notes thereto), (ii) as
incurred in connection with the Contemplated Transactions, (iii) as set forth in
Section 3.2(e) of the Disclosure Schedule, (iv) as described in the Company SEC
Documents filed since December 31, 1998, but prior to the date of this Agreement
(the "Recent Company SEC Documents") or (v) as incurred in the ordinary course
of business consistent with past practice in amounts that are not material to
the Company and its Subsidiaries taken as a whole. Neither the Company, nor any
of its Subsidiaries is, or has received any notice or has any Knowledge that any
other party is, in default or breach under or is unable to perform in any
material respect under any Material Contracts, nor has there occurred any event
that with the lapse of time or the giving of notice or both would constitute
such a default or breach, except for those defaults, breaches or inability to
perform which would not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect.
(f) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Company 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 Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
the Investor for inclusion or incorporation by reference therein.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Recent Company SEC Documents or in Section 3.2(g) of the Disclosure Schedule,
since December 31, 1998, the Company has conducted its business only in the
ordinary course consistent with past practice, and there is not and has not
been: (i) any Material Adverse Change; (ii) any condition, event or occurrence
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or give rise to a Material Adverse
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Change; (iii) any event which, if it had taken place following the execution of
this Agreement, would not have been permitted by Sections 4.2 or 4.4 without the
prior written consent of the Investor; or (iv) any condition, event or
occurrence which would prevent or materially hinder or delay the ability of the
Company to consummate the Contemplated Transactions.
(h) LITIGATION; LABOR MATTERS; COMPLIANCE WITH LAWS.
(i) Except as disclosed in the Company SEC Documents,
there is no suit, action, proceeding, investigation or inquiry pending
or, to the Knowledge of the Company, Threatened against or affecting
the Company or any of its Subsidiaries or, to the Knowledge of the
Company, any basis for any such suit, action, proceeding, investigation
or inquiry that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or prevent or materially
hinder or delay the ability of the Company or the Investor to
consummate the Contemplated Transactions, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries
having, or which, in the future would reasonably be expected to have,
any such effect.
(ii) 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, nor is it or any of its Subsidiaries the subject of
any proceeding asserting that it or any Subsidiary has committed an
unfair labor practice or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment nor is there any
strike, work stoppage or other labor dispute involving it or any of its
Subsidiaries pending or, to its Knowledge, Threatened, any of which
would reasonably be expected to have a Material Adverse Effect.
(iii) The conduct of the business of each of the
Company and each of its Subsidiaries complies with all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees or
arbitration awards applicable thereto, except for violations or
failures so to comply, if any, that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
(i) EMPLOYEE MATTERS. Section 3.2(i) of the Disclosure Schedule
contains a complete and accurate list of all employment, severance, bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, phantom stock, performance unit, pension, retirement,
deferred compensation, welfare or employee benefit plan, agreement, trust fund
or other arrangement and any union, guild or collective bargaining agreement
maintained or contributed to or required to be contributed to by the Company or
any of its ERISA Affiliates, for the benefit or welfare of any current or former
director, officer, employee, consultant of the Company or any of its ERISA
Affiliates (such plans, agreements, trust funds and arrangements being
collectively the "Employee Agreements and Plans"), other than employment
agreements which provide for compensation to an individual that is not in
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excess of $60,000 per year (including any payments available upon acceleration,
termination, or change of control). Each of the Employee Agreements and Plans is
in compliance with all applicable laws including ERISA and the Code except where
noncompliance would not reasonably be expected to have a Material Adverse
Effect. The IRS has issued a determination letter stating that each Employee
Agreement and Plan that is intended to be a qualified plan under Section 401(a)
of the Code is so qualified and the Company is aware of no event occurring after
the date of such determination that would adversely affect such determination.
The liabilities accrued under each such Employee Agreement and Plan are
reflected on the latest balance sheet of the Company included in the Recent SEC
Reports to the extent required in accordance with GAAP. No condition exists that
is reasonably likely to subject the Company or any of its Subsidiaries to any
direct or indirect liability under Title IV of ERISA or to a civil penalty under
Section 502(j) of ERISA or liability under Section 4069 of ERISA or 4975, 4976,
or 4980B of the Code or the loss of a federal tax deduction under Section 280G
of the Code or other liability with respect to the Employee Agreements and Plan
that would have a Material Adverse Effect and that is not reflected on such
balance sheet. No Employee Agreement and Plan (other than any one that is a
"multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA, all
of which are indicated in Section 3.2(i) of the Disclosure Schedule) is subject
to Title IV of ERISA. There are no pending or, to the Knowledge of the Company,
anticipated or Threatened claims (other than routine claims for benefits or
immaterial claims) by, on behalf of or against any of the Employee Agreements
and Plans or any trusts related thereto. "ERISA Affiliate" means, with respect
to any Person, any trade or business, whether or not incorporated, that together
with such Person would be deemed a "single employer" within the meaning of
Section 4001(a)(15) of ERISA.
(j) TAX RETURNS AND TAX PAYMENTS.
(i) The Company and each of its Subsidiaries has
filed or caused to be filed, on a timely basis, all Tax Returns that
are or were required to be filed by or with respect to any of them,
either separately or as a member of a group, pursuant to applicable
law. Each of the Company and its Subsidiaries has paid, or made
provision for the payment of, all Taxes that have or may have become
due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by the Company or its Subsidiaries, except such
Taxes, if any, as are listed in Section 3.2(j)(i)(B) of the Disclosure
Schedule and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the
Company SEC Financial Statements;
(ii) The Company and its Subsidiaries have not
granted the IRS or relevant state tax authorities any extension or
waiver of or the applicable statute of limitations for their respective
United States federal and state income Tax Returns for any period. All
deficiencies proposed as a result of any audits of any Tax Returns have
been paid, reserved against, settled, or, as listed on Section
3.2(j)(ii) of the Disclosure Schedule, are being contested in good
faith by appropriate proceedings. No issues have been raised (and are
currently pending) by any taxing authority in connection with any
14
Tax Return of the Company or any of its Subsidiaries, and neither the
Company nor any of its Subsidiaries has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of the Company or its Subsidiaries for
which any of them may be liable;
(iii) The charges, accruals, and reserves with
respect to Taxes on the respective books of each of the Company and its
Subsidiaries are adequate (determined in accordance with GAAP) and are
at least equal to that company's liability for Taxes. All Taxes that
the Company or any of its Subsidiaries is or was required by applicable
law to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental entity
or other Person;
(iv) All Tax Returns filed by (or that include on a
consolidated basis) the Company and/or its Subsidiaries are true,
correct, and complete. There is no tax sharing agreement that will
require any payment by the Company or any of its Subsidiaries after the
date of this Agreement. Except as set forth in Section 3.2(j)(iv) of
the Disclosure Schedule, neither the Company nor any of its
Subsidiaries is or has been a member of any consolidated, combined,
unitary or aggregate group for Tax purposes except such a group
consisting only of the Company and its Subsidiaries; and
(v) Neither the Company nor any of its Subsidiaries
has filed a consent pursuant to the collapsible corporation provisions
of Section 341(f) of the Code (or any corresponding provision of state,
local or foreign income tax law).
(k) STATE ANTITAKEOVER LAWS NOT APPLICABLE; NO OTHER RESTRICTIONS. The
Board of Directors of the Company has approved this Agreement and the
Contemplated Transactions and such approval constitutes approval of the
Investor's acquisition of the Series A Preferred Shares and the Warrant and the
other Contemplated Transactions by the Board of Directors of the Company under
the provisions of Section 203 of the DGCL and Chapter 110C of the Massachusetts
General Laws such that such provisions do not apply to this Agreement or the
Contemplated Transactions. No other state takeover statute or similar statute or
regulation of the State of Delaware or The Commonwealth of Massachusetts (or, to
the Knowledge of the Company, of any other state or jurisdiction) applies to
this Agreement or the Contemplated Transactions. No provision of the Certificate
of Incorporation, Bylaws or other governing instruments of the Company or any of
its Subsidiaries or the terms of any plan or agreement of the Company would,
directly or indirectly, restrict or impair (i) the ability of the Investor to
vote, or otherwise to exercise the rights of a stockholder with respect to,
securities of the Company and its Subsidiaries that may be acquired or
controlled by the Investor by virtue of this Agreement or the Contemplated
Transactions or (ii) the rights granted hereunder, or permit any stockholder to
acquire securities of the Company or the Investor, or any of their respective
Subsidiaries, on a basis not available to the Investor in the event that the
Investor were to acquire securities of the Company.
15
(l) ENVIRONMENTAL MATTERS. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action or, to the
Knowledge of the Company, private environmental investigations or remediation
activities or governmental investigations of any nature seeking to impose, or
that would reasonably be expected to result in the imposition, on the Company or
any of its Subsidiaries of any liability or obligations arising under common law
standards relating to environmental protection, human health or safety, or under
any local, state, federal, national or supernational environmental statute,
regulation or ordinance, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (collectively, "Environmental
Laws"), pending or, to the Knowledge of the Company, Threatened, against the
Company or any of its Subsidiaries, which liability or obligation would have or
would reasonably be expected to have a Material Adverse Effect. To the Knowledge
of the Company or any of its Subsidiaries, there is no reasonable basis for any
such proceeding, claim, action or governmental investigation that would impose
any liability or obligation that would have or would reasonably be expected to
have a Material Adverse Effect. To the Knowledge of the Company, during or prior
to the period of (i) its or any of its Subsidiaries' ownership or operation of
any of their respective current properties, or (ii) its or any of its
Subsidiaries' holding of a security interest or other interest in any property,
there was no release or Threatened release of hazardous, toxic, radioactive or
dangerous materials or other materials regulated under Environmental Laws in,
on, under or affecting any such property which would reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, regulatory agency, other Governmental Entity or third party
imposing any material liability or obligations pursuant to or under any
Environmental Law that would have or would reasonably be expected to have a
Material Adverse Effect.
(m) PROPERTIES. Except as disclosed in the Company SEC Documents, each
of the Company and its Subsidiaries (i) has good and marketable title to all the
properties and assets reflected in the latest audited balance sheet included in
such Recent Company SEC Documents as being owned by the Company or one of its
Subsidiaries or acquired after the date thereof which are, individually or in
the aggregate, material to the Company's business on a consolidated basis
(except properties and assets sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all Liens except
Permitted Liens and (ii) is the lessee of all leasehold estates reflected in the
latest audited financial statements included in such Recent Company SEC
Documents or acquired after the date thereof which are material to its business
on a consolidated basis and is in possession of the properties purported to be
leased thereunder, and each such lease is valid without material default
thereunder by the lessee or, to the Company's Knowledge, the lessor.
(n) INTELLECTUAL PROPERTY. Section 3.2(n) of the Disclosure Schedule
contains a list of all copyrights, patents, trademarks, service marks and
tradenames (including applications, continuations, reissues and similar rights)
("Intellectual Property") and software (other than standard, off-the-shelf
software subject to "shrink wrap" licenses) ("Software") owned by or licensed to
the Company and its Subsidiaries which are material to the conduct of
16
business of the Company or any of its Subsidiaries. The Company or the
Subsidiary using such Intellectual Property or Software either (i) owns the
entire right, title and interest in and to the Intellectual Property and
Software free and clear of any Liens (other than Permitted Liens) or (ii) has
the right and license to use the same in its business, except where the failure
to so own or have such right or license would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. No
proceedings are pending or, to the Knowledge of the Company, Threatened, which
challenge the validity, use or ownership of any of the Intellectual Property or
Software listed in Section 3.2(n) of the Disclosure Schedule. To the Knowledge
of the Company, no infringement by the Company or any of its Subsidiaries of any
Intellectual Property of any other Person has occurred and the Company and its
Subsidiaries have not received notice of a claim that the Company or its
Subsidiaries are infringing any Intellectual Property of any other Person. To
the Knowledge of the Company, no Person is engaged in any unauthorized use of
the Intellectual Property of the Company.
(o) BROKERS. No broker, investment banker, financial advisor or other
Person, other than Bear, ▇▇▇▇▇▇▇ & Co., the fees and expenses of which will be
paid by the Company, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the Contemplated
Transactions based upon arrangements made by or on behalf of the Company. The
Company has provided to the Investor a true and correct copy of any agreement
with Bear, ▇▇▇▇▇▇▇ & Co. providing for payment of any such fee or commission.
(p) OPINION OF FINANCIAL ADVISOR. The Company has received, prior to
the execution of this Agreement, the oral opinion of Bear, ▇▇▇▇▇▇▇ & Co. to the
effect that the purchase price to be received by the Company for the Purchased
Securities is fair, from a financial point of view, to the Company, a signed
written copy of which opinion, dated as of the date of this Agreement (the "Bear
▇▇▇▇▇▇▇ Opinion"), will be delivered to the Investor within five (5) Business
Days of the date hereof.
(q) BOARD AND SPECIAL COMMITTEE RECOMMENDATIONS. The Board of
Directors of the Company, at a meeting duly called and held, has by unanimous
vote of those directors present (who constituted 100% of the directors then in
office) (i) determined that this Agreement and the Contemplated Transactions are
fair to and in the best interests of the stockholders of the Company, (ii)
approved the Certificate of Designation in the form attached hereto as Exhibit B
and resolved that it be filed in accordance with applicable law as soon as
practicable following the Company Stockholder Approval and prior to the Closing
Date, and (iii) resolved to recommend that the holders of the Common Shares
approve this Agreement and the Contemplated Transactions. The special committee
of independent directors of the Board of Directors of the Company (the "Special
Committee") has, by unanimous vote, recommended that the Board of Directors
approve this Agreement, the Certificate of Designation and the Contemplated
Transactions.
(r) COMMON SHARES LISTING. The Common Shares are registered pursuant
to Section 12(g) of the Exchange Act and are listed on the Nasdaq National
Market ("Nasdaq").
17
The Company has taken no action designed to cause, or likely to result in, the
termination of the registration of the Common Shares under the Exchange Act or
the delisting of the Common Shares from Nasdaq, nor has the Company received any
notification that the SEC or the National Association of Securities Dealers,
Inc. ("NASD") is contemplating the termination of such registration or listing.
(s) REQUIRED VOTE. The Company Stockholder Approval, required pursuant
to NASD Rule 4310(c)(25)(H)(i)d.2. prior to the purchase by the Investor of the
Purchased Securities and the consummation of the Contemplated Transactions in
order to avoid the possible delisting of the Common Shares from Nasdaq, is the
only vote of the holders of any class or series of the Company's securities
necessary to approve any of the Contemplated Transactions or this Agreement.
(t) TERMINATION OF SHAREHOLDERS AGREEMENT. The Shareholders Agreement,
dated as of June 9, 1997, and as amended as of July 21, 1997, by and among the
Company, ▇▇▇▇▇ ▇▇▇▇▇, The ▇▇▇▇ ▇▇▇▇▇▇▇ Self-Declaration of Revocable Trust,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇, will be terminated as of the Closing by way
of a termination agreement duly executed by all of the parties to such
Shareholders Agreement, an executed copy of which termination agreement has been
delivered by the Company to the Investor. Pursuant to such termination
agreement, ▇▇▇▇ ▇▇▇▇▇▇▇ has relinquished any right he may have had to be
nominated to and/or to serve on the Board of Directors of the Company, including
pursuant to such Shareholders Agreement, his Consulting Agreement, dated as of
May 7, 1997, by and among ▇▇▇▇ ▇▇▇▇▇▇▇, the Company and SMI Merger, Inc., or
otherwise.
(u) YEAR 2000 COMPLIANCE. The Company's disclosure in the Recent
Company SEC Documents concerning the "Year 2000" Issue is true and correct in
all material respects.
3.3 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. The Investor is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to carry on its business as now being
conducted. The Investor is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a material adverse
effect on the Investor.
(b) AUTHORITY; NONCONTRAVENTION. The Investor has all requisite
partnership power and authority to enter into this Agreement and to consummate
the Contemplated Transactions. The execution and delivery of this Agreement by
the Investor and the consummation by the Investor of the Contemplated
Transactions have been duly authorized by
18
all necessary action on the part of the Investor. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding obligation of,
the Investor, enforceable against the Investor in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of the
Contemplated Transactions and compliance with the provisions hereof will not,
conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a benefit under, or result in the creation of any Lien
upon its or its Subsidiaries' properties or assets under, (i) the Investor's
Certificate of Limited Partnership or the comparable Organizational Documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, contract or other agreement, instrument, permit,
concession, franchise or license applicable to the Investor or any of its
Subsidiaries, properties or assets which is material to the Investor or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to the Investor or its Subsidiaries,
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a material adverse effect with
respect to the Investor or would not prevent or materially hinder or delay the
ability of the Investor to consummate the Contemplated Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, or notice to, any Governmental Entity or any other Person is required by
or with respect to the Investor or any Subsidiary of Investor in connection with
the execution and delivery of this Agreement or the consummation by the Investor
of any of the Contemplated Transactions, except for (i) the filing of a
premerger notification and report form under the HSR Act, (ii) the filing with
the SEC of such reports or schedules under the Exchange Act as may be required
in connection with this Agreement and the Contemplated Transactions, and (iii)
such other consents, approvals, orders, authorizations, registrations,
declarations, filings or notices as may be required under the "takeover" or
"blue sky" laws of various states.
(c) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Investor for inclusion or incorporation by reference in the
Proxy Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Company 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.
(d) LITIGATION. There is no suit, action, proceeding, investigation or
inquiry pending or, to the Knowledge of the Investor, Threatened against or
affecting the Investor or any of its Subsidiaries or any basis for any such
suit, action, proceeding, investigation or inquiry that, individually or in the
aggregate, would reasonably be expected to have a material adverse effect with
respect to the Investor or prevent or materially hinder or delay the ability of
the Company or the Investor to consummate the Contemplated Transactions, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator
19
outstanding against the Investor or any of its Subsidiaries or Affiliates
having, or which, in the future would have, any such effect.
(e) BROKERS. No broker, investment banker, financial advisor or other
Person, other than ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, the fees
and expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Contemplated Transactions based upon arrangements made by or on behalf
of the Investor. The Investor has provided to the Company a true and correct
copy of any agreement with ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation
providing for payment of any such fee or commission.
(f) INVESTOR STATUS. The Investor has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Series A Preferred Shares and the Warrant and is
able to bear the economic risks of such investment.
(g) ACCREDITED INVESTOR. The Investor is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act. The Investor is acquiring the Series
A Preferred Shares and the Warrant for its own account and not with a view to
any resale, distribution or other disposition of the Series A Preferred Shares
or the Warrant in violation of the United States securities laws.
(h) FINANCIAL ABILITY. The Investor has the financial capability to
consummate the Contemplated Transactions, and the Investor understands that
under the terms of this Agreement the Investor's obligations hereunder are not
in any way contingent or otherwise subject to (i) the Investor's consummation of
any financing arrangements or the Investor's obtaining any financing or (ii) the
availability of any financing to the Investor.
(i) NO OTHER AGREEMENTS. Except for the Employment Agreements and the
Voting Agreement, the Investor has made no other agreements, arrangements or
understandings concerning the Contemplated Transactions or the Company or any of
its Subsidiaries with (a) any director, officer, employee or consultant of the
Company or any of its Subsidiaries, or (b) any stockholder beneficially owning
at least 5% of the outstanding Common Shares.
ARTICLE 4
COVENANTS OF THE COMPANY
4.1 AFFIRMATIVE COVENANTS. The Company covenants and agrees with the
Investor that it will do or cause to be done the following, until the earlier of
the Closing or the termination of this Agreement pursuant to Section 7.1:
(a) use its Best Efforts to obtain all consents, approvals and
authorizations
20
set forth and marked with an asterisk in Section 3.2(d) of the Disclosure
Schedule, or otherwise required to consummate the Contemplated Transactions, and
to consult with the Investor and keep the Investor appraised of the progress
with respect to such consents, approvals and authorizations;
(b) permit a Representative of the Investor to attend all meetings of
the Board of Directors, provided, that the Representative of the Investor shall
excuse himself or herself from the meeting if so requested by the Board of
Directors;
(c) promptly provide the Investor with written notification of any
event, occurrence or other information of any kind whatsoever which in any way
would cause any representation or warranty made by the Company in this Agreement
to be untrue, incorrect or incomplete or would cause any of the conditions to
any party's obligations to consummate the Contemplated Transactions not to be
fulfilled ("UPDATES"). All such written notifications shall specifically
identify any and all of the representations or warranties affected by the event,
occurrence or information that necessitated the giving of such notice.
Notwithstanding the foregoing, the Updates shall not be given effect for the
purposes of (i) determining the accuracy of the representations and warranties
contained in this Agreement, (ii) determining the satisfaction of the conditions
precedent to the obligations of the Investor contained in Section 6.2 of this
Agreement, or (iii) limiting the Investor's ability to seek indemnification from
the Company pursuant to the terms of this Agreement; and
(d) subject to the provisions of the Confidentiality Agreement, will,
and will cause its Subsidiaries and each of their Representatives to, give the
Investor and its respective Representatives reasonable access, upon reasonable
notice and during normal business hours, to the offices and other facilities and
to the books and records of the Company and its Subsidiaries and will cause the
Representatives of the Company and the Company's Subsidiaries to furnish the
Investor and Representatives of the Investor with such financial and operating
data and such other information with respect to the business and operations of
the Company and its Subsidiaries as the Investor may from time to time
reasonably request.
4.2 RESTRICTIONS. Except as contemplated by this Agreement or with the
prior written consent of Investor (which consent shall not be unreasonably
withheld or delayed), during the period from the date of this Agreement to the
earlier of the termination of this Agreement pursuant to Section 7.1 and the
Closing, the Company will, and will cause each of its Subsidiaries to, conduct
its operations according to its ordinary course of business and consistent with
past practice and use its and their respective reasonable Best Efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them and to preserve
goodwill. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or required by law prior to the
Closing Date, the Company will not, and will cause its Subsidiaries not to,
without the prior written consent of the Investor (which consent shall not be
unreasonably withheld or delayed):
21
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except for any dividend
payable by a wholly owned Subsidiary of the Company to the Company or any wholly
owned Subsidiary of the Company), (ii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) purchase, redeem or otherwise acquire 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;
(b) authorize for issuance, issue, deliver, sell or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise), pledge
or otherwise encumber any shares of its capital stock or the capital stock of
any of its Subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights),
other than the issuance of Common Shares upon the exercise of the Company Stock
Options or the warrants set forth in Section 3.2(c) of the Disclosure Schedule
outstanding on the date of this Agreement and in accordance with their present
terms, or pursuant to the 1993 Employee Stock Purchase Plan;
(c) propose, authorize or effect any change or amendment to its
articles, by-laws or equivalent Organizational Documents or alter through
merger, liquidation. reorganization, restructuring or in any other fashion the
corporate structure or ownership of any material Subsidiary of the Company;
(d) take any action that would, or is reasonably likely to, result in
any of its representations and warranties in this Agreement becoming untrue, or
in any of the conditions to the Closing set forth in Section 6.1 or 6.2 not
being satisfied; or
(e) authorize any of, or commit or agree to take any of, the foregoing
actions.
4.3 NO SOLICITATION. From and after the date hereof until the earlier of
the Closing Date or the termination of this Agreement pursuant to Section 7.1:
(a) The Company shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize (and shall use Best Efforts to prevent) any of its or
its Subsidiaries' Representatives to, directly or indirectly through another
Person, (i) solicit, initiate or encourage (including by way of furnishing
non-public information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company Takeover
Proposal or (ii) participate in any negotiations regarding any Company Takeover
Proposal; PROVIDED, HOWEVER, that if the Board of Directors of the Company or
the Special Committee determines in good faith, following consultation with
outside counsel, that
22
failure to do so would be reasonably likely to constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, in response to any Company Takeover Proposal made prior to the Company
Stockholder Approval, which proposal was not solicited by it or any of its
Subsidiaries and which did not otherwise result from a breach of this Section
4.3(a), and subject to providing prior written notice of its decision to take
such action to the Investor and compliance with Section 4.3(c), (x) furnish
information with respect to the Company and its Subsidiaries to any person
making a Company Takeover Proposal pursuant to a customary confidentiality
agreement (as determined by the Company or the Special Committee following
consultation with its outside counsel) and (y) participate in negotiations
regarding such Company Takeover Proposal.
(b) Except as expressly permitted by this Section 4.3(b), neither the
Board of Directors of the Company, the Special Committee, nor any other
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to the Investor, the approval or recommendation
by such Board of Directors, the Special Committee, or such other committee of
the Contemplated Transactions, (ii) approve or recommend, or propose to approve
or recommend, any Company Takeover Proposal, or (iii) cause the Company to enter
into any Company Acquisition Agreement. Notwithstanding the foregoing, the Board
of Directors of the Company or the Special Committee, to the extent that it
determines in good faith, following consultation with outside counsel, that in
light of a Company Superior Proposal failure to do so would be reasonably likely
to constitute a breach of its fiduciary duties to the Company's stockholders
under applicable law, may terminate this Agreement solely in order to
concurrently enter into a Company Acquisition Agreement with respect to a
Company Superior Proposal, but only following notice to the Investor and payment
to the Investor of a fee of $3.5 million.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.3, the Company shall immediately (but
in any event within one day) advise the Investor orally and in writing of any
request for information or any Company Takeover Proposal, the material terms and
conditions of such initial request or Company Takeover Proposal and the identity
of the person making such request or Company Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act if, in the good faith judgment of
the Board of Directors of the Company or the Special Committee, following
consultation with outside counsel, failure so to disclose would be a violation
of its obligations under applicable law; PROVIDED, HOWEVER, that, neither the
Company nor its Board of Directors, the Special Committee, nor any other
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Contemplated
Transactions or approve or recommend, or propose publicly to approve or
recommend, a Company Takeover Proposal unless this Agreement is first terminated
in accordance with Section 4.3(b).
23
4.4 CERTAIN AGREEMENTS. The Company will immediately cease and cause its
Representatives to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Company
Takeover Proposal, and shall use its Best Efforts to cause such parties in
possession of confidential information about the Company or its Subsidiaries
that was furnished by or on behalf of the Company or its Subsidiaries to return
or destroy all such information in the possession of any such party or in the
possession of any attorney, agent, advisor or representative of such party.
Neither the Company nor any Subsidiary of the Company will waive or fail to
enforce any provision of any confidentiality agreement entered into in
connection with a potential Company Takeover Proposal or standstill or similar
agreement to which it is a party without the prior written consent of the
Investor.
4.5 CONTINUING COVENANTS. The Company covenants that from and after the
date of this Agreement and through the Closing and thereafter so long as the
Investor owns Common Shares and/or Series A Preferred Shares (including shares
underlying the Warrant) representing on an as converted basis, in the aggregate,
at least 782,828 Common Shares (or an equivalent adjusted number of shares of
voting securities of the Company into which such Common Shares have been
converted following any reclassification or combination or similar change to the
common stock of the Company):
(a) The Company shall not issue or authorize for issuance any shares of
equity securities of the Company in violation of the provisions of the
Certificate of Designation;
(b) The Company shall use its Best Efforts to maintain its status as a
registrant under the Exchange Act that is not in default or contravention of any
requirement of the Exchange Act, except in the event that, following the
Closing, there is a merger, sale of all or substantially all of the assets of
the Company or similar transaction involving the Company and its Subsidiaries
and requiring approval of the Board of Directors and shareholders of the
Company;
(c) The Company shall use its Best Efforts to maintain the listing and
posting for trading of the Common Shares on Nasdaq, except in the event that,
following the Closing, there is a merger, sale of all or substantially all of
the assets of the Company or similar transaction involving the Company and its
Subsidiaries and requiring approval of the Board of Directors and shareholders
of the Company;
(d) The Company shall at all times reserve and keep available, solely
for issuance and delivery upon conversion of the Purchased Securities, the
number of Common Shares from time to time issuable upon conversion of all of the
Purchased Securities at the time outstanding. All Common Shares issuable upon
conversion of the Purchased Securities shall be duly authorized and, when issued
upon such conversion, shall be validly issued, fully paid and nonassessable, and
admitted for listing and quotation on Nasdaq;
(e) Upon the written request of the Investor from time to time
following the
24
Closing, (i) nominate and recommend for election to the Board of Directors of
the Company at each annual meeting of the stockholders of the Company (and each
special meeting of the stockholders of the Company at which Directors are to be
elected): (A) so long as the Investor owns Common Shares and/or Series A
Preferred Shares (including shares underlying the Warrant) representing on an as
converted basis, in the aggregate, at least 3,131,313 Common Shares (or an
equivalent adjusted number of shares of voting securities of the Company into
which such Common Shares have been converted following any reclassification or
combination or similar change to the common stock of the Company), three (3)
nominees for director designated by the Investor (but not its permitted
transferees that are not affiliates of the Investor) in each such written
request, or, if the size of the Board of Directors is changed with the consent
of the Investor pursuant to Section 4.5(g) below, such other number of nominees
for director designated by the Investor as would constitute one less than a
majority of the Board of Directors, (B) so long as the Investor owns Common
Shares and/or Series A Preferred Shares (including shares underlying the
Warrant) representing on an as converted basis, in the aggregate, at least
1,565,656 Common Shares but less than 3,131,313 Common Shares (or an equivalent
adjusted number of shares of voting securities of the Company into which such
Common Shares have been converted following any reclassification or combination
or similar change to the common stock of the Company), two (2) nominees for
director designated by the Investor (but not its permitted transferees that are
not affiliates of the Investor) in each such written request, or, if the size of
the Board of Directors is changed with the consent of the Investor pursuant to
Section 4.5(g) below, such other number of nominees for director designated by
the Investor as would constitute at least two-sevenths of the members of the
Board of Directors, and (C) so long as the Investor owns Common Shares and/or
Series A Preferred Shares (including shares underlying the Warrant) representing
on an as converted basis, in the aggregate, at least 782,828 Common Shares but
less than 1,565,656 Common Shares (or an equivalent adjusted number of shares of
voting securities of the Company into which such Common Shares have been
converted following any reclassification or combination or similar change to the
common stock of the Company), one (1) nominee for director designated by the
Investor (but not its permitted transferees that are not affiliates of the
Investor) in each such written request, or, if the size of the Board of
Directors is changed with the consent of the Investor pursuant to Section 4.5(g)
below, such other number of nominees for director designated by the Investor as
would constitute at least one-seventh of the members of the Board of Directors;
and (ii) nominate and use Best Efforts to cause to be elected as Chairman of the
Board of Directors, ▇▇▇ ▇▇▇▇▇▇ or such other nominee as is designated by the
Investor (but not its permitted transferees that are not affiliates of the
Investor) in such written request;
(f) In the event that any member of the Board of Directors of the
Company nominated by the Investor pursuant to the provisions of 4.5(e) or 5.1(b)
vacates his position as a director of the Company as a result of his death,
resignation, disqualification, removal or other cause other than pursuant to a
vote of the stockholders of the Company, the Company agrees to appoint to the
Board of Directors a replacement member designated by the Investor to serve out
the remainder of the term of such former member in accordance with the
provisions of the Certificate of Incorporation of the Company; and
25
(g) Except as set forth in Section 6.2(h), the Company shall not make
any change in the size of its Board of Directors, change the term of office of
any member of the Board of Directors, or otherwise reclassify its Board of
Directors or amend or otherwise modify the effect of any provision of Article
VII of the Restated Certificate of Incorporation of the Company, filed with the
Office of the Secretary of State of the State of Delaware on January 27, 1995,
without the prior written consent of the Investor.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF THE PROXY STATEMENT; STOCKHOLDER MEETING.
(a) Promptly following the date of execution of this Agreement, the
Company shall prepare and file with the SEC a Proxy Statement on Schedule 14A
(the "Proxy Statement"). The Investor shall provide to the Company all
information required by applicable securities laws to be included in the Proxy
Statement regarding the Investor and its Affiliates and designees (as described
below in Section 5.1(b)). The Company will use its reasonable Best Efforts to
cause the Proxy Statement to be mailed to its stockholders as promptly as
practicable after any comments thereto issued by the SEC are cleared by the SEC.
(b) The Company will, as promptly as practicable following the date of
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the purpose
of obtaining the approval of the Company stockholders of: (i) the Company's
issuance and sale of the Purchased Securities to the Investor, by means of the
affirmative vote of a majority of the votes cast by holders of the outstanding
Common Shares as required by Nasdaq, and (ii) the election to the Board of
Directors of the Company of three (3) nominees designated by the Investor to the
Company in writing prior to the filing of the Proxy Statement, to serve as
members of a class of directors to serve for a term of two (2) years or until
the annual meeting of the stockholders of the Company in the year 2001, if
later, by means of the affirmative vote of a plurality of the votes cast by
holders of the outstanding Common Shares as required by the Company's by-laws
(such approval of the Company stockholders of the foregoing matters set forth in
clauses (i) and (ii) being referred to herein as the "Company Stockholder
Approval"). The Company will, through its Board of Directors in accordance with
the provisions of Section 3.2(q), recommend to its stockholders that they vote
in favor of the Company Stockholders Approval. Such recommendation, together
with a copy of the Bear ▇▇▇▇▇▇▇ Opinion, shall be included in the Proxy
Statement. The Company will use Best Efforts to hold such meeting as soon as
practicable after the date of execution of this Agreement.
5.2 BEST EFFORTS. Each of the parties agrees to use its Best Efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the
26
other parties in doing, all things necessary, proper or advisable, to
consummate, in the most expeditious manner practicable, the Closing and the
other Contemplated Transactions. The Investor and the Company will use their
Best Efforts and cooperate with one another (i) in promptly determining whether
any filings are required to be made or consents, approvals, waivers, permits or
authorizations are required to be obtained under any applicable law or
regulation or from any governmental authorities or third parties in connection
with the Contemplated Transactions, and (ii) in promptly making any such
filings, in furnishing information required in connection therewith and in
timely seeking to obtain any such consents, approvals, waivers, permits or
authorizations, including any notification and report forms and related material
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR Act.
Each of the parties shall use its Best Efforts to obtain an early termination of
the applicable waiting period under the HSR Act, and shall make any further
filings or information submissions pursuant thereto that may be necessary,
proper or advisable.
5.3 PUBLIC ANNOUNCEMENTS. The Investor and the Company will consult with
each other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
Contemplated Transactions, and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or as are agreed upon in
advance. The parties agree that the initial press release or releases to be
issued with respect to the Contemplated Transactions shall be mutually agreed
upon prior to the issuance thereof.
5.4 TAKEOVER STATUTES. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the Contemplated Transactions, the Company and the members of its
Board of Directors, on the one hand, and the Investor and its general partner,
on the other hand, shall grant such approvals and take such actions as are
reasonably necessary so that the Contemplated Transactions may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
Contemplated Transactions.
5.5 RESTRICTION ON INVESTOR. Except as expressly provided in this
Agreement or required by law prior to the Closing Date, the Investor will not,
without the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed), take any action that would, or is reasonably
likely to, result in any of its representations and warranties in this Agreement
becoming untrue, or in any of the conditions to the Closing set forth in Section
6.1 or 6.3 not being satisfied.
5.6 RESTRICTIVE LEGEND. The Purchased Securities shall be stamped or
otherwise imprinted with the following legend and the Investor agrees to
transfer such Purchased Securities only in accordance therewith:
27
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND NEITHER
THIS SECURITY, NOR ANY INTEREST THEREIN, MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (ii) AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, SUCH EXEMPTION TO BE EVIDENCED BY
SUCH DOCUMENTATION AS THE ISSUER MAY REASONABLY REQUEST."
5.7 STANDSTILL. Investor agrees that for so long as Investor beneficially
owns Common Shares and/or Series A Preferred Shares (including shares underlying
the Warrant) representing on an as converted basis, in the aggregate, at least
782,828 Common Shares, neither it nor its Affiliates will, directly or
indirectly, without the prior written consent of a majority of the Board of
Directors of the Company (other than the nominees or designees or the Investor),
(i) acquire, agree to acquire, make any proposal to acquire or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) to do any of the foregoing, any equity securities (other than the shares of
Series A Preferred Stock and the Warrants or any shares of capital stock
issuable upon the conversion or exercise thereof) of the Company, or (ii) make,
or in any way participate in any "solicitation" of "proxies" (as such terms are
used in the proxy rules of the Securities Exchange Commission) to vote any
voting securities of the Company (other than in connection with the solicitation
of proxies by the Board of Directors of the Company, or as contemplated by the
Voting Agreement); provided, however, that the agreements of Investor set forth
in this Section 5.7 shall not apply (A) following the breach by the Company of
any of the covenants set forth in Section 4.5, upon which breach such agreements
of the Investor shall be of no further force and effect; (B) in the event that
any of the following events occurs and such event has not been endorsed or
supported by the Board of Directors of the Company within ten (10) Business Days
of the earlier of its occurrence or the receipt by the Board of Directors of
notice of its anticipated occurrence: (x) the acquisition by any "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) of 20% of any class of
equity securities of the Company, (y) the solicitation of proxies by any Person
or group (other than Investor or the Board of Directors of the Company) or (z)
the public announcement of any of the foregoing, or of any intent to engage in
the foregoing, in which event the Investor shall be permitted to make a proposal
to the disinterested members of the Board of Directors of the Company with
respect to an acquisition or solicitation described in clause (i) or (ii) above;
(C) (x) to the extent of any sales or transfers of Common Shares by any of the
parties to the Voting Agreement (other than the Investor) or any of their
transferees to any Person not subject to the Voting Agreement, and the Investor
shall be permitted to acquire and/or solicit for the acquisition of Common
Shares up to the aggregate amount of any such sales or transfers, or (y) upon
the material breach of the Voting Agreement by any of the parties thereto (other
than the Investor), (1) upon which material breach, if arising from the failure
of the
28
breaching party to vote such party's shares in accordance with the provisions of
the Voting Agreement and the Investor is unable to exercise its proxy with
respect to such shares, the Investor shall be entitled to purchase the number of
Common Shares equal to the percentage of ownership of the outstanding capital
stock of the Company (including the Common Shares underlying the Warrant) owned
by such breaching party or parties immediately following the date of this
Agreement (or as of the date any such breaching party acquired its Common Shares
if the breaching party is a transferee of a party to the Voting Agreement which
transferee agreed to bound by the Voting Agreement), or (2) upon which material
breach, if arising from the sale or other transfer of Common Shares by the
breaching party in violation of the provisions of the Voting Agreement, the
Investor shall be entitled to purchase the number of Common Shares equal to the
aggregate amount of any such sales or transfers; or (D) in the event of any
issuances of voting securities of the Company other than to current or former
officers, employees, directors or consultants of the Company or its wholly owned
Subsidiaries pursuant to the Option Plans or future stock option plans of the
Company approved by the Board of Directors of the Company or pursuant to the
Employment Agreements and Exchange Agreements listed at Section 3.2(c)(iii)(B)
through (G) of the Disclosure Schedule, in which event the Investor shall be
able to acquire and/or solicit for the acquisition of voting securities of the
Company (including Common Shares) such that the Investor's total ownership of
the Company is equal to the sum of (1) the number of Common Shares equal to
twenty-three percent (23%) of the outstanding capital stock of the Company
(including the Common Shares underlying the Warrant) PLUS (2) the number of
Common Shares equal to the excess of twenty-four percent (24%) over the
percentage of ownership of the outstanding capital stock of the Company
(including the Common Shares underlying the Warrant) owned by the stockholders
of the Company who are parties to the Voting Agreement (or any transferees of
such stockholders who have agreed to the terms of the Voting Agreement)
following the issuance of the voting securities referenced at the beginning of
this clause (D).
In the event that the Investor acquires shares pursuant to the provisions
of clause (C) or (D)(2) in the preceding paragraph, the Investor agrees that,
with respect to any vote of the shareholders of the Company other than a vote
involving the election, replacement, removal or disqualification of any person
nominated by the Investor pursuant to Section 4.5(e) hereof, it will vote the
excess number of (X) Common Shares beneficially owned by the Investor OVER (Y)
the number of Common Shares representing the percentage of ownership of the
fully diluted capital stock of the Company represented by the Purchased
Securities as of the date of this Agreement (including, without limitation, the
Common Shares underlying the Warrant), as if the Purchased Securities had been
issued to the Investor as of the date of this Agreement, PRO RATA in accordance
with the votes of the other holders of Common Shares of the Company.
5.8 RESIGNATION OF INVESTOR DIRECTORS. The Investor agrees that if at any
time as a result of a sale, transfer or otherwise it beneficially owns capital
stock of the Company in an amount that would cause its number of director
nominees to be reduced pursuant to Section 4.5(e), then the Investor shall cause
its current designee or designees to the Board of Directors, as the case may be,
to resign from the Board of Directors effective immediately as of such date in
proportion to the amount of directors the Investor would be entitled to
designate for nomination pursuant to Section 4.5(e). As a condition to the
Company's obligation to nominate
29
and recommend Investor's designees under Section 4.5(e), each such designee
shall agree to resign as set forth in this Section 5.8 under the circumstances
set forth herein.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING. The
respective obligation of each party to effect the transactions to be effected by
it at the Closing, shall be subject to the satisfaction, or waiver, on or prior
to the Closing Date of the following conditions:
(a) HSR ACT. The waiting period (and any extension thereof) applicable
to the HSR Act shall have been terminated or shall have expired.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of any of the Contemplated Transactions shall be in effect;
PROVIDED, HOWEVER, that the parties hereto shall use their Best Efforts to have
any such injunction, order, restraint or prohibition vacated.
(c) COMPANY STOCKHOLDER APPROVAL. The Company Stockholder Approval
shall have been obtained.
(d) NASDAQ LISTING. The Company shall not have received any notice
(which notice has not subsequently been withdrawn) that the Common Shares will
not be eligible or approved for listing or quotation on Nasdaq as a result of
the Contemplated Transactions.
6.2 CONDITIONS TO OBLIGATION OF THE INVESTOR. The obligation of the
Investor to effect the transactions to be effected by it at the Closing, shall
be subject to the satisfaction, or waiver, on or prior to the Closing Date of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement, shall be true and correct in all
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date; PROVIDED that for purposes of
determining the satisfaction of the foregoing, such representations and
warranties shall be deemed true and correct if the failure or failures of such
representations and warranties to be so true and correct (excluding the effect
of any qualification set forth therein relating to "materiality", "Material
Adverse Change" or "Material Adverse Effect") have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or a material effect on the ability of the Company to consummate
the Contemplated Transactions or to perform its obligations hereunder. The
Investor shall have received a certificate signed on behalf of the Company by
30
the chief executive officer and the chief financial officer of the Company,
dated as of the date of the Closing Date, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Closing Date in all material respects, and the Investor shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company, dated as of
the date of the Closing Date, to such effect.
(c) CONSENTS, ETC. The Investor has received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and other third parties as are necessary in connection with the transactions
contemplated hereby have been obtained.
(d) NO MATERIAL ADVERSE CHANGE From the date of this Agreement to the
Closing Date, there shall not have occurred any Material Adverse Change with
respect to the Company.
(e) DELIVERY OF CERTAIN DOCUMENTS. The Company shall have delivered to
the Investor (i) a certificate dated as of the Closing Date, executed by an
officer of the Company, attaching true and correct copies of the Certificate of
Incorporation and bylaws of the Company and the resolutions of its Board of
Directors and stockholders made in connection with this Agreement and the
Contemplated Transactions, and certifying as to the genuineness and authenticity
of the signature, and the accuracy of the title, of each officer of the Company
executing this Agreement or any document delivered at the Closing, and (ii) the
legal opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, or such other counsel as is reasonably
acceptable to the Investor, dated as of the Closing Date, as set forth in
Exhibit F hereto.
(f) DELIVERY AND PERFORMANCE OF AGREEMENTS. The Registration Rights
Agreement, the Management Agreement and the Warrant shall have been duly
executed and delivered by the Company.
(g) CERTIFICATE OF DESIGNATION. The Company shall have filed with the
Secretary of State of the State of Delaware the Certificate of Designation and
such instrument shall have become effective.
(h) BOARD ELECTION. The Board of Directors of the Company shall have
been expanded to seven (7) members and the Investor's three (3) nominees to the
Board of Directors shall have been elected, effective following the Closing.
6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company
to effect the transactions to be effected by it at the Closing, shall be subject
to the satisfaction, or waiver, on or prior to the Closing Date of the following
conditions:
31
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investor set forth in this Agreement shall be true and correct in all
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date; PROVIDED that for purposes of
determining the satisfaction of the foregoing, such representations and
warranties shall be deemed true and correct if the failure or failures of such
representations and warranties to be so true and correct (excluding the effect
of any qualification set forth therein relating to "materiality", "material
adverse change" or "material adverse effect") have not had and would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of the Investor to consummate the Contemplated
Transactions or to perform its obligations hereunder. The Company shall have
received a certificate signed on behalf of the Investor by the chief executive
officer and the chief financial officer of the general partner of the Investor,
dated as of the date of the Closing Date, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE INVESTOR. The Investor shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Closing Date in all material respects, and the Company shall
have received a certificate signed on behalf of the Investor by the chief
executive officer and the chief financial officer of the general partner of the
Investor, dated as of the date of the Closing Date, to such effect.
(c) DELIVERY OF CERTAIN DOCUMENTS. The Investor shall have delivered to
the Company a certificate dated as of the Closing Date, executed by a general
partner of the Investor, attaching true and correct copies of the Certificate of
Limited Partnership of the Investor and the resolutions of its partners made in
connection with this Agreement and the Contemplated Transactions, and certifying
as to the genuineness and authenticity of the signature, and the accuracy of the
title, of the general partner of the Investor executing this Agreement or any
document delivered at the Closing.
(d) DELIVERY AND PERFORMANCE OF AGREEMENTS. The Registration Rights
Agreement shall have been duly executed and delivered by the Investor, the
Management Agreement shall have been duly executed and delivered by the Yucaipa
Companies, and the Purchase Price shall have been delivered to the Company
pursuant to Section 2.3(c)(i).
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. Prior to the Closing, this Agreement may be terminated
and the Contemplated Transactions may be abandoned:
(i) at any time by mutual written consent of the
Company and the Investor;
(ii) by either the Company or the Investor if the
Closing shall not
32
have occurred prior to the earlier of (A) ten (10) days following
notice to the non-terminating party of the prior fulfillment or waiver
of all conditions set forth in Article 6 hereof and (B) February 15,
2000, other than due to the failure of the party seeking to terminate
this Agreement to perform its obligations under this Agreement required
to be performed at or prior to the Closing;
(iii) by either the Company or the Investor if
consummation of the Contemplated Transactions would violate any
nonappealable final order, decree or judgment of any Governmental
Entity having competent jurisdiction; or
(iv) by either party if, after 10 days notice to the
other party, any condition to the terminating party's obligations to
consummate the transactions contemplated by this Agreement to take
place at the Closing is incapable of being satisfied prior to February
15, 2000;
(v) by either the Company or the Investor if the
Company Stockholder Approval is not received (or is voted down) prior
to February 15, 2000;
(vi) by the Company as provided in Section 4.3(b); or
(vii) by either the Company or the Investor if a
material breach of any provision of this Agreement has been committed
by the other party, and such breach has not been cured or waived within
ten (10) days of the delivery of written notice to the breaching party
thereof;
PROVIDED, THAT, no party may terminate this Agreement pursuant to clauses (ii),
(iii), (iv), (v), (vi) or (vii) above, if such party is, at the time of any such
attempted termination, in material breach of any term hereof.
7.2 EFFECT OF TERMINATION.
(a) If there has been a termination pursuant to Section 7.1, then this
Agreement shall be deemed void and of no further force and effect, and all
further obligations of the parties hereunder shall terminate, except that the
obligations set forth in Section 9.5 shall survive. Nothing contained in this
Section 7.2 (with the exception of the last sentence of Section 7.2(b)),
however, shall (i) relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in this Agreement prior to any
such termination or the corresponding liability for indemnification arising
therefrom pursuant to Article 8, or (ii) limit or restrict the availability of
specific performance or other injunctive or equitable relief to the extent that
specific performance or such other relief would otherwise be available to a
party hereunder.
(b) Notwithstanding the foregoing provisions of this Section 7.2, in
the event of a termination of this Agreement: (i) by the Investor pursuant to
Sections 7.1(iv) or
33
(vii) because of the breach or non-performance by the Company of any of its
covenants or obligations set forth in Section 5.1 and prior to, simultaneously
with or within twelve (12) months after such termination the Company enters into
a Company Acquisition Agreement (substituting 23% for 10% in the definition of
the term "Company Takeover Proposal" contained in the definition of Company
Acquisition Agreement); (ii) after (A) a bona fide Company Takeover Proposal has
been proposed by a third party and such Company Takeover Proposal has not been
withdrawn prior to the Company Stockholders Meeting and the Company Stockholder
Approval is not obtained at the Company Stockholders Meeting and (B) prior to,
simultaneously with or within twelve (12) months after such termination the
Company enters into a Company Acquisition Agreement (substituting 23% for 10% in
the definition of the term "Company Takeover Proposal" contained in the
definition of Company Acquisition Agreement); or (iii) after (A) the Company
fails to comply with Section 4.3 and (B) a Company Takeover Proposal has been
proposed by a third party; then the Company will immediately pay to the Investor
a fee of Three Million Five Hundred Thousand Dollars ($3,500,000), in addition
to the amount due to the Investor under Section 9.5, by wire transfer of
immediately available funds to accounts designated by the Investor; provided,
however, that any such fee otherwise payable pursuant to this Section 7.2 or
Section 4.3(b) and the amount otherwise due under Section 9.5 shall not be
payable, and any attempted termination of this Agreement by the Investor shall
not be effective, if the Investor is, at the time of such attempted termination,
in material breach of any term hereof. Upon the Investor's receipt from the
Company of such $3,500,000 fee pursuant to this Section 7.2 or Section 4.3(b),
plus the amount due under Section 9.5, this Agreement shall be deemed void and
the Investor shall have no further claims against the Company for any breach of
any provision of this Agreement, and all further obligations of the parties
hereunder shall terminate.
7.3 AMENDMENT. This Agreement may be amended by mutual agreement of the
parties at any time, but only pursuant to an instrument in writing duly executed
on behalf of each of the Company and the Investor.
7.4 EXTENSION; WAIVER. At any time prior to the Closing Date, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly executed 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 such rights.
ARTICLE 8
INDEMNIFICATION; REMEDIES
8.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
34
representations and warranties in this Agreement, the Disclosure Schedule and in
any certificate or document delivered pursuant to this Agreement shall survive
for a period of one (1) year following the Closing Date. This Section 8.1 shall
not limit any covenant, restriction, obligation or other agreement of the
parties set forth or contemplated herein, each of which shall survive for its
respective term set forth in this Agreement. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, restrictions, obligations and agreements will not be affected by any
investigation conducted with respect to, or any Knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant,
or obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE COMPANY. The Company
will indemnify and hold harmless the Investor and its Representatives, partners,
controlling persons, and Affiliates and each of their respective Representatives
(collectively, the "Company Indemnified Persons") from and against, and will pay
to the Company Indemnified Persons the amount of, any and all losses,
liabilities, claims, damages, or expenses (including costs of investigation,
defense, litigation and reasonable attorneys' fees), whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by the Company in
this Agreement, the Disclosure Schedule or any other certificate or document
delivered by the Company pursuant to this Agreement, provided that notice of
such breach is given to the Company pursuant to Section 8.5 or 8.6, as
applicable, on or prior to the first anniversary of the Closing Date; or
(b) any breach by the Company of any covenant, restriction, obligation
or agreement of the Company in this Agreement.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE INVESTOR. The Investor
will indemnify and hold harmless the Company, its respective Representatives,
and Affiliates and each of their respective Representatives (collectively, the
"Investor Indemnified Persons"), and will pay to the Company the amount of any
Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by the Investor
in this Agreement or in any certificate or document delivered by the Investor
pursuant to this Agreement, provided that notice of such breach is given to the
Investor pursuant to Section 8.5 or 8.6, as applicable, within three months of
the expiration of the survivability of the
35
representation or warranty; or
(b) any breach by the Investor of any covenant, restriction, obligation
or agreement of the Investor in this Agreement.
8.4 LIMITATION ON AMOUNT.
(a) The Company will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or clause (b) of
Section 8.2 until the total of all Damages attributable to the Company with
respect to such matters taken as a whole exceeds $250,000, after which the
amount of such Damages in excess of such initial $250,000 shall be recoverable
hereunder up to a maximum recovery equal to the entire amount of the Purchase
Price paid by the Investor to the Company hereunder. Notwithstanding the
foregoing, this Section 8.4(a) will not apply to any breach of any of the
Company's representations and warranties set forth in Section 3.2(o), and the
Company will be liable for all Damages with respect to such breaches.
(b) The Investor will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or clause (b) of
Section 8.3 until the total of all Damages incurred by the Company with respect
to such matters taken as a whole exceeds $25,000, after which the amount of such
Damages in excess of such initial $25,000 shall be recoverable hereunder up to a
maximum recovery equal to $100,000.
8.5 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person described in
Section 8.2 or 8.3 of notice of the commencement of any Proceeding against
it, including reasonable details as to the basis for such claim (to the
extent within the Knowledge of the Indemnified Person), such Indemnified
Person will, if a claim is to be made against an indemnifying party under
such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the
Indemnified Person's failure to give such notice.
(b) If any Proceeding referred to in Section 8.5(a) is brought against
an Indemnified Person and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless
the indemnifying party fails to provide reasonable assurance to the
Indemnified Person of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel reasonably satisfactory to the
Indemnified Person and, after notice from the indemnifying party to the
Indemnified Person of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the Indemnified
36
Person under this Article 8 for any fees of other counsel or any other
expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnified Person in connection with the
defense of such Proceeding, other than reasonable costs of investigation;
PROVIDED that if the indemnifying party is also a party to such Proceeding
and, under applicable standards of professional conduct, joint
representation of the Indemnified Person and the indemnifying party would
be inappropriate, then the Indemnified Person shall be entitled to retain
separate counsel whose fees and expenses shall be paid by the indemnifying
party. If the indemnifying party assumes the defense of a Proceeding, (i)
no compromise or settlement of such claims may be effected by the
indemnifying party without the Indemnified Person's consent not to be
unreasonably withheld unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any
Person and no effect on any other claims that may be made against the
Indemnified Person, and (B) the sole relief provided is monetary damages
that are paid in full by the indemnifying party; and (ii) the Indemnified
Person will have no liability with respect to any compromise or settlement
of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten (10) days after the Indemnified
Person's notice is given, give notice to the Indemnified Person of its
election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the Indemnified Person. The
Indemnified Person shall provide its reasonable cooperation with the
indemnifying party in connection with the defense of a proceeding assumed
by indemnifying party hereunder, including the provision of information
reasonably requested by the indemnifying party.
(c) The Company and the Investor hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on the Company and
the Investor with respect to such a claim anywhere in the world.
8.6 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
8.7 REMEDIES EXCLUSIVE. The remedies provided in this Section 8 shall be
exclusive remedies of the parties hereto after the Closing in connection with
any breach of a representation or warranty, non-performance, partial or total,
of any covenant or agreement contained herein, except with respect to any breach
or non-performance of any post-Closing covenant or obligation including, without
limitation, those set forth in Section 4.5 or Section 5.7, or in the case of
fraud, with respect to which the remedies shall not be limited to those set
forth herein.
37
ARTICLE 9
GENERAL PROVISIONS
9.1 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when received if delivered personally, on the next Business Day if sent by
overnight courier for next Business Day delivery (providing proof of delivery),
when confirmation is received, if sent by facsimile or in 5 Business Days if
sent by U.S. registered or certified mail, postage prepaid (return receipt
requested) to the other parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Investor, to:
The Yucaipa Companies
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Company, to:
Cyrk, Inc.
▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
38
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇
Exchange Place
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Cameron Read
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
9.2 INTERPRETATION. A reference made in this Agreement to an Article,
Section, Exhibit or Schedule, shall be to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.4 ENTIRE AGREEMENT; NO THIRDPARTY BENEFICIARIES. This Agreement, the
Registration Rights Agreement and the Confidentiality Agreement together
constitute the entire agreement between the parties with respect to the subject
hereof and thereof, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of such
agreements. Except as explicitly provided in Sections 8.2 and 8.3, this
Agreement is not intended to confer upon any Person other than the parties any
rights or remedies.
9.5 COSTS AND EXPENSES. All costs and expenses in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the Contemplated Transactions (including, irrespective of whether the
Closing shall have occurred, costs incurred by the Investor and its Affiliates
in connection with an investment in (or acquisition of) the Company, which
include, without limitation, all attorney fees and other consultant and advisor
fees, including all fees and expenses arising from any due diligence
investigation and fees of brokers, investment bankers or financial advisors)
shall be borne by the Company, and the Company shall reimburse the Investor for
all such costs and expenses on the earlier to occur of: (i) the Closing, (ii)
the third Business Day following the Company Stockholders Meeting if the Company
Stockholder Approval is not received, (iii) immediately following the
termination of
39
the Agreement pursuant to Section 4.3(b) or under circumstances in which a fee
is payable pursuant to Section 7.2(b), and (iv) the third Business Day following
the termination of the Agreement for any other reason, other than for material
breach of any term hereof by the Investor, provided, in the event of (i) above
the Company's reimbursement obligation hereunder shall be limited to Two Million
Two Hundred Thousand Dollars ($2,200,000) in the aggregate; provided, further,
in the event of (ii) or (iv) above the Company's reimbursement obligation
hereunder shall be limited to One Million Seven Hundred Thousand Dollars
($1,700,000) in the aggregate; and provided, further, in the event of (iii)
above, the Company's reimbursement obligation hereunder shall be limited to One
Million Two Hundred Thousand Dollars ($1,200,000) in the aggregate.
9.6 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding two sentences, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
9.8 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 any court of the State of Delaware
or of the United States located in the State of Delaware in the event any
dispute arises out of this Agreement or any of the Contemplated Transactions,
and each party agrees (a) it will not attempt to deny or defeat personal
jurisdiction or venue in any such court by motion or other request for leave
from any such court and (b) it will not bring any action relating to this
Agreement or any of the Contemplated Transactions in any court other than any
such court.
9.9 SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein, so long as the economic and legal substance of the
Contemplated Transactions are not affected in a manner materially adverse to any
party hereto.
9.10 FURTHER ASSURANCES. The parties agree (i) to furnish upon request to
each other such further information, (ii) to execute and deliver to each other
such other documents, and
40
(iii) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
9.11 CONSTRUCTION. In entering into this Agreement, each party represents
and warrants that such party does so freely and voluntarily, after having had
the opportunity to meet and confer with such party's respective attorneys
regarding the contents and legal effect of this Agreement. Each party represents
and warrants that such party has full power and authority to enter into and
execute this Agreement. Every covenant, term, and provision of this Agreement
shall be construed simply according to its fair meaning and not strictly for or
against any party. In the event any claim is made by any party relating to any
conflict, omission, or ambiguity in this Agreement, no presumption or burden of
proof or persuasion shall be implied by virtue of the fact that this Agreement
was prepared by or at the request of a particular party or such party's counsel.
41
IN WITNESS WHEREOF, the Investor and the Company have caused
this Agreement to be signed by their respective general partner or officer
hereunto duly authorized, all as of the date first written above.
OVERSEAS TOYS, L.P.
By:
----------------------------
Its:
----------------------------
CYRK, INC.
By:
----------------------------
Its:
----------------------------
42
EXHIBIT A
DEFINITIONS
"AFFILIATE" means, with respect to any Person, another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
"AGREEMENT" or "SECURITIES PURCHASE AGREEMENT" means this Securities
Purchase Agreement, including all Exhibits and Disclosure Schedules attached
hereto, as amended from time to time in accordance with the provisions of
Section 7.3. Words such as "herein," "hereinafter," "hereof," "hereto" and
"hereunder" refer to this Agreement as a whole, unless the context otherwise
requires.
"BEAR ▇▇▇▇▇▇▇ OPINION" has the meaning set forth in Section 3.2(p).
"BEST EFFORTS" means the commercially reasonable efforts that a prudent
Person desirous of achieving a result would use in good faith in similar
circumstances to ensure that such result is achieved as expeditiously as can
reasonably be expected.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day
which is a legal holiday in the State of Delaware.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation for
the Series A Preferred Stock attached hereto as Exhibit B.
"CLOSING" has the meaning set forth in Section 2.3.
"CLOSING DATE" has the meaning set forth in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"COMMON SHARES" has the meaning set forth in Section 3.2(c).
"COMPANY" has the meaning set forth in the Preamble.
"COMPANY ACQUISITION AGREEMENT" means any letter of intent, agreement
in principle, acquisition agreement or other similar agreement related to any
Company Takeover Proposal.
"COMPANY SEC FINANCIAL STATEMENTS" has the meaning set forth in Section
3.2(e)
"COMPANY SEC DOCUMENTS" has the meaning set forth in Section 3.2(e)
43
"COMPANY STOCK OPTIONS" means all outstanding officer, employee,
director or consultant stock options to purchase shares of Common Stock granted
under the Option Plans.
"COMPANY STOCKHOLDER APPROVAL" has the meaning set forth in Section
5.1(b).
"COMPANY STOCKHOLDERS MEETING" has the meaning set forth in Section
5.1(b).
"COMPANY SUPERIOR PROPOSAL" means any Company Takeover Proposal
(substituting 25% for 10% in the definition thereof), on terms which the Board
of Directors of the Company or the Special Committee determines in its good
faith judgment, following consultation with its outside counsel and its
financial advisor, taking into account all legal, financial, regulatory and
other aspects of such proposal, to be more favorable to the Company's
stockholders than the Contemplated Transactions and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Board of Directors of the Company or the Special Committee, following
consultation with its outside counsel and its financial advisor, is reasonably
capable of being obtained by such third party.
"COMPANY TAKEOVER PROPOSAL" means, other than the transactions
contemplated by this Agreement, any inquiry, proposal or offer from any Person
unaffiliated with the Investor relating to (i) any direct or indirect
acquisition or purchase (including by merger, consolidation, business
combination, recapitalization, reorganization, liquidation, dissolution or
similar transaction) from the Company or any of its Subsidiaries of assets,
equity securities, or any other interest of or in the Company or any of its
Subsidiaries with a fair market value, in the aggregate, of 10% or more of the
total market capitalization of the Company (i.e., the average of the Closing
Prices (as defined in the Certificate of Designation) of the Common Shares for
the twenty (20) consecutive Trading Days (as defined in the Certificate of
Designation) ending on the day before the Company Takeover Proposal is made
MULTIPLIED by the number of outstanding Common Shares as of the most recent
annual or quarterly SEC filing of the Company), (ii) any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 10% or more of any class of any equity securities of the Company (other
than the Series A Preferred Shares), or (iii) any merger, consolidation,
business combination, recapitalization, reorganization, or similar transaction
involving the Company in which the holders of voting stock of the Company
immediately prior to such transaction do not own at least 90% of the voting
stock of the company surviving such transaction.
"CONFIDENTIALITY AGREEMENT" means that certain letter agreement dated
as of January 25, 1999 by and between the Company and the Investor.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
by this Agreement, including, without limitation, (i) the sale by the Company of
the Series A Preferred Shares and the Warrant to the Investor, (ii) the
execution, delivery, and performance of the Registration Rights Agreement, the
Management Agreement, and the Voting Agreement, (iii) the performance by the
Investor and the Company of their respective
44
covenants and obligations under this Agreement, and (iv) the Investor's
acquisition and ownership of the Preferred Shares and the Warrant. "DAMAGES" has
the meaning set forth in Section 8.2.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3.1.
"EMPLOYEE AGREEMENTS AND PLANS" has the meaning set forth in Section
3.2(i).
"EMPLOYMENT AGREEMENTS" has the meaning set forth in the Recitals.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 3.2(l).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"ERISA AFFILIATE" has the meaning set forth in Section 3.2(i).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"GAAP" means generally accepted accounting principles as used in the
United States.
"GOVERNMENTAL ENTIT(Y/IES)" has the meaning set forth in Section
3.2(d).
"HSR ACT" has the meaning set forth in Section 3.2(d).
"INDEMNIFIED PERSONS" means the Investor Indemnified Persons and the
Company Indemnified Persons, each an "Indemnified Person".
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 3.2(n).
"INVESTOR" has the meaning set forth in the Preamble.
"INVESTOR INDEMNIFIED PERSONS" has the meaning set forth in Section
8.3.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" means, with respect to an individual, that such individual
will be deemed to have "Knowledge" of a particular fact or other matter if (a)
such individual is actually aware
45
of such fact or other matter, or (b) a prudent individual would be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter. A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director or executive officer of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"LIENS" has the meaning set forth in Section 3.2(b).
"MANAGEMENT AGREEMENT" has the meaning set forth in the Recitals.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
or effect that either individually or in the aggregate with all other such
changes or effects is, or would reasonably be expected to be, materially adverse
to the business, assets, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole (except for changes affecting the
economy generally or resulting from the announcement or execution of this
Agreement or the consummation of the Contemplated Transactions);
"MATERIAL CONTRACTS" has the meaning set forth in Section 3.2(d).
"NASD" has the meaning set forth in Section 3.2(r).
"NASDAQ" has the meaning set forth in Section 3.2(r).
"OPTION PLANS" mean the Company's 1993 Omnibus Stock Plan, 1997
Acquisition Stock Plan, or 1993 Employee Stock Purchase Plan, each an "Option
Plan."
"ORGANIZATIONAL DOCUMENTS" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person, and (v) any amendment
to any of the foregoing (including any pending or proposed amendments).
"PERMITTED LIENS" means (i) liens, charges and encumbrances for any
taxes, assessments or other governmental charges for sums not yet due; (ii)
liens granted under the Company's or any of its Subsidiaries' senior secured
lending facilities; (iii) purchase money liens, and (iv) such other liens,
restrictions and other encumbrances, if any, which do not materially detract
from the value of, or materially interfere with, the present use of the Company
of the property subject thereof or affected thereby.
"PERSON" means an individual, or a corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
46
"PREFERRED SHARES" has the meaning set forth in Section 3.2(c).
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Entity or arbitrator.
"PROXY STATEMENT" has the meaning set forth in Section 5.1(a).
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"PURCHASED SECURITIES" has the meaning set forth in Section 2.1.
"RECENT COMPANY SEC DOCUMENTS" has the meaning set forth in Section
3.2(e).
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in the
Recitals.
"REPRESENTATIVE" means with respect to a particular Person, any
authorized director, officer, employee, agent, consultant, advisor, or other
authorized representative of such Person, including legal counsel, accountants,
and financial advisors.
"SEC" has the meaning set forth in Section 3.2(d).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SERIES A PREFERRED SHARES" has the meaning set forth in Section 2.1.
"SERIES A PREFERRED STOCK" has the meaning set forth in the Recitals.
"SOFTWARE" has the meaning set forth in Section 3.2(n).
"SPECIAL COMMITTEE" has the meaning set forth in Section 3.2(q).
"STOCK PLANS" means the Option Plans, the warrants set forth in Section
3.2(c) of the Disclosure Schedule and any other plan, program, agreement or
arrangement providing for the issuance or grant of any interest in respect of
the capital stock of the Company or any Subsidiary of the Company.
"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 interest of which, is owned directly or indirectly by such
47
first Person.
"TAX RETURN(S)" means any return(s), report(s) or statement(s) required
to be filed with any Governmental Entity with respect to any Tax(es).
"TAX(ES)" means any and all tax(es) of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity.
"THREATENED" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing).
"UPDATES" has the meaning set forth in Section 4.1(e).
"VOTING AGREEMENT" means the Voting Agreement, entered into as of the
date hereof and as amended from time to time pursuant to the provisions of
Section 4.2 thereof, by and among the Investor and the stockholders of the
Company listed on the signature page thereof or who subsequently become a party
thereto.
"WARRANT" has the meaning set forth in the Recitals.
