Exhibit 99(c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
FAMILY GOLF CENTERS, INC.
FAMILY GOLF Acquisition, INC.
and
METROGOLF INCORPORATED
December 23, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER................................................................. 1
Section 1.01. The Offer.................................................. 1
Section 1.02. Company Actions............................................ 3
ARTICLE II
THE MERGER................................................................ 5
Section 2.01. The Merger Closing......................................... 5
Section 2.02. The Merger................................................. 5
Section 2.03. Certain Effects of the Merger.............................. 5
Section 2.04. Corporate Organization..................................... 5
Section 2.05. Conversion of Shares....................................... 6
Section 2.06. Dissenting Shares.......................................... 6
Section 2.07. Exchange of Certificates................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MGI..................................... 8
Section 3.01. Organization and Good Standing............................. 8
Section 3.02. Foreign Qualification...................................... 8
Section 3.03. Capitalization............................................. 8
Section 3.04. Authority of MGI........................................... 10
Section 3.05. No Conflict; Required Filings and Consents................. 10
Section 3.06. SEC Reports................................................ 11
Section 3.07. Title to Property.......................................... 12
Section 3.08. Compliance with Law........................................ 14
Section 3.09. Litigation................................................. 15
Section 3.10. Taxes...................................................... 15
Section 3.11. Insurance.................................................. 17
Section 3.12. Material Contracts; Debt Instruments....................... 17
Section 3.13. Employment Agreements...................................... 20
Section 3.14. Intellectual Property...................................... 20
Section 3.15. Employees and Related Agreements: ERISA.................... 20
Section 3.16. Absence of Certain Changes or Events....................... 25
Section 3.17. Finder's Fee............................................... 26
Section 3.18. Environmental Matters...................................... 26
Section 3.19. Employment Relations; Compliance........................... 29
Section 3.20. Indemnification of Employees, Etc.......................... 29
Section 3.21. Labor Relations............................................ 29
Section 3.22. Board Recommendation....................................... 29
Section 3.23. Opinion of Financial Advisor............................... 30
Section 3.24. Related Party Transactions................................. 30
Section 3.25. Schedule 14D-9, Offer Documents and Schedule 14D-1......... 30
Section 3.26. Charter Documents.......................................... 30
Section 3.27. Full Disclosure............................................ 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.................. 31
Section 4.01. Organization and Good Standing............................. 31
Section 4.02. Authority of Parent and Acquisition........................ 31
Section 4.03. No Conflict; Required Filings and Consents................. 31
Section 4.04. Finder's Fees.............................................. 32
ARTICLE V
COVENANTS................................................................. 32
Section 5.01. No Solicitation............................................ 32
Section 5.02. Interim Operations......................................... 34
Section 5.03. Stockholder Approval....................................... 35
Section 5.04. Access by Acquisition...................................... 37
Section 5.05. Government Filings; Xxxx Xxxxx Xxxxxx Filing............... 38
Section 5.06. No Breach of Representations and Warranties................ 38
Section 5.07. Consents; Notices.......................................... 38
Section 5.08. Reasonable Efforts......................................... 39
Section 5.09. Indemnification; Directors' and Officers' Insurance........ 39
Section 5.10. Options.................................................... 40
Section 5.11. Directors.................................................. 42
Section 5.12. Notification of Certain Matters............................ 42
Section 5.13. Fees and Expenses.......................................... 43
Section 5.14. Certain Litigation......................................... 43
Section 5.15. Insurance.................................................. 44
Section 5.16. Purchase Agreements........................................ 44
ARTICLE VI
CONDITIONS TO PARENT'S AND ACQUISITION'S OBLIGATIONS...................... 44
Section 6.01. Injunctions................................................ 44
Section 6.02. Stockholder Approval....................................... 44
Section 6.03. Consummation of the Offer.................................. 45
Section 6.04. Representations and Warranties............................. 45
Section 6.05. HSR Approvals.............................................. 45
Section 6.06. Employment Agreements...................................... 45
ARTICLE VII
CONDITIONS TO MGI'S OBLIGATIONS........................................... 45
Section 7.01. Injunctions................................................ 45
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Section 7.02. Stockholder Approval....................................... 45
Section 7.03. Consummation of the Offer.................................. 45
Section 7.04. HSR Approvals.............................................. 45
ARTICLE VIII
TERMINATION............................................................... 46
Section 8.01. Termination................................................ 46
Section 8.02. Effect of Termination...................................... 47
ARTICLE IX
MISCELLANEOUS............................................................. 47
Section 9.01. Amendment.................................................. 47
Section 9.02. Extension: Waiver.......................................... 47
Section 9.03. Non-Survival............................................... 48
Section 9.04. Further Assurances......................................... 48
Section 9.05. Entire Agreement........................................... 48
Section 9.06. Notices.................................................... 48
Section 9.07. Successors and Assigns..................................... 49
Section 9.08. Governing Law.............................................. 49
Section 9.09. Gender and Person.......................................... 49
Section 9.10. Captions................................................... 49
Section 9.11. Confidentiality of Disclosures............................. 50
Section 9.12. Publicity.................................................. 50
Section 9.13. Third Parties.............................................. 50
Section 9.14. Counterparts............................................... 50
Section 9.15. Interpretation............................................. 50
Section 9.16. Enforcement................................................ 51
Exhibit A
Conditions of the Offer................................................... 53
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AGREEMENT AND PLAN OF MERGER, dated December 23, 1997, among FAMILY GOLF
CENTERS, INC. ("Parent"), a Delaware corporation, FAMILY GOLF Acquisition,
INC. ("Acquisition"), a Colorado corporation and a wholly-owned subsidiary of
Parent, and METROGOLF INCORPORATED ("MGI" or the "Company"), a Colorado
corporation.
WHEREAS, the respective Boards of Directors of Parent, Acquisition and
MGI deem it to be desirable and in the best interests of their respective
companies and stockholders to consummate the business transactions provided
for herein and have approved such transactions;
WHEREAS, in the furtherance of such transactions, Acquisition shall make
a tender offer (as it may be amended from time to time as permitted
hereunder, the "Offer") to purchase all the issued and outstanding shares of
common stock, without par value (the "Common Stock"), of MGI, at a price per
share of $1.50, upon the terms and subject to the conditions of this
Agreement; and the Board of Directors of MGI has adopted resolutions
approving the Offer and Merger (as hereinafter defined) and recommending that
the Company's stockholders accept the Offer; and
WHEREAS, the respective Boards of Directors of Acquisition, Parent and
MGI have approved the merger of Acquisition with and into MGI, following
consummation of the Offer as set forth below (the "Merger"), upon the terms
and subject to the conditions of this Agreement, whereby each issued and
outstanding share of Common Stock of MGI not owned directly or indirectly by
Acquisition, except shares of Common Stock held by persons who object to the
Merger and comply with all the provisions of Colorado law concerning the
right of holders of Common Stock to dissent from the Merger and require
appraisal of their shares of Common Stock, will be converted into the right
to receive the per share consideration paid pursuant to the Offer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five
business days after the public announcement of the execution of this
Agreement, Acquisition shall commence the Offer. The obligation of
Acquisition to consummate the Offer and accept for payment, and pay for, any
shares of Common Stock (the "MGI Shares" and each holder thereof, a "MGI
Stockholder") tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may be waived by Acquisition
in its sole discretion). Acquisition expressly reserves the right to modify
the terms of the Offer, except that, without the consent of MGI, Acquisition
shall not (i) reduce the number of MGI Shares subject to the Offer, (ii)
reduce the price per MGI Share to be paid pursuant to the Offer, (iii) add to
the conditions set forth in Exhibit A, (iv) except as
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provided in this Section 1.01(a) below, extend the Offer, (v) change the form
of consideration payable in the Offer, or (vi) make any other change in the
terms of the Offer adverse to the MGI Stockholders. The initial expiration
date of the Offer shall be the date this is 20 business days after the date
that the Offer has been commenced. Acquisition may extend the Offer in
accordance with applicable law, but if the conditions set forth in Exhibit A
are satisfied as of the then scheduled expiration date of the Offer, the
Offer may be extended only with the prior written consent of MGI or as
required by law. Notwithstanding the foregoing, Acquisition may, without the
consent of MGI, (A) extend the Offer, if at the scheduled or extended
expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or
waived; provided, however, that Acquisition shall not extend the Offer later
than June 30, 1998 pursuant to this clause (A) without MGI's prior written
consent, (B) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC" or the "Commission") or the staff thereof applicable to
the Offer, (C) extend the Offer from time to time until two business days
after the expiration of the waiting period under the HSR Act (as defined in
Section 3.05 below), if applicable, and (D) extend the Offer for a period not
to exceed 15 business days, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer, if, immediately prior
to such expiration date (as it may be extended), the MGI Shares tendered and
not withdrawn pursuant to the Offer equal less than 90%, but more than 75%,
of the outstanding MGI Shares (on a fully-diluted basis). Subject to the
conditions set forth in this Agreement, Acquisition shall pay for all MGI
Shares validly tendered and not withdrawn pursuant to the Offer promptly
after the expiration of the Offer.
(b) Parent shall provide or cause to be provided to Acquisition on
a timely basis the funds necessary to accept for payment, and pay for, any
MGI Shares that Acquisition becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
(c) MGI will not, nor will it permit any of its Subsidiaries (as
defined below) to, tender into the Offer any MGI Shares beneficially owned by
it. For purposes of this Section 1.01 only, "Subsidiaries" means, as to any
Person (as defined below): (i) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (other than stock having such voting power solely by reason of
the happening of any contingency) is at the time directly or indirectly
owned or controlled by such Person and/or one or more of the Subsidiaries;
(ii) any limited liability company, partnership or joint venture in which
such Person or Subsidiary of such Person is a managing member, general
partner or joint venturer or of which a majority of the partnership or other
ownership interests are at the time owned by such Person and/or one or more
of the Subsidiaries; or (iii) any entity which is controlled (as hereinafter
defined) by such Person or any of the Subsidiaries. For all other purposes
of this Agreement, "Subsidiaries" shall have the meaning therefor set forth
in Article III hereof. For purposes of this Agreement, (A) "Person" means
any individual, corporation, company, voluntary association, limited
liability company, partnership, joint venture, trust, unincorporated
organization or other entity and (B) "control" (including, with correlative
meanings, "controlled by" and "under common control with") means possession,
directly or
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indirectly, of power to direct or cause the direction of the management or
policies of a Person (whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise).
(d) On the date of commencement of the Offer, Parent and
Acquisition shall file with the SEC a Tender Offer Statement on Schedule
14D-1 with respect to the Offer, which shall contain an offer to purchase and
a related letter of transmittal and summary advertisement (such Schedule
14D-1 and the documents therein pursuant to which the Offer will be made,
together with any supplements or amendments thereof, the "Offer Documents").
The Offer Documents shall be consistent with this Agreement, shall add no
conditions to the consummation of the Offer not set forth in Exhibit A and
shall add no provisions to the Offer adverse to the MGI Stockholders. The
Offer Documents shall comply as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, and on
the date first published, sent or given to the MGI Stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or
Acquisition with respect to information supplied by MGI or any of its
representatives, agents or stockholders for inclusion or incorporation by
reference in the Offer Documents. Each of Parent, Acquisition and MGI agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false
or misleading in any material respect, and Parent and Acquisition further
agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the Commission and to be disseminated to the MGI
Stockholders, in each case as and to the extent required by applicable
Federal securities laws. Acquisition shall afford MGI and its counsel a
reasonable opportunity to review and comment on the Offer Documents prior to
the filing of the respective Offer Documents with the Commission.
Acquisition agrees to provide MGI and its counsel in writing with any
comments Acquisition or its counsel may receive from the Commission or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(e) All amounts payable pursuant to the Offer and the Merger may
be paid net of amounts required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code"), or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the MGI
Stockholder in respect of which such deduction and withholding was made.
Section 1.02. Company Actions. (a) MGI hereby approves of and
consents to the Offer and represents that (i) the Board of Directors of MGI
(the "Board" or "Board of Directors"), at a meeting duly called and held, has
duly adopted resolutions approving the execution, delivery and performance of
this Agreement, the Offer and the Merger, determining that the price and
terms of the Offer and Merger are fair to, adequate and in the best interests
of, MGI and the MGI stockholders and recommending that the MGI stockholders
accept the Offer, tender their MGI
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Shares pursuant to the Offer and approve and adopt this Agreement; (ii) such
approval constitutes Board approval of the Offer, this Agreement and the
transactions contemplated hereby, including the Merger, for purposes of
Section 0-000-000 of the Colorado Business Corporation Act, as amended (the
"BCA"); and (iii) Xxxxxxxx Xxxxx Xxxxxx & Xxxxx (the "Financial Advisor")
has delivered to the Board its opinion (the "Fairness Opinion") to the effect
that, as of the date of this Agreement and based upon and subject to the
matters set forth therein, the cash consideration to be received by the MGI
Stockholders, in the Offer and the Merger, is fair to such MGI Stockholders
from a financial point of view.
(b) At the time the Offer Documents are filed with the SEC, MGI
shall file with the Commission a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended
from time to time, the "Schedule 14D-9") containing the recommendations
described in paragraph (a) and shall mail the Schedule 14D-9 to the MGI
Stockholders. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and, on the date filed
with the Commission and on the date first published, sent or given to the MGI
Stockholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation is made
by MGI with respect to information supplied by Parent or Acquisition,
expressly for inclusion or incorporation by reference in the Schedule 14D-9.
Each of MGI, Parent and Acquisition agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and MGI further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the Commission and
disseminated to the MGI Stockholders, in each case as and to the extent
required by applicable Federal securities laws. MGI shall afford Parent and
Acquisition and their counsel a reasonable opportunity to review and comment
on the Schedule 14D-9 prior to its filing with the SEC. MGI agrees to
provide Parent and Acquisition and their counsel in writing with any comments
MGI or its counsel may receive from the Commission or its staff with respect
to the Schedule 14D-9 promptly after the receipt of such comments.
Section 1.03. Stockholder Lists. In connection with the Offer and the
Merger, MGI will furnish, or cause its transfer agent to furnish, Acquisition
with mailing labels containing the names and addresses of the record holders
of MGI Shares as of a recent date and of those persons becoming record
holders subsequent to such date, together with copies of all lists of
stockholders, security position listings and computer files and all other
information in MGI's possession or control regarding the beneficial owners of
MGI Shares, and information concerning outstanding options, warrants and
other rights to acquire MGI Common Stock and shall furnish to Acquisition
such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Parent may reasonably
request in communicating the Offer to MGI's Stockholders. Subject to the
requirements of applicable law and stock exchange rules, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent, Acquisition and their
agents shall hold in confidence the information contained in any such labels,
listings
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and files, will use such information only in connection with the Offer and
the Merger and, if this Agreement shall be terminated, will deliver to MGI
all copies of such information in their possession.
ARTICLE II
THE MERGER
Section 2.01. The Merger Closing. Upon the terms and subject to the
conditions of this Agreement, the closing (the "Closing") of the Merger shall
take place at 10:00 A.M., on the third business day after the fulfillment of
the conditions specified in Sections 6.02 and 7.02 hereof, at the offices of
Squadron, Ellenoff, Plesent & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other time, date and place as may be agreed upon in
writing by Parent and MGI. The date on which the Closing shall take place is
referred to as the "Closing Date" and the time on the Closing Date when the
Closing shall take place is referred to as the "Closing Time," MGI, Parent
and Acquisition shall use their respective best efforts to cause the Merger
to be consummated at the earliest practicable time after consummation of the
Offer.
Section 2.02. The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the BCA, at the Effective Time (as
hereinafter defined), Acquisition shall be merged with and into MGI. MGI
shall continue its existence as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of
Acquisition shall terminate at the Effective Time (as hereinafter defined).
The Merger shall become effective at such time as a duly prepared and
executed articles of merger or other appropriate documents (collectively, the
"Articles of Merger"), in form and substance reasonably satisfactory to
Parent and MGI, providing for the merger of Acquisition with and into MGI, is
filed with the Secretary of State of the State of Colorado in accordance with
the relevant provisions of the BCA (the "Effective Time"). The Articles of
Merger and all other filings or recordings required under the BCA shall be
filed as soon as practicable after the Closing Time.
Section 2.03. Certain Effects of the Merger. At the Effective Time,
the Surviving Corporation shall thereafter, consistently with its articles
of incorporation as altered by the Merger, possess all the rights,
privileges, immunities, powers and purposes, and assume and be liable for all
the liabilities, obligations and penalties, of each of Acquisition and MGI
(sometimes hereinafter referred to as the "Constituent Corporations"); and
all property, real and personal, causes of action and every other asset of
each of the Constituent Corporations shall vest in the Surviving Corporation
without further act or deed. The directors and officers of Acquisition
immediately prior to the Effective Time shall be, from and after the
Effective Time, the directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and By-laws.
Section 2.04. Corporate Organization. The Articles of Incorporation
and By-laws of MGI at the Effective Time shall be the Articles of
Incorporation and By-laws, respectively, of the Surviving Corporation after
the Effective Time.
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Section 2.05. Conversion of Shares. (a) At the Effective Time,
subject to Section 2.06, each issued and outstanding MGI Share, immediately
prior to the Effective Time (other than the Dissenting Shares) shall, by
reason of the Merger and without any action by the holders thereof, be
converted into the right to receive $1.50 per share in cash (the "Merger
Consideration"), without interest.
(b) Each share of the capital stock of Acquisition issued and
outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, without par value, of
the Surviving Corporation.
Section 2.06. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary,
any MGI Shares which are outstanding immediately prior to the Effective Time
and which are held by MGI Stockholders who shall not have voted such MGI
Shares in favor of the Merger or consented thereto in writing and who shall
have filed with MGI a written objection to the Merger and a demand for
payment of such MGI Shares in accordance with the BCA ("Dissenting Shares")
shall not be converted into the right to receive, or be exchangeable for, the
Merger Consideration, but, instead, such MGI Stockholders shall be entitled
only to such rights as are granted by Article 113 of the BCA with respect to
Dissenting Shares held by them in accordance with the provisions of the BCA,
except that all Dissenting Shares held by MGI Stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Dissenting Shares under the BCA shall thereupon
be deemed to have been converted into and to have become exchangeable for, as
of the Effective Time, the right to receive the Merger Consideration, without
any interest thereon, upon surrender, in the manner provided in Section 2.07,
of the certificate or certificates that formerly evidenced such MGI Shares.
(b) MGI shall give Acquisition (i) prompt notice of any demands
for appraisal received by MGI, withdrawals of such demands and any other
instruments served pursuant to the BCA and received by MGI and (ii) the
opportunity to participate in and direct all negotiations and proceedings
with respect to demands for appraisal under the BCA. MGI shall not, except
with the prior written consent of Acquisition, make any payment with respect
to any demands for appraisal or offer to settle or settle or otherwise
negotiate any such demands.
Section 2.07. Exchange of Certificates
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company reasonably acceptable to MGI to act as paying agent in the Merger
(the "Paying Agent"), and, from time to time on, prior to or after the
Effective Time, Parent shall make available, or cause the Surviving
Corporation to make available, to the Paying Agent funds in amounts and at
the times necessary for the payment of the Merger Consideration upon
surrender of certificates
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representing MGI Shares (it being understood that any and all interest earned
on funds made available to the Paying Agent pursuant to this Agreement shall
be turned over to Parent).
(b) As soon as reasonably practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented MGI
Shares (the "Certificates"), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration into which
the MGI Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 2.05, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of MGI Shares
that is not registered in the transfer records of MGI, payment may be made to
a person other than the person in whose name the Certificate so surrendered
is registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person
other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.07, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration,
without interest, into which the MGI Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 2.05. No interest
will be paid or will accrue on the Merger Consideration payable upon the
surrender of any Certificate.
(c) All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed
to have been paid in full satisfaction of all rights pertaining to the MGI
Shares theretofore represented by such Certificates. At the Effective Time,
the stock transfer books of MGI shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the MGI Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason,
they shall be canceled and exchanged as provided in this Article II.
(d) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the
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foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MGI
MGI represents and warrants to Parent and Acquisition that:
Section 3.01. Organization and Good Standing. Each of MGI and the
Subsidiaries (as hereinafter defined) is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation or
organization, and each has the requisite power and authority to own, lease
and operate all of the properties and assets owned or leased by it and to
carry on its business as it is now being conducted.
Section 3.02. Foreign Qualification. Each of MGI and the Subsidiaries
is duly licensed or qualified to do business as a foreign corporation,
limited liability company or limited partnership and is in good standing in
each jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except for jurisdictions
in which the failure to become so qualified or to be in good standing would
not individually or in the aggregate have a MGI Material Adverse Effect. As
used herein, "MGI Material Adverse Effect" means any event, occurrence or
condition which has or would be reasonably likely to (i) have a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of MGI and the Subsidiaries taken as a
whole or (ii) materially impair the ability of MGI to perform its obligations
under this Agreement, or to consummate the transactions contemplated herein.
Section 3.03. Capitalization. (a) MGI is authorized to issue (i)
50,000,000 MGI Shares, (A) 4,434,607 of which are issued and outstanding as
of the date hereof, (B) 1,019,931 of which are reserved for issuance upon the
exercise of outstanding warrants, (C) 667,500 of which are reserved for
issuance upon the exercise of outstanding options, (D) 86,997 (plus an
indeterminate number of shares in connection with the Rocky Point and Xxxxxx
transactions and the Hitters' Haven lease) of which are reserved for issuance
pursuant to certain contracts and rights set forth in Schedule 3.03, and (E)
3,198,386 (plus (x) an indeterminate number of shares reserved for issuance
upon conversion of accrued interest on such notes and (y) 83,035 shares that
will be issuable per month commencing January 1, 1998 if a registration
statement with respect to certain shares is not in effect by such date) of
which are reserved for issuance pursuant to the convertible notes set forth
on Schedule 3.03, and (ii) 1,000,000 Preferred Shares, none of which are
issued or outstanding as of the date hereof. The capitalization of MGI is set
forth on Schedule 3.03, provided that up to an additional 175,000 MGI Shares
may be issuable pursuant to the terms of certain agreements. There are no
other series or classes of capital stock of MGI authorized to be issued, and
there are no other shares of outstanding capital stock of MGI.
8
(b) There are no issued or outstanding bonds, debentures, notes or
other indebtedness of MGI or any of the Subsidiaries which, without
conversion thereof by their terms entitle the holders thereof to the right
to vote on any matters on which MGI Stockholders may vote ("Voting Debt").
Except as set forth in Schedule 3.03, neither MGI nor any Subsidiary is a
party to any outstanding or authorized subscriptions, convertible securities,
warrants, options, contracts, rights (preemptive or otherwise), calls,
commitments or demands of any kind or character relating to any authorized
and issued or unissued shares of capital stock of MGI or any of the
Subsidiaries, including, without limitation, MGI Shares, or outstanding
securities, obligations, rights, bonds, debentures, notes or other
instruments convertible into or exchangeable for such stock, which obligate
MGI to seek authorization to issue, deliver or sell or cause to be issued,
delivered or sold any additional MGI Shares or MGI Preferred Shares or any
other capital stock or Voting Debt of MGI or any securities convertible into,
or exercisable or exchangeable for, or evidencing the right to subscribe for
any such shares, interests or Voting Debt or obligating MGI to grant, extend
or enter into any such option, warrant, call, subscription or other right.
Except as set forth in Schedule 3.03, immediately after the Effective Time,
there will be no subscriptions, options, warrants, calls, rights, commitments
or agreements which will entitle (conditionally or unconditionally) any
person or entity to purchase or otherwise acquire, or will obligate
(conditionally or unconditionally) the Surviving Corporation (as MGI's
successor) to sell, issue or deliver any shares of capital stock, any other
equity interest or any Voting Debt of the Surviving Corporation or obligating
the Surviving Corporation to grant, extend or enter into any such
subscription, warrant, call, right, commitment or agreement. Except as set
forth in Schedule 3.03, MGI has not adopted, authorized or assumed any plans,
arrangements or practices for the benefit of its officers, employees or
directors which require or permit the issuance, sale, purchase or grant of
any capital stock, other equity interests or Voting Debt of MGI, any options,
warrants or other securities convertible into, or exercisable or exchangeable
for, any such stock, interests or Voting Debt or any phantom shares, phantom
equity interests or stock or equity appreciation rights.
(c) All of the outstanding MGI Shares have been duly authorized
and validly issued, are fully paid and nonassessable, and, as of the date
hereof, a total of 4,446,607 MGI Shares have been listed for trading on the
Boston Stock Exchange and the NASDAQ Smallcap Market. None of the MGI Shares
is subject to or has been issued in violation of any preemptive rights nor
have any MGI Shares been issued in violation of the Securities Act or the
securities or "blue sky" laws of any state or territory of the United States
of America.
(d) Except as set forth in Schedule 3.03, MGI does not own any
shares of stock or any other securities of any corporation or have any
interest in any other Person. All of the outstanding shares of capital stock
or ownership interest of each corporation, partnership or other organization,
whether incorporated or unincorporated, which is consolidated with MGI for
financial reporting purposes (a "Subsidiary") (i) have been duly authorized
and validly issued, (ii) in the case of each corporation, are fully paid and
nonassessable, (iii) are owned, directly or indirectly, by MGI, free and
clear of any mortgage, charge, pledge, lien, security interest, claim,
encumbrance or restriction, of any kind or nature (other than any pledges or
grants in favor of Parent), and (iv) are not subject to, nor have they been
issued in violation of, any preemptive
9
rights. Except for those granted in favor of Parent, there are no
outstanding or authorized subscriptions, warrants, options, contracts, rights
(preemptive or otherwise), calls, commitments or demands of any character to
which MGI or any Subsidiary is a party that, directly or indirectly, (i) call
for or relate to the sale, pledge, transfer or other disposition by MGI or
any Subsidiary of any shares of capital stock, any partnership or other
equity interests, or any Voting Debt of any Subsidiary or (ii) relate to the
voting or control of such capital stock, partnership or other equity
interests or Voting Debt. Except as contemplated by this Agreement, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which MGI is a party or by which it is bound relating to
the voting of or any other rights in or to, any shares of the capital stock
of MGI which will limit in any way the tender and purchase of the MGI Shares
pursuant to the Offer, or the solicitation of proxies by or on behalf of MGI
from, or the casting of votes by, the MGI Stockholders with respect to the
Merger. There are no restrictions on the right of MGI to vote the stock of,
or any other equity interest in, any of the Subsidiaries.
Section 3.04. Authority of MGI. MGI has all requisite corporate power
and authority to execute and deliver the Operative Agreements (as hereinafter
defined) and all other documents hereby or thereby contemplated, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by it and them pursuant to the provisions
hereof and thereof. The execution, delivery and performance of, and
consummation of the transactions contemplated by, the Operative Agreements
and all other documents hereby or thereby contemplated have been duly
authorized by MGI's Board of Directors and, except for approval of this
Agreement and the transactions contemplated hereby by the holders of
outstanding MGI Shares, no other corporate proceedings on the part of MGI are
necessary to authorize the Operative Agreements and the transactions
contemplated hereby or thereby. The Operative Agreements constitute and, on
the Closing Date, the Articles of Merger and all other documents hereby
contemplated to be executed by MGI will constitute, legal, valid and binding
obligations of MGI, enforceable against it in accordance with their
respective terms. The note, dated as of even date herewith, in the principal
amount of $500,000 by MGI to Parent; the Option Agreement ("Option
Agreement"), dated as of even date herewith, between Parent and MGI; the
Pledge Agreement (the "Pledge Agreement"), dated as of even date herewith,
between Parent and MGI; and the Escrow Agreement (the "Escrow Agreement"),
dated as of even date herewith, among Parent, MGI and United States Trust
Company of New York (the "Escrow Agent"), are collectively referred to in
this Agreement as the "Operative Agreements."
Section 3.05. No Conflict; Required Filings and Consents. (a) Except
as set forth on Schedule 3.05, the execution and delivery of the Operative
Agreements by MGI do not, and the performance by MGI of its obligations
hereunder and thereunder, and the consummation by MGI of the transactions
contemplated hereby or thereby, will not, (i) violate the Articles of
Incorporation or By-laws of MGI or any similar organization document of any
of the Subsidiaries, (ii) subject to making the filings and obtaining the
approvals identified in Section 3.05(b), violate any law, rule, regulation,
order, judgment or decree applicable to MGI or any of the Subsidiaries or by
which any property or asset of MGI or any of the Subsidiaries is bound or
affected, or (iii) subject to making the filings and obtaining the approvals
identified in Section 3.05(b), result in any breach of or constitute a
default (or an event which with notice or lapse of
10
time or both would become a default) under, result in the loss of a benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of,
or result in the creation of a lien on any property or asset of MGI or any of
the Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which MGI or any of the Subsidiaries is a party or by which MGI
or any of the Subsidiaries or any property or asset of MGI or any of the
Subsidiaries is bound or affected (any such conflict, violation, breach,
default or other occurrence, a "Violation").
(b) The execution and delivery of the Operative Agreements and all
other documents contemplated hereby or thereby by MGI do not, and the
performance of the Operative Agreements and such other documents and the
consummation by MGI of the transactions contemplated hereby or thereby will
not, (i) require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency or commission or
other governmental or regulatory authority, domestic or foreign (each a
"Governmental Authority"), except as set forth in Schedule 3.05 and except
for (A) applicable requirements, if any, of the Exchange Act, (B) the
pre-merger notification requirement, if any, of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), and (c) filing and recordation of appropriate
merger and similar documents as required by Colorado; or (ii) require any
consent by or approval of (a "Contract Consent") or notice to (a "Contract
Notice") any other person or entity (other than a Governmental Authority),
under any contract or otherwise.
Section 3.06. SEC Reports. Since its incorporation, MGI has filed all
required forms, reports and documents with the SEC (the "SEC Reports")
required to be filed by it pursuant to the Federal securities laws and the
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act and the rules and
regulations promulgated thereunder. Except as set forth in Schedule 3.06
hereof, as of their respective dates of filing in final or definitive form
(or, if amended or superseded by a subsequent filing, then on the date of
such subsequent filing), none of the SEC Reports of MGI, including, without
limitation, any financial statements or schedules included therein, contained
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 in which they were made, not
misleading. Except as set forth in Schedule 3.06 hereof, the financial
statements (including the related notes) included in the SEC Reports of MGI
complied as to form in all material respects with the published rules and
regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved, except as otherwise noted
therein or, in the case of the unaudited financial statements, as permitted
by the applicable rules and regulations of the Commission and fairly
presented in all material respects in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to year-end audit
adjustments, as permitted by Rule 10-01, and any other adjustments described
therein) the consolidated financial position of MGI and its consolidated
Subsidiaries as of their respective
11
dates and the consolidated results of operations and the consolidated cash
flows of MGI and its consolidated Subsidiaries for the periods presented
therein. Except as and to the extent set forth or disclosed in the
consolidated balance sheet of MGI as of September 30, 1997 (the "Last
Balance Sheet") or as set forth on Schedule 3.06, (i) at September 30, 1997,
neither MGI nor any Subsidiary had any material liabilities, absolute,
accrued or contingent, required by GAAP to be reflected on a balance sheet of
MGI or the notes thereto, and (ii) since September 30, 1997, MGI has not
incurred any liabilities (absolute, accrued or contingent) which are required
by GAAP, to be reflected on a balance sheet of MGI and which individually or
in the aggregate, would have a MGI Material Adverse Effect, except
liabilities incurred in the ordinary course of business.
Section 3.07. Title to Property. (a) Schedule 3.07 sets forth a list
of all real property owned in fee by MGI and/or the Subsidiaries
(individually, an "Owned Property" and, collectively, the "Owned
Properties"). Except as set forth on Schedule 3.07, either MGI and/or a
Subsidiary has good and marketable fee title to each Owned Property,
including the buildings, structures and other improvements located thereon,
in each case free and clear of all mortgages, liens, claims, charges,
security interests, easements, restrictive covenants, rights-of-way, leases,
purchase agreements, options and other encumbrances and agreements ("Liens"),
except for (i) Liens for taxes and other governmental charges, assessments or
fees which are not yet due and payable and (ii) imperfections of title which,
individually or in the aggregate, do not materially detract from the value of
or materially interfere with the present use of any of the Owned Properties
(collectively, "Permitted Liens"). There are no condemnations or eminent
domain (which term, as used herein, shall include all compulsory acquisitions
or takings by Governmental Authorities) proceedings pending or, to the
knowledge of MGI and/or the Subsidiaries, threatened against any Owned
Property or any material portion thereof. Neither MGI nor the Subsidiaries
has received any notice from any city, village or other Governmental
Authority of any zoning, ordinance, land use, building, fire or health code
or other legal Violation in respect of any Owned Property, other than
violations which have been corrected. There are no material structural
defects or material defects in the heating, ventilation, air-conditioning,
mechanical and electrical systems and roofs relating to any of the
improvements at any of the other Owned Properties.
(b) Schedule 3.07 lists all the real property (including all land
and buildings) which is leased by MGI and/or any Subsidiaries as lessee or
sublessee (the "Leased Real Estate"). Except as set forth on Schedule 3.07,
either MGI and/or a Subsidiary has good and marketable leasehold title to the
land underlying each parcel of Lease Real Estate, good and marketable fee or
leasehold title to the buildings, structures and other improvements located
thereon, in each case free and clear of (i) all Liens, except for Permitted
Liens, and (ii) any right of the landlord for each such parcel (a "Landlord")
to terminate the lease for each such parcel in the absence of a default of
the tenant thereunder. With respect to those parcels of Leased Real Estate
in respect of which a landlord has such right of termination, a copy of the
lease provision giving rise to such right is included in Schedule 3.07. MGI
has delivered or caused to be delivered to Parent and Acquisition accurate
copies of all of the written leases and subleases, and any and all amendments
and modifications thereto, which MGI or any of the Subsidiaries is a party.
All such leases, subleases and amendments, and the Leased Real Estate which
each covers, are listed in Schedule 3.07. Neither MGI nor any of the
Subsidiaries has received written notice of condemnation or eminent domain
proceedings pending or threatened against any Leased Real Estate. Neither
MGI nor any of the Subsidiaries has received any notice from any city,
village or other Governmental Authority of any zoning, ordinance, building,
fire or health code or other legal Violation in respect of any Leased Real
Estate, other than violations which have been corrected. There are no
material structural defects or material defects in the heating, ventilation,
air-conditioning, mechanical and electrical systems and roofs relating to any
Leased Real Estate. Except as set forth on Schedule 3.07: (i) each of the
leases or subleases relating to the Leased Real Estate (each, a "Lease" and
collectively, the "Leases") is in full force and effect and, to the knowledge
of MGI, valid and binding on the lessor or sublessor and enforceable in
accordance with its terms; (ii) no amount payable under any Lease is past
due; (iii) neither MGI nor any Subsidiary has received any written notice (A)
of a default (which has not been cured), offset or counterclaim under any
Lease, or any other communication calling upon MGI and/or the applicable
Subsidiary to comply with any provision of any Lease or asserting
noncompliance, or
12
asserting MGI and/or the applicable Subsidiary has waived or altered its
rights thereunder, and no event or condition has happened or presently exists
which constitutes a default or, after notice or lapse of time or both, would
constitute a default under any Lease on the part of MGI and/or the
Subsidiaries or any other party thereto, or (B) of any action against any
party under any Lease which if adversely determined would result in such
Lease being terminated or modified in a manner adverse to MGI and/or the
applicable Subsidiary; (iv) neither MGI nor any Subsidiary has assigned,
mortgaged, pledged or otherwise encumbered its interest, if any, under any
Lease; and (v) MGI and/or the applicable Subsidiary has exercised within the
time prescribed in each Lease any option provided therein to extend or renew
the term thereof.
(c) The Owned Properties and the Leased Real Estate constitute, in
the aggregate, all of the real property used to conduct the business of MGI
in the manner in which such business was conducted during the 12-month period
ended December 23, 1997 and since such time. Except as set forth in Schedule
3.07, no consent is required of any party to any of the Leases by virtue of
the Merger, and the Merger will not result in the termination of any Lease.
None of the Leased Real Estate is owned, in whole or in part, by any
director, officer or stockholder of MGI or any of the Subsidiaries, by any
affiliate thereof or by any entity created for the benefit of any family
member(s) of any of the foregoing persons.
(d) Except as disclosed on Schedule 3.07, MGI and/or the
Subsidiaries has good and valid title to all tangible personal property which
it owns or uses in the operation of its business, including all such tangible
personal property reflected in the Last Balance Sheet as owned by MGI and/or
the Subsidiaries, except for such tangible personal property disposed of to
third parties since the date of the Last Balance Sheet in the ordinary course
of business and consistent with past practices, in each case free and clear
of all Liens, except (i) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlord's or other like Liens securing
obligations that are not delinquent; (ii) Liens for taxes and other
governmental charges which are not due and payable or which may be paid
without penalty; (iii) purchase money liens securing the purchase price of
the related personal property listed as purchase money liens on Schedule
3.07; and (iv) other Liens, if any, set forth in Schedule 3.07. With respect
to those Liens which are mortgages or deeds of trust, MGI has delivered, or
caused to be delivered, to Parent accurate copies of such mortgages and deeds
of trust, and any and all amendments and modifications thereto. All such
documents, and the Owned Properties and Leased Real Estate which each
encumbers, are listed on Schedule 3.07. Except as set forth in Schedule
3.07, no consent is required of any Mortgage Lender (as hereinafter defined)
by virtue of any "change of control" provisions in any pertinent agreement or
document. Except as set forth in Schedule 3.07, none of the tangible
personal property which is used in the business by MGI is leased by MGI. The
tangible personal property owned or used in the operation of the business of
MGI is in good working order, reasonable wear and tear excepted, and is
suitable for the use for which it is intended in all material respects.
(e) The tangible personal property of MGI which is currently owned
or leased by it is, in the aggregate, all of the tangible personal property
used to conduct such business in the manner in which such business was
conducted during the 12-month period ended December 23, 1997 and since such
time there have been no changes in such property, except for additions
13
thereto and deletions therefrom in the ordinary course of business and
consistent with past practice which could not reasonably be expected to have
a MGI Material Adverse Effect.
Section 3.08. Compliance with Law. (a) Except as set forth in
Schedule 3.08, each of MGI and the Subsidiaries has complied with all Laws
(as hereinafter defined) applicable to MGI or any of the Subsidiaries or to
the Owned Real Estate or to the Leased Real Estate, except in those instances
were the failure to so comply would not individually or in the aggregate have
an MGI Material Adverse Effect. Each of MGI and the Subsidiaries has
maintained in full force and effect and is in compliance with, all licenses,
permits, variances, exemptions, orders, franchises, approvals and consents
for the lawful conduct of its business, except in those instances where the
failure to so comply would not individually or in the aggregate have a MGI
Material Adverse Effect. No violation exists (and no event has occurred
which, with notice or lapse of time or both would constitute a violation) of
any term, condition or provision of the Articles of Incorporation or By-laws
of MGI or of any similar organization document of any Subsidiaries. No
claims or investigations by any Governmental Authority alleging any violation
by MGI of any such Laws have at any time been made or settled during the last
two years.
(b) Neither MGI nor any of the Subsidiaries has, nor, to the best
of MGI's and the Subsidiaries' knowledge, has any director, officer, agent of
employee thereof: (i) made or agreed to make any contributions, payments or
gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment
or gift was or is illegal under the laws of the United States, any state
thereof or any other jurisdiction (foreign or domestic); (ii) established or
maintained any unrecorded fund or asset for any purpose, or made any false or
artificial entries on any of its books or records for any reason; (iii) made
or agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person or entity, to candidates for public
office whether Federal, state, local or foreign, where such contributions
were or would be violative of applicable law; or (iv) otherwise violated the
Federal Corrupt Practices Act of 1977, as amended.
(c) For purposes of this Agreement, "Law" shall mean the common
law and any statute, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority or court.
Section 3.09. Litigation. Except as set forth in Schedule 3.09 or in
the SEC Reports:
(a) there is no claim, suit, action, proceeding, audit or
investigation pending or, to the best of MGI's knowledge, threatened against,
involving or affecting MGI or any of the Subsidiaries, the officers and
directors of MGI or any of the Subsidiaries in such capacities or any of the
properties or rights of MGI or any of the Subsidiaries seeking equitable
relief or claiming monetary damages, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against MGI or any of the
Subsidiaries or the officers and directors of MGI or any of the Subsidiaries
in such capacities which seeks to or would likely (i) result in the
modification or any termination or suspension of any contract to which MGI or
any of the Subsidiaries is a party; (ii)
14
affect the manner in which MGI and the Subsidiaries conduct their business;
or (iii) affect the ability of MGI, Parent or Acquisition to consummate the
transactions contemplated hereby;
(b) neither MGI nor any of the Subsidiaries has been charged with
or, to the best of MGI's knowledge, threatened with a charge of any violation
of, or, to the best of MGI's knowledge, is under investigation with respect
to a possible violation of, any provision of any Federal, state or local law
or administrative ruling or regulation relating to its business;
(c) neither MGI nor any of the Subsidiaries has received any
written notice of any pending or threatened action or proceeding, in any
court, before any arbitrator or arbitration tribunal or before or by any
Governmental Authority which if adversely determined would have a MGI
Material Adverse Effect, nor to the best knowledge of MGI or the
Subsidiaries, has any officer, director or employee of MGI or any of the
Subsidiaries been served, within the 12-month period prior to the date
hereof, with a subpoena to testify before a Governmental Authority with
regard to a governmental investigation or governmental proceeding with
respect to matters relating to the business, operations or activities of MGI
or any of the Subsidiaries; and
(d) neither MGI nor any of the Subsidiaries is in default under or
with respect to any judgment, writ, injunction, order or decree of any court,
any arbitrator or arbitration tribunal or any Governmental Authority against
MGI or any of the Subsidiaries or any of MGI's or any of the Subsidiaries'
assets.
Section 3.10. Taxes. (a) Each of MGI and the Subsidiaries has timely
and duly filed, or will timely or duly file (giving effect to extensions duly
taken), all Federal, state, local or foreign income tax returns or reports
(including, without limitation, information returns) ("Tax Returns") and
other material Tax Returns and reports required to be filed by, or with
respect to, MGI or any of the Subsidiaries on or prior to the Closing Date.
All such Tax Returns are, or will be, correct and complete in all material
respects. MGI's federal income tax returns have not been audited. Complete
and accurate copies of the Federal, state and local Tax Returns for MGI and
the Subsidiaries for the years 1996, 1995 and 1994 have been made available
to Parent.
(b) Each of MGI and the Subsidiaries has paid or will pay all
taxes, charges, fees, levies or other assessments of any nature whatsoever
(including, without limitation, all Federal, state, local and foreign income
taxes, alternative or add-on minimum taxes, withholding taxes, estimated
taxes, excise taxes, sales taxes, use taxes, transfer taxes, gross receipt
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net
income), together with any related penalties, interest and additions to taxes
(any of the foregoing being referred to herein as a "Tax") required to be
paid by it. All Taxes not yet due but incurred on or before the Closing Date
(other than Taxes, if any, arising out of the transactions hereby
contemplated) are adequately disclosed and fully provided for (in accordance
with GAAP) on the books and records and the financial statements of MGI or
the Subsidiaries. Except as set forth on Schedule 3.10, each of MGI and the
Subsidiaries has fully collected, withheld and/or paid over all Taxes
required to be collected, withheld and/or paid over for material sales taxes,
wages or otherwise to a taxing authority.
15
(c) Except as set forth in Schedule 3.10, neither MGI nor any of
the Subsidiaries is currently being audited by any taxing authority with
respect to the returns and reports and there are no claims or assessments
proposed or assessed by any taxing or other Governmental Authority against
MGI or any of the Subsidiaries. Except as set forth in Schedule 3.10,
neither MGI nor any of the Subsidiaries has agreed to waive or extend the
statute of limitations with respect to any Taxes or tax returns or has filed
any consent under Section 341(f) of the Code (or any corresponding provision
of state, local or foreign tax law). Except as set forth on Schedule 3.10,
neither MGI nor any of the Subsidiaries is liable for the Taxes of any other
Person or entity or is a party to any agreement providing for the allocation
or sharing of any Taxes and neither has a contractual obligation to indemnify
any other individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Authority or other Person with
respect to any Taxes. No written claim has been made in the last five years
by a taxing authority in a jurisdiction in which MGI or any of the
Subsidiaries does not presently file tax returns that MGI or any of the
Subsidiaries is or may be subject to taxation by that jurisdiction. True and
complete copies of all tax returns and reports filed by MGI or any of the
Subsidiaries have been made available to Parent and Acquisition. Except as
set forth in Schedule 3.10, neither MGI nor any of the Subsidiaries is
contesting any of the property taxes or assessments with respect to the Owned
Properties or Leased Real Estate. True and complete copies of any closing
agreements with respect to MGI or any of the Subsidiaries which were entered
into with the Internal Revenue Service or any other taxing authority in the
last five years have heretofore been furnished to Parent and Acquisition.
(d) Neither MGI nor any of the Subsidiaries has agreed to make
any material adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision).
(e) Neither MGI nor any of the Subsidiaries has made any payment,
is obligated to make any payment, or is a party to an agreement that could
obligate it to make any payments that are subject to Code Section 280G or are
not (or will not be) deductible under Section 162 of the Code.
(f) Neither MGI nor any of the Subsidiaries has engaged in, or is
a party to any transaction that is characterized as, or subject to the
deferred intercompany transactions rules as set forth in Treas. Regs. Section
1.1502-13.
(g) No Powers of Attorney have been executed by MGI or the
Subsidiaries with respect to tax matters which are currently in force.
(h) MGI is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code.
Section 3.11. Insurance. (a) Each of MGI and the Subsidiaries has
insurance coverage for the assets and operations of the business of MGI and
the Subsidiaries which it believes is adequate. All policies of insurance
carried by MGI or any of the Subsidiaries or pursuant to which MGI or any of
the Subsidiaries is a named beneficiary or pursuant to which the business or
properties of MGI and the Subsidiaries are insured are in full force and
effect; all premiums due
16
and payable in respect of such policies have been paid in full; and there
exists no material default or other circumstance which would create the
substantial likelihood of the cancellation or non-renewal of any such policy;
provided, however, each such representation with respect to policies
maintained by others for MGI's benefit is limited to the best of MGI's
knowledge. MGI or a Subsidiary has notified such insurers of any material
claim known to MGI or any of the Subsidiaries which it believes is covered by
any such insurance policy.
(b) All policies or binders of fire, liability, workmen's
compensation, vehicular or other insurance held by or on behalf of MGI and/or
the Subsidiaries insure against risks and liabilities customary for companies
of similar size, financial condition and engaged in the business in which MGI
is engaged. As of the date that MGI delivers the list of policies and
binders referred to Section 5.15, except for claims set forth on Schedule
3.11 (which schedule shall be delivered by MGI with such list of policies and
binders), there are no outstanding unpaid claims under any such policy or
binder, and neither MGI nor the Subsidiaries has been advised of any defense
to coverage in connection with any claim to coverage asserted or noticed by
MGI and/or the Subsidiaries under or in connection with any of its extant
insurance policies. Neither MGI nor the Subsidiaries has received any written
notice from or on behalf of any insurance carrier issuing policies or binders
relating to or covering MGI and/or the Subsidiaries that there will be a
cancellation or non-renewal of existing policies or binders, or that
alteration of any equipment or assets or any improvements to real estate
occupied by or leased to or by MGI and/or the Subsidiaries, purchase of
additional equipment or assets, or material modification of any of the
methods of doing business, will be required.
Section 3.12. Material Contracts; Debt Instruments. (a) Except as set
forth in Schedule 3.12, neither MGI nor any of the Subsidiaries is a party to
any of the following (collectively, "Material Contracts"):
(i) any collective bargaining or other agreement with labor
unions, trade unions, employee representatives, work committees, guilds or
associations representing employees of either MGI or any of the Subsidiaries;
(ii) any employment, consulting, severance, termination, or
indemnification agreement, contract or arrangement, written or oral, with any
current or former officer, consultant, director or employee which (x)
provides for payments in excess of $25,000 per annum or (y) requires
aggregate payments over the life of such agreement, contract or arrangement
in excess of $50,000, which in any case is not terminable by MGI and/or any
Subsidiary on 30 days' notice or less without penalty or obligation to make
payments related to or after such termination;
(iii) any joint venture contract or arrangement or any
other agreement which has involved or is expected to involve a sharing of
revenues with other persons or entities;
(iv) any management agreement, lease or other significant
agreement or arrangement between MGI and/or any of the Subsidiaries and any
entity for whom MGI and/or any of the Subsidiaries provides concession
services;
17
(v) any lease for real or personal property in which the
amount of payments which MGI and/or any of the Subsidiaries is required to
make, or is expected to receive, on an annual basis exceeds $10,000;
(vi) any material agreement, contract, policy, license,
document, instrument, arrangement or commitment which has not been terminated
or performed in its entirety and which may be, by its terms, terminated,
impaired or adversely affected by reason of the execution of the Operative
Agreements, the closing of the Merger, or the consummation of the other
transactions contemplated hereby or thereby;
(vii) any agreement, contract, policy, license, document,
instrument or additional advance arrangement or commitment that materially
limits the freedom of MGI and/or any of the Subsidiaries to compete in any
line of business or with any person or entity or in any geographic area or
which would so materially limit the freedom of the Surviving Corporation or
Parent or any of Parent's subsidiaries after the Effective Time;
(viii) any agreement or contract relating to any
outstanding commitment for capital expenditures in excess of $10,000
individually or $25,000 in the aggregate, or any partially or fully executory
agreement or contract relating to the acquisition or disposition of rights or
assets having a value of in excess of $10,000 individually or $25,000 in the
aggregate;
(ix) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee or take-or-pay contract or agreement; or
(x) any other agreement, contract, policy, license, document,
instrument arrangement or commitment not made in the ordinary course of
business which is material to MGI and/or any of the Subsidiaries.
(b) Set forth in Schedule 3.12 is (x) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of MGI or any Subsidiary is
outstanding or may be incurred (collectively, "Loan Agreements") and (y) the
respective principal amounts outstanding thereunder as of the dates specified
in Schedule 3.12. Since September 30, 1997, none of MGI and the Subsidiaries
has made any drawings under or with respect to the loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements referred to in
clause (x) above. Except as set forth in Schedule 3.12, all such
indebtedness is prepayable at any time without penalty, subject to the notice
provisions of the agreements governing such indebtedness. For purposes of
this Section 3.12 "indebtedness" shall mean, without duplication, (A) all
obligations for borrowed money, or with respect to deposits or advances of
any kind, (B) all obligations evidenced by bonds, debentures, notes or
similar instruments, (C) all obligations upon which interest charges are
customarily paid, (D) all obligations under conditional sale or other title
retention agreements relating to purchased property, (E) all obligations
issued or assumed as the deferred purchase price of property or services
(excluding obligations to creditors for inventory, services and supplies
incurred in the ordinary course of business), (F) all capitalized lease
obligations, (G) all obligations of others secured by any Lien on property or
assets owned or acquired, whether or not
18
the obligations secured thereby have been assumed, (H) all obligations under
interest rate or currency swap transactions (valued at the termination value
thereof), (I) all letters of credit issued for the account of MGI and/or any
of the Subsidiaries (excluding letters of credit issued for the benefit of
suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations to purchase securities (or other
property) which arise out of or in connection with the sale of the same or
substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of any indebtedness of
any other person or entity.
(c) Except as set forth in Schedule 3.12, as of the date hereof
each of the Material Contracts and Loan Agreements is in full force and
effect and is a valid and binding obligation of MGI and/or a Subsidiary and,
to the knowledge of MGI, the other parties thereto. Except as set forth in
Schedule 3.12, neither MGI nor any of the Subsidiaries is in either payment
default or material non-payment default under any Material Contract or Loan
Agreement, nor does any condition exist that with notice or lapse of time or
both would constitute a material default thereunder. To the knowledge of
MGI, no other party to any Material Contract or Loan Agreement is in default
thereunder. Neither MGI nor any Subsidiary has any reason to believe that
any of the Material Contracts or Loan Agreements that are renewable will not
be renewed on reasonable terms, nor does MGI and/or any Subsidiary know of
any expressed desire or intent, on the part of any other party to any of the
Material Contracts or Loan Agreements, to materially reduce or terminate the
amount of its business with MGI and/or the Subsidiaries in the future.
Except as set forth in Schedule 3.12, no consent is required of any party to
any of the Material Contracts or any of the Loan Agreements by virtue of the
Merger, and the Merger will not result in the termination of any Material
Contract or Loan Agreement.
Section 3.13. Employment Agreements. Schedule 3.13 contains a complete
list of each management, employment, consulting or other agreement, contract
or commitment, in each case, in writing, between MGI or any of the
Subsidiaries and any employee, officer or director thereof (a) providing for
the employment of any person or providing for retention of management,
executive or consulting services and providing for an obligation to pay or
accrue compensation of $50,000 or more per annum, or (b) providing for the
payment or accrual of any compensation or severance upon (i) a change in
control of MGI or any of the Subsidiaries or (ii) any termination of such
management, employment, consulting or other relationship.
Section 3.14. Intellectual Property. Schedule 3.14 is a list of all
trademarks, trade names, patents, fictitious business names, service marks
and pending applications therefor that are owned by MGI or the Subsidiaries
and a list of all trademarks, trade names, patents, fictitious business
names, service marks and pending applications therefor that are used by MGI
or the Subsidiaries or which MGI or the Subsidiaries have the right to use.
The trademarks, trade names, patents, fictitious business names, service
marks and pending applications appearing in Schedule 3.14, together with any
other trademarks, trade names, patents, fictitious business names and service
marks owned or used by MGI or the Subsidiaries, are collectively herein
referred to as the "Proprietary Rights". Except as disclosed in Schedule
3.14, to the best of MGI's knowledge, in the last five years, no written
claim alleging any infringement or violation
19
of any statutory or common law or any other rights of any third parties
(including, without limitation, copyright, trademark and the rights of
privacy and publicity) has been received by MGI or any of the Subsidiaries.
Section 3.15. Employees and Related Agreements: ERISA. (a) Schedule
3.15 sets forth each Plan (as hereinafter defined) which MGI or any of the
Subsidiaries or any ERISA Affiliate (as hereinafter defined) maintains or
contributes to, or has any obligation to contribute to, or during the six
year period ending on the date hereof, maintained, contributed to, or had any
obligation to contribute to, and each Plan as to which MGI or any of the
Subsidiaries has any material liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or
similar agreement) or obligation. Except as set forth in Schedule 3.15, none
of these Plans is a Single Employer Defined Benefit Plan (as hereinafter
defined), a Multiemployer Plan (as hereinafter defined) or a severance pay
plan.
(b) No event has occurred with respect to a Plan (other than a
Multiemployer Plan) in connection with which MGI or any of the Subsidiaries
or any Plan identified in Schedule 3.15 or any "plan administrator" (as
defined in section 3(16) of ERISA) thereof, directly or indirectly, is or, to
the best of MGI's knowledge, could be subject to liability, other than for
routine claims for benefits, contingent or otherwise, or any lien, whether or
not perfected, under the terms of any Plan or under ERISA, the Code or any
other law, regulation or governmental order applicable to any Plan at any
time maintained or contributed to by MGI or any of the Subsidiaries or by any
ERISA Affiliate or under any agreement, instrument, statute, rule of law or
regulation pursuant to or under which MGI or any of the Subsidiaries has
agreed to indemnify or is required to indemnify any person against liability
incurred under, or for a violation or failure to satisfy the requirements of,
any such statute, regulation or order.
(c) Except as set forth in Schedule 3.15, all payments and
contributions due from MGI or any of the Subsidiaries under each Plan
identified in said Schedule 3.15 with respect to all prior periods have been
made or properly recorded on the books of MGI or the Subsidiaries.
(d) Except as set forth in Schedule 3.15, and except for any
Multiemployer Plan, no "employee welfare benefit plan" as defined in section
3(1) of ERISA or "multiple employer welfare arrangement" as defined in
section 3(40) of ERISA provides benefits, including, without limitation,
death or medical benefits (whether or not insured) with respect to any
current or former employee of MGI or any of the Subsidiaries beyond his or
her retirement or other termination of service other than (i) coverage
mandated by applicable law or (ii) disability benefits that have been fully
provided for by insurance or otherwise.
(e) Except as set forth in Schedule 3.15, the transactions
contemplated by this Agreement will not result in any payment or series of
payments by the Surviving Corporation under any Plan established by MGI or
any of the Subsidiaries to any Person of a parachute payment within the
meaning of section 280G of the Code.
20
(f) Except as set forth in Schedule 3.15, the consummation of the
transactions contemplated by the Operative Agreements will not (i) entitle
any employee or former employee of MGI or any of the Subsidiaries to
severance pay, unemployment compensation or any other payment except as
expressly provided in this Agreement or (ii) result in any prohibited
transaction described in section 406 of ERISA or section 4975 of the Code for
which an exemption is not available.
(g) There has been delivered to Parent and Acquisition with
respect to each Plan identified in Schedule 3.15 other than a Multiemployer
Plan:
(1) A copy of the annual report (with accompanying schedules and
exhibits), if required under ERISA, which has been filed with respect
to such Plan for the two most recently completed plan years. The
information contained in such report (including such schedules and
exhibits) is true and complete in all material respects.
(2) A copy of the most recent summary plan description, together
with each Summary of Material Modifications with respect thereto,
required under ERISA with respect to such Plan, and a true and
complete copy of such Plan;
(3) If such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding vehicle and the
latest financial statements thereof;
(4) The most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
qualify under section 401 of the Code;
(5) A copy of the actuarial report, if any, with respect to each
such Plan for the last two years. The information contained therein,
and the information furnished by the administrator of such Plan or by
MGI or any of the Subsidiaries or by any ERISA Affiliate in connection
with the preparation thereof, is true and complete in all material
respects; and
(6) A copy of each Plan, including all amendments thereto, or in
the cases where there is no formal Plan document, a description of
each such Plan.
(h) Neither MGI nor any of the Subsidiaries nor any ERISA Affiliate
has made any agreement, understanding or promise, whether written or oral, to
create, establish, sponsor, maintain or contribute, directly or indirectly, to
or under any additional Plan for the benefit of current or former employees of
MGI or any of the Subsidiaries nor, except as set forth in Schedule 3.15, to
amend or modify any existing Plan identified in Schedule 3.15 in any manner not
reflected in the plan documents of such Plan delivered to Parent and
Acquisition.
21
(i) Except as set forth in Schedule 3.15, neither MGI nor any of
the Subsidiaries is a party to any collective bargaining agreements, whether
or not expired. MGI does not know of any activities or proceedings of any
labor organization (or representative thereof) to organize any unorganized
employees of MGI or any of the Subsidiaries. A copy of each such collective
bargaining agreement has been delivered to Parent and Acquisition.
(j) Neither MGI nor any of the Subsidiaries has violated any
provision of Federal or state law or any governmental rule or regulation, or
any order, ruling, decree, judgment or arbitration award of any court,
arbitrator or any government agency regarding the terms and conditions of
employment of employees or former employees or, without limitation, laws,
rules, regulations, orders, rulings, decrees, judgments and awards relating
to discrimination (including, without limitation, discrimination on the basis
of age, sex, race or religion), fair labor standards and occupational health
and safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees or state temporary
disability laws, rules or regulations.
(k) There is and, for two years prior to the date hereof there has
been, no material unfair labor practice, charge or complaint pending or, to
the best of MGI's knowledge, threatened against MGI or any of the
Subsidiaries before the National Labor Relations Board or any State Labor
Relations Board. There are and, for two years prior to the date hereof, there
have been no material claims of discrimination of any kind pending or, to the
best of MGI's knowledge, threatened against MGI or any of the Subsidiaries
before any Governmental Authority. Neither MGI nor any of the Subsidiaries
has any liability to any or all of its employees under or arising as a result
of the Worker Adjustment and Retraining Act.
(l) Other than matters affecting generally the industries in which
MGI or a Subsidiary is engaged, there is, and for one year prior to the date
hereof there has been, no labor strike, work stoppage or lockout, or material
dispute, slowdown, disturbance, grievance or claim pending or, to the best of
MGI's knowledge, threatened against MGI or any of the Subsidiaries.
(m) Other than with respect to a Multiemployer Plan, each Plan to
which MGI or any of the Subsidiaries contributes or has any obligation to
contribute and which is intended to be qualified under section 401 of the
Code, has received a favorable determination letter from the Internal Revenue
Service with respect to such qualification and with respect to the exemption
from tax of the trusts created thereunder under section 501(a) of the Code,
and, to the best of MGI's knowledge, nothing has occurred that has affected
or is likely adversely to affect such qualification or exemption since the
date of such letter with respect to each Plan.
(n) Except as set forth in Schedule 3.15, with respect to each
Plan other than a Multiemployer Plan, all reports and other information
required under ERISA or any other applicable law or regulation to be filed in
respect of any Plan by the administrator thereof or by MGI or any of the
Subsidiaries on or prior to the date hereof with the relevant governmental
authority and/or distributed or made available to any Plan participant and
beneficiary (including "alternate payees," as such term is defined in section
206(d)(3)(K) of ERISA), as the case may be, have been filed, distributed or
made available in accordance with ERISA or such other
22
applicable law or regulation, as the case may be, and all such reports and
other information are true and complete in all material respects as of the
date given.
(o) Except as set forth in Schedule 3.15, other than with respect
to a Multiemployer Plan, neither MGI nor any of the Subsidiaries has entered
into any agreement, written or otherwise, relating to any Plan providing
medical benefits obligating MGI or any of the Subsidiaries or its successor
in interest to make any supplemental or retrospective premium payments for
the current or any prior contract period in the event of adverse experience,
termination of the minimum premium arrangement or termination of an insurance
contract relating to such Plan. To the extent reasonably available to MGI, a
disclosure of the attendant costs is set forth in Schedule 3.15.
(p) With respect to each Multiemployer Plan identified in Schedule
3.15 which is subject to the provisions of Subtitle B of Title IV of ERISA,
(i) none of MGI, any of the Subsidiaries or any ERISA Affiliate has received
any notice of any claim or demand for complete or partial withdrawal
liability under ERISA sections 4201 et seq. except as attached to Schedule
3.15; (ii) none of MGI, any of the Subsidiaries or any ERISA Affiliate has
received any notice that such Multiemployer Plan is in "reorganization"
(within the meaning of section 4241 of ERISA), that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of an
excise tax, or that the Multiemployer Plan is or may become "insolvent"
(within the meaning of section 4245 of ERISA) except as attached to Schedule
3.15; (iii) except as set forth in Schedule 3.15, to the best of MGI's
knowledge, none of MGI, any of the Subsidiaries nor any ERISA Affiliate has
incurred any withdrawal liability not set forth in Schedule 3.15; and (iv)
MGI, the Subsidiaries and each ERISA Affiliate have timely made all required
contributions or payments to each Multiemployer Plan or such contributions or
payments will be made prior to the Closing.
(q) With respect to each Single Employer Defined Benefit Plan
identified in Schedule 3.15, (i) except with respect to the transactions
contemplated by this Agreement, there has not occurred any "reportable event"
within the meaning of section 4043(b) of ERISA or the regulations thereunder
with respect to which the 30 day notice requirement has not been waived under
applicable regulations, (ii) there exists no ground upon which the PBGC (as
hereinafter defined) could demand termination of any Single Employer Defined
Benefit Plan or appointment of itself or its nominee as trustee thereunder,
(iii) there has been no notice given of intent to terminate any Single
Employer Defined Benefit Plan under section 4041 of ERISA, (iv) there has not
been any proceeding instituted under section 4042 of ERISA to terminate any
Single Employer Defined Benefit Plan, and (v) there has been no termination,
or except as set forth in Schedule 3.15, a partial termination of any Single
Employer Defined Benefit Plan within the meaning of section 411(d)(3) of the
Code. The PBGC has not instituted or, to the best of MGI's knowledge,
threatened a proceeding to terminate any Single Employer Defined Benefit
Plan. All PBGC premiums due on or before the Closing with respect to each
Single Employer Defined Benefit Plan have been, or prior to the Closing will
be, paid in full, including late fees, interest and penalties, if and to the
extent applicable.
23
(r) No funding waiver from the Internal Revenue Service has been
requested or received with respect to any Single Employer Defined Benefit
Plan identified in Schedule 3.15, and no extension of the amortization period
within the meaning of section 412 of the Code or section 302 of ERISA has
been applied for.
(s) Neither MGI, the Subsidiaries nor any ERISA Affiliate has
engaged in any transaction described under section 4069 of ERISA nor has any
lien been imposed with respect to an amount on any such persons or their
assets under section 4068 of ERISA.
(t) With respect to any Single Employer Defined Benefit Plan, any
significant reduction in the rate of future benefit accrual was preceded by
an adequate and appropriate notice to the parties described in and as
required by section 204(h) of ERISA.
(u) Concerning any Single Employer Defined Benefit Plan maintained
by MGI or any ERISA Affiliate (i) since January 1, 1991, there has been no
cessation of operations at a facility so as to become subject to the
provisions of sections 4062(e) of ERISA, (ii) since January 1, 1991, there
has been no withdrawal of a substantial employer from any Single Employer
Defined Benefit Plan so as to become subject to the provisions of section
4063 of ERISA.
(v) For the purposes of this Agreement:
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute thereto and all final or
temporary regulations promulgated thereunder and generally applicable
published rulings entitled to precedential effect.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated)
under common control and all other entities which, together with MGI, are
treated as a single employer under any or all of sections 414(b) or (c) of
the Code on either the date of this Agreement or the Closing Date.
"Multiemployer Plan" means a "Multi-employer plan" as defined in
section 3(37) or section 4001(a)(3) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any person
succeeding to the functions thereof.
"Single Employer Defined Benefit Plan" means a plan subject to
Subtitle B of Title IV of ERISA which is not a Multi-employer Plan.
"Plan" means any plan, program, arrangement, agreement or
commitment which is a pension, profit sharing, savings, thrift or other
retirement plan, life, health, accident or disability insurance plan
(including without limitation any "employee benefit plan as defined in
section 3(3) of ERISA), deferred compensation, stock purchase, stock option,
performance share,
24
bonus or other executive plan or severance pay plan, policy or procedure, or
vacation or other employee benefit plan, program arrangement, agreement or
commitment.
Section 3.16. Absence of Certain Changes or Events. Since September
30, 1997, except as disclosed in Schedule 3.16, MGI and the Subsidiaries have
conducted their business, in all material respects, in the ordinary course
and in a manner consistent with past practice (except in connection with the
negotiation and execution and delivery of this Agreement), and since
September 30, 1997, except as disclosed in Schedule 3.16, and except as
permitted in this Agreement, there has not been (i) any event or events
(whether or not covered by insurance), individually or in the aggregate,
having a MGI Material Adverse Effect, (ii) any material change by MGI in its
accounting methods, principles or practices, (iii) any entry by MGI or any
Subsidiary into any commitment or transaction material to MGI or such
Subsidiary, except in the ordinary course of business and consistent with
past practice or except in connection with the negotiation and execution and
delivery of this Agreement, (iv) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of MGI or any
redemption, purchases or other acquisition of any of MGI's or the
Subsidiaries' securities (except for cash dividends paid to MGI by its
wholly-owned Subsidiaries with regard to their capital stock), (v) other than
pursuant to the Plans or as required by law, any increase in, amendment to,
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan (other than a Multi-employer plan), (vi) granted any
general increase in compensation, bonus or other benefits payable to the
employees of MGI or the Subsidiaries, except for increases occurring in the
ordinary course of business in accordance with its customary practice, (vii)
paid any bonus to the employees of MGI or the Subsidiaries except for bonuses
accrued on MGI's unaudited balance sheet for the quarter ended September 30,
1997, (viii) any incurrence of indebtedness for borrowed money or assumption
or guarantee of indebtedness for borrowed money by MGI or any of the
Subsidiaries (other than loans from MGI to any wholly-owned Subsidiary or
from any wholly-owned Subsidiary to MGI or any other wholly-owned
Subsidiary), or the grant of any Lien on the material assets of MGI or the
Subsidiaries to secure indebtedness for borrowed money except, in any such
case, any drawdowns by MGI under its revolving credit facility consistent
with past practice, (ix) any sale or transfer of any material assets of MGI
or the Subsidiaries other than in the ordinary course of business and
consistent with past practice, (x) any loan, advance or capital contribution
to or investment in any person in an aggregate amount in excess of $100,000
by MGI or any Subsidiary (excluding any loan, advance or capital contribution
to, or investment in, MGI or any wholly-owned Subsidiary); or (xi) entered
into any contractual arrangement or understanding (written or oral, express
or implied) to do any of the foregoing.
Section 3.17. Finder's Fee. Neither MGI nor any of the Subsidiaries
has incurred any liability for finder's or brokerage fees or commissions in
connection with this Agreement or the transactions hereby contemplated,
except for fees owed Prime Charter Ltd.
Section 3.18. Environmental Matters. (a) Except as set forth in
Schedule 3.18, MGI and the Subsidiaries have obtained or caused to be
obtained and continue to maintain and will continue to maintain up to the
Closing Date, or cause the maintenance of permits, licenses,
25
consents and approvals necessary (the "Environmental Approvals") for
conducting the business of MGI and the Subsidiaries which are required under
Environmental Laws (as hereinafter defined), and neither MGI nor any of the
Subsidiaries has operated in violation of any Environmental Law or the terms
of any Environmental Approval. To the best of MGI's knowledge, the
operations of MGI and each of the Subsidiaries, as of the date of
consummation of the Offer, will be in compliance in all respects with all
Environmental Laws.
(b) Except as set forth in Schedule 3.18:
(i) neither MGI nor any of the Subsidiaries has used, stored,
generated, discharged, emitted, transported, disposed of or treated
Hazardous Substances (as hereinafter defined) except in a manner which
complies with the applicable Environmental Laws and Environmental
Approvals and to the best of knowledge of MGI and each of the
Subsidiaries, there are no Hazardous Substances present in, on or
under any Owned Real Property owned by MGI or any of the Subsidiaries
or any real property leased or managed by MGI or any of the
Subsidiaries, the nature, amount or concentration of which would
reasonably be expected to result in any Federal, state or local
environmental protection agency undertaking or requiring the removal
or Remediation (as defined below) of such Hazardous Substances if such
agency were aware of the presence of such Hazardous Substances.
(ii) to the best of MGI's knowledge, no prior owner, occupant,
tenant or user of any facility which is now or has heretofore been
owned or used by MGI or any of the Subsidiaries (a "Facility") has
ever used, stored, generated, discharged, emitted, transported,
disposed of or treated Hazardous Substances at, on or from any
Facility except in a manner which complies with all Environmental Laws
and Environmental Approvals;
(iii) there is not, and there has not been, any Environmental
Condition (as defined herein) or release or threat of release (as
those terms are defined in Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
section 9601 et seq.) ("CERCLA")) of Hazardous Substances at, on or
from any Facility;
(iv) to the best knowledge of MGI and each of the Subsidiaries,
there is not now nor has there ever been, on or in any Owned Real
Property or real property leased by MGI or any of the Subsidiaries,
any underground storage tanks or surface impoundments containing
Hazardous Substances; and
(v) MGI has furnished Parent with copies of the environmental
reports and assessments that MGI has commissioned or been provided
with in respect to the Owned Properties and Leased Real Estate set
forth on Schedule 3.18, and shall promptly furnish Parent with all
other such reports and assessments in its possession.
26
(c) Except as set forth in Schedule 3.18, neither MGI nor any of the
Subsidiaries has received notice of any pending or threatened investigation,
claim, enforcement proceeding, cleanup order, citizen suit or other action
instituted by any private party, employee or Governmental Authority under any
Environmental Laws arising out of the conduct or the operations of MGI or any of
the Subsidiaries or as a result of any Environmental Condition at any Facility.
Neither MGI nor any of the Subsidiaries is subject to any outstanding written
orders from, or written agreements with, any Governmental Entity respecting (i)
violations or liability pursuant to Environmental Laws, (ii) Remedial Action (as
hereinafter defined) or (iii) any Release or threatened Release (as hereinafter
defined) of a Hazardous Substance. No judicial or administrative proceedings
or governmental investigations are pending, or to the knowledge of MGI or any of
the Subsidiaries threatened, against MGI or any of the Subsidiaries alleging the
violation of or seeking to impose liability pursuant to any Environmental Law or
as the result of the Release or alleged Release of a Hazardous Substance, except
for any such proceedings or investigations that would not result in a MGI
Material Adverse Effect, and neither MGI nor any of the Subsidiaries has
received any notice of any pending or threatened investigation, claim,
enforcement proceeding or other action instituted by any Governmental Authority
or private party under any Environmental Laws arising out of the conduct or
operations of MGI or any of the Subsidiaries.
(d) For the purpose of this Agreement:
"Environment" means soil, surface waters, ground waters, land, stream,
sediments, surface or subsurface strata and ambient air.
"Environmental Condition" means any condition with respect to the
Environment, whether or not yet discovered, at any Facility, including any
condition resulting from the operation of the business of MGI or any of the
Subsidiaries or the operation of the business of any subtenant or occupant of
any Facility, which is reasonably likely to or does result in any material
losses.
"Environmental Laws" means all laws of any Governmental Authority or
any judgment, decree, injunction, writ or order of any Governmental Authority
relating to injury to, or the protection of, human health or the Environment
that are in effect prior to the Closing Date, including, without limitation, all
valid and lawful requirements of courts and other Governmental Authorities
pertaining to reporting, licensing, permitting, investigating, Remediation and
removal of, emissions, discharges, Releases or threatened Releases of Hazardous
Substances, chemical substances, pesticides, petroleum or petroleum products,
pollutants, contaminants or hazardous or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the Environment, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature.
"Hazardous Substances" means any substance (a) the presence of which
requires notification, investigation or remediation under any Environmental Law
as in effect prior to the Closing Date; (b) which prior to the Closing Date is
or becomes defined under any
27
Environmental Laws as "hazardous waste", "hazardous material" or "hazardous
substance", "extremely hazardous waste," "restricted hazardous waste," "solid
waste,: "toxic waste," "toxic substance" or "pollutant" or "contaminant" and
is regulated under any Environmental Law, (c) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or become regulated by any Governmental Authority
under Environmental Laws prior to the Closing Date; (d) which contains
gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic
compounds regulated under Environmental Laws prior to the Closing Date; (e)
which contains polychlorinated byphenyls (PCBs) or friable asbestos or urea
formaldehyde foam insulation; or (f) which contains or emits radioactive
particles, waves or materials, including radon gas.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.
"Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment; and
"Remedial Action" means all actions, including, without limitation,
any capital expenditures, required by a Governmental Authority or required under
any Environmental Law, or voluntarily undertaken to (1) clean up, treat or in
any other way ameliorate or address any Hazardous Materials or other substance
in the environment, (2) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public health or welfare or the environment; (3)
perform pre-remedial studies and investigations or post-remedial monitoring and
care pertaining or relating to a Release; or (4) bring the applicable party into
compliance with any Environmental Law.
Section 3.19. Employment Relations; Compliance. There are no
administrative proceedings, audits or investigations pending or, to the best of
MGI's knowledge, threatened and no written or, to the best of MGI's knowledge,
oral or threatened complaints against MGI or any of the Subsidiaries concerning
the employment or term of employment of any employee of MGI or any of the
Subsidiaries, or any violation of any Federal, state or local law, executive
order or regulation relating to employment relations, collective bargaining,
employment discrimination, employee benefits, occupational safety and health,
wages and hours of employees, immigration, medical and family leave and the
collection and payment of withholding and/or social security taxes and any
similar tax (an "Employment Law"). To the best knowledge of MGI, each of MGI
and the Subsidiaries is in compliance in all material respects with all
Employment Laws.
Section 3.20. Indemnification of Employees, Etc. Except in connection
with matters set forth in Schedule 3.20 hereto, and except for matters covered
by insurance (subject to deductibles) as of the date hereof, there is no
proceeding, claim, suit, action or governmental investigation pending or, to the
best knowledge of MGI, threatened, with respect to which any current or former
director, officer, employee or agent of MGI or any of the Subsidiaries is
entitled, or has asserted he is entitled, to claim indemnification from MGI or
any of the Subsidiaries pursuant to the Articles of Incorporation or By-Laws of
MGI or any provisions of the comparable charter or organizational documents of
any of the Subsidiaries, as provided in any
28
indemnification agreement to which MGI or any Subsidiary is a party, or
pursuant to applicable law.
Section 3.21. Labor Relations. Except as set forth in Schedule 3.21,
there are or were, at any time in the three (3) year period preceding the date
of this Agreement, no collective bargaining agreements, memoranda of
understanding, side letters, or other agreements with any labor union or
organization in effect to which MGI or any of the Subsidiaries are or were a
party or otherwise bound and which materially affect MGI's business
(collectively, the "Labor Agreements"), including agreements referred to or
incorporated by reference into any of the Labor Agreements, and no employees of
MGI or any of the Subsidiaries are represented by any labor organization. There
are no provisions in any of the Labor Agreements that would materially interfere
with MGI's ability to consummate the Offer or Merger hereunder.
Section 3.22. Board Recommendation. On or prior to the date hereof, the
Board of Directors of MGI, at a meeting duly called and held, has by the vote of
those directors present (a) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, taken together, are
fair and in the best interests of the MGI Stockholders and has approved the same
and (b) resolved to recommend that the holders of the MGI Shares accept the
Offer and approve the Merger.
Section 3.23. Opinion of Financial Advisor. The MGI Board of Directors
has received the written opinion of the Financial Advisor, dated the date of
this Agreement, to the effect that the cash consideration to be received, in the
Offer and the Merger, by the MGI Stockholders is fair to the MGI Stockholders
from a financial point of view, a copy of such opinion has been delivered to
Parent and such opinion has not been withdrawn or modified.
Section 3.24. Related Party Transactions. Since September 30, 1997,
except as set forth on Schedule 3.24 and except for the Plans or as otherwise
disclosed hereunder, no director hereunder, no director, officer, "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
MGI or any of the Subsidiaries (a) has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to MGI or any of the
Subsidiaries for indebtedness or similar obligations incurred in the ordinary
course of business or (b) is otherwise a party to any contract, arrangement or
understanding with MGI or any of the Subsidiaries of a nature that would be
required to be disclosed under Item 404 of Regulation S-K of the Securities Act.
Section 3.25. Schedule 14D-9, Offer Documents and Schedule 14D-1. The
Schedule 14D-9 and any amendments and supplements thereto will, when filed with
the Commission and when published, sent or given to holders of MGI Shares,
comply as to form in all material respects with the Exchange Act and the rules
and regulations thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by MGI with respect to information supplied by Parent and
Acquisition in writing for inclusion therein. None of the information supplied
by MGI for inclusion in the Offer Documents or the Schedule 14D-1, and
29
any amendments thereof or supplements thereto, will, when such materials are
filed with the Commission and when published, sent or given to holders of MGI
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.26. Charter Documents. MGI has delivered to Parent and
Acquisition true and correct copies of MGI's Articles of Incorporation and
By-laws, and each of the Subsidiaries has delivered to Parent and Acquisition
true and correct copies of their similar charter and organization documents, all
as amended through and in effect on the date hereof. The minute books of MGI
and the Subsidiaries, as made available to Parent and Acquisition, contain true
records of all meetings of, or written consents in lieu of meetings executed by,
MGI's or the Subsidiaries' board of directors (and all committees thereof) and
the Stockholders of MGI or the Subsidiary. All material actions and
transactions taken or entered into by MGI and/or the Subsidiaries, as the case
may be, requiring action by MGI's and/or the Subsidiaries board of directors or
Stockholders or members, were duly authorized or ratified as necessary. The
stock certificate books and stock records of MGI and/or the Subsidiaries as made
available to Parent and Acquisition are true and complete.
Section 3.27. Full Disclosure. No statement herein or in the Schedules
hereto or in any certificate delivered pursuant to the requirements of this
Agreement by or on behalf of MGI and/or the Subsidiaries contains or will
contain any untrue statement of a material fact concerning MGI and/or the
Subsidiaries or any or their affiliates, or omits or will omit to state a
material fact necessary in order to make the statements made herein or therein
concerning MGI and/or the Subsidiaries or any or their affiliates, in light of
the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition represent and warrant to MGI that:
Section 4.01. Organization and Good Standing. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, Acquisition is a corporation duly organized validly existing
and in good standing under the laws of the State of Colorado, and each has the
corporate power and authority to own or lease all of the properties and assets
owned or leased by it and to carry on its business as it is now being conducted.
Section 4.02. Authority of Parent and Acquisition. Each of Parent and
Acquisition has the corporate power to execute and deliver this Agreement and
all other documents hereby contemplated, to consummate the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. The execution, delivery and performance
of, and consummation of the transactions contemplated by, this Agreement and
all other documents hereby contemplated have been duly authorized by Parent's
and Acquisition's
30
Board of Directors and Parent as Acquisition's sole stockholder, and no other
corporate proceedings on the part of Parent of Acquisition are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of Parent and
Acquisition enforceable against each in accordance with its terms.
Section 4.03. No Conflict; Required Filings and Consents. The execution
and delivery of this Agreement by Parent and Acquisition does not, and the
consummation by Parent and Acquisition of the transactions contemplated hereby
will not, (i) violate the Certificate or Articles of Incorporation or By-laws of
Parent or Acquisition, or (ii), subject to making the filings and obtaining the
approvals identified in Section 4.03(b), violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Acquisition or by which any
property or asset of Parent or Acquisition is bound or affected, or (iii)
subject to making the filings and obtaining the approvals identified in
Schedule 4.03(a), result in any violation pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Acquisition is a party or by which
Parent or Acquisition or any property or assets of Parent or Acquisition is
bound or affected, except, in the case of clause (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of the Offer or Merger in any material respect, or
otherwise prevent Parent of Acquisition from performing its material obligations
under this Agreement, or would not, individually or in the aggregate, limit
Parent's or Acquisition's ability to consummate the transactions hereby
contemplated or have a material adverse effect on the business, properties,
assets, liabilities, results of operations or financial condition of Parent or
Acquisition (a "Parent or Acquisition Material Adverse Effect").
(b) The execution and delivery of this Agreement by Parent and
Acquisition do not, and the performance of this Agreement and the consummation
by Parent and Acquisition of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (A) applicable
requirements of the Exchange Act, (B) the pre-merger notification requirements
of the HSR Act, and (C) filing and recordation of appropriate merger and similar
documents as required by Colorado law.
Section 4.04. Finder's Fees. Neither Parent nor Acquisition has incurred
any liability for finder's, brokerage or similar fees or commissions in
connection with this Agreement or the transactions hereby contemplated, except
for fees owed Xxxxxxxxx & Company, Inc.
ARTICLE V
COVENANTS
Section 5.01. No Solicitation. From the date hereof until such time as
Parent's designees shall constitute a majority of the members of the Board of
Directors of MGI, MGI shall not, and shall not permit any of the Subsidiaries,
or any of its or their officers, directors, employees, representatives, agents
or affiliates (including, without limitation, any investment banker, attorney or
accountant retained by MGI or any of the Subsidiaries) to, directly or
indirectly, enter into, solicit, initiate or continue any discussions or
negotiations with, or provide
31
any information to, or otherwise cooperate in any other way with, any
corporation, partnership, person or other entity or group (each, a "Third
Party"), concerning any offer or proposal which constitutes or is reasonably
likely to lead to any Acquisition Proposal (as hereinafter defined);
provided that the Board of Directors of MGI may, in the event of an
unsolicited Acquisition Proposal, engage in negotiations or discussions with,
or provide information or data to, any Third Party relating to an Acquisition
Proposal if (i) the Acquisition Proposal (as hereinafter defined) is a bona
fide fully-financed written offer submitted to MGI's Board of Directors and
such Board of Directors, after consulting with a nationally recognized
investment bank, determines that such Acquisition Proposal is a Superior
Proposal (as hereinafter defined) and (ii) MGI's Board of Directors
determines, after having received the written opinion of outside legal
counsel to MGI, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the
fiduciary duties of the Board of Directors of MGI under applicable law.
Then, in such event, the Board of Directors may withdraw or modify its
approval or recommendation of the Offer, this Agreement or the Merger,
approve or recommend the Superior Proposal or terminate this Agreement
pursuant to Section 8.01(c) hereof. Parent shall have the right to match any
such Superior Proposal, and have such matching proposal immediately accepted
by MGI for five business days after Parent is informed of the necessary
determination in clauses (i) and (ii) of the preceding sentence with respect
to such Superior Proposal. Any information furnished to any Third Party in
connection with an Acquisition Proposal shall be provided pursuant to a
confidentiality agreement in customary form. Subject to all of the foregoing
requirements, MGI will immediately notify Parent orally and in writing if any
discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any information is requested by any Third Party with
respect to any Acquisition Proposal or which could lead to an Acquisition
Proposal and immediately notify Parent of all material terms of any proposal
which it may receive in respect of any such Acquisition Proposal, including
the identity of the Third Party making the Acquisition Proposal or the
request for information, if known, and thereafter shall inform Parent on a
timely, ongoing basis of the status and content of any discussions or
negotiations with such a Third Party, including immediately reporting any
material changes to the terms and conditions thereof. MGI shall, and shall
cause the Subsidiaries, and will use its best efforts to ensure their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, immediately cease and cause to be terminated
all discussions and negotiations that have taken place prior to the date
hereof, if any, with any Third Parties conducted heretofore with respect to
any Acquisition Proposal.
(b) For purposes hereof:
(i) "Acquisition Proposal" means any inquiry, proposal or offer
from any Third Party relating to any direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of MGI or any of the
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any Third Party beneficially owning 15% or more of any class of equity
securities of MGI or any of the Subsidiaries, any merger, consolidation,
business combination, sale of all or substantially all of the assets,
recapitalization, liquidation, dissolution or similar transaction involving MGI
or any of the Subsidiaries, other than the transactions contemplated by this
Agreement, or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Offer
and/or the
32
Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby; and
(ii) "Superior Proposal" means any bona fide fully-financed
written offer made by a Third Party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the shares
of Common Stock then outstanding or all or substantially all the assets of MGI
and otherwise on terms which the Board of Directors of MGI determines (after
consultation with the Financial Advisor or another nationally recognized
investment bank) to be economically superior to the transaction contemplated by
this Agreement.
(c) Nothing contained in this Section 5.01 shall prohibit MGI from
taking and disclosing to MGI's Stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
MGI Stockholders if, in the good faith judgment of the Board of Directors of
MGI, after consultation with outside counsel, failure so to disclose would be
inconsistent with its fiduciary duties to the MGI Stockholders under applicable
law; provided, however, neither MGI nor its Board of Directors nor any committee
thereof shall, except as permitted by Section 5.01(a), withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer, this
Agreement or the Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
Section 5.02. Interim Operations. Except as contemplated by this Agreement
or as expressly agreed to in writing by Parent, during the period from the date
of this Agreement until such time as Parent's designees shall constitute a
majority of the members of the Board of Directors of MGI, MGI will, and will
cause each of the Subsidiaries to, conduct its operations according to its
ordinary and usual course of business and consistent with past practice and use
its and their respective 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 (a) otherwise expressly provided in this Agreement, (b)
required by law, or (c) set forth on Schedule 5.02, MGI will not, and will cause
the Subsidiaries not to, without the consent of Parent:
(i) except with respect to annual bonuses made in the ordinary
course of business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, pension, retirement, employment or other
employee benefit agreement, trust, plan or other arrangement for the benefit or
welfare of any director, officer of employee of MGI or any of the Subsidiaries
or increase in any manner the compensation or fringe benefits of any director,
officer or employee of MGI or any of the Subsidiaries or pay any benefit not
required by any existing agreement or place any assets in any trust for the
benefit of any director, officer or employee of MGI or any of the Subsidiaries
(in each case, except with respect to employees and directors in the ordinary
course of business consistent with past practice);
33
(ii) incur any indebtedness for borrowed money in excess of
$25,000, other than in consultation with Parent;
(iii) expend funds for individual capital expenditures in
excess of $50,000 in the aggregate for any 12-month period (to be apportioned
pro-rata over any period less than 12 months), other than in consultation with
Parent;
(iv) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or assets,
except in the ordinary course of business consistent with past practice;
(v) (A) declare, set aside or pay any dividends on, or make
anyother distributions in respect of, any of its capital stock, (B) 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 (C) purchase, redeem or otherwise acquire
any shares of capital stock of MGI or any of the Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(vi) 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 the Subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such share,
voting securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) other than
issuances upon exercise of the options, warrants, notes and contract rights set
forth in Schedule 3.03.
(vii) amend its Articles of Incorporation, 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 Subsidiary of MGI;
(viii) make or agree to make any acquisition of assets which
is material to MGI and the Subsidiaries, taken as a whole, except for (A)
purchases of inventory in the ordinary course of business, (B) pursuant to
purchase orders entered into in the ordinary course of business which do not
call for payments in excess of $5,000, or (C) project-related expenditures
which, individually, do not exceed $10,000;
(ix) settle or compromise any shareholder derivative suits
arising out of the transactions contemplated hereby or any other litigation
(whether or not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims required to be paid, or
(x) authorize any of, or commit or agree to take any of, the
foregoing.
Section 5.03. Stockholder Approval. To the extent stockholder approval
of this Agreement or the Merger is required by law, MGI will take (and
Acquisition and Parent shall use
34
all reasonable efforts to cause MGI to take) all action necessary in
accordance with Colorado law, MGI's Articles of Incorporation, as amended,
its By-laws and the requirements of the Boston Stock Exchange and the NASDAQ
Smallcap Market, to duly call, give notice of and convene a special meeting
of the MGI Stockholders (the "MGI Stockholders Meeting") as promptly as
practicable following the expiration of the Offer to obtain such stockholder
approval. Without limiting the generality of the foregoing, MGI agrees that
its obligations pursuant to this Section 5.03(a) shall not be affected by (i)
the commencement, public proposal, public disclosure or communication to MGI
of any Acquisition Proposal or (ii) the withdrawal or modification by the
Board of Directors of MGI of its approval or recommendation of the Offer,
this Agreement or the Merger.
(b) Except as MGI's Board of Directors determines in good faith and
as advised by outside legal counsel would be inconsistent with the fiduciary
duties of the Board of Directors under applicable law, MGI's Board of Directors
shall recommend that the MGI Stockholders vote in favor of the Merger, this
Agreement and the transactions hereby contemplated and cause MGI to take all
lawful actions to solicit from the MGI Stockholders proxies in favor of such
approval.
(c) Notwithstanding the foregoing, if Acquisition and its affiliates
shall own at least 90% of the outstanding MGI Shares, the parties shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer without a meeting of MGI
Stockholders in accordance with Section 0-000-000 of the BCA.
(d) If stockholder approval of this Agreement or the Merger is
required by law, MGI shall, at Parent's request, prepare and file a preliminary
Proxy Statement with the SEC and will use its best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy Statement to be mailed
to MGI's Stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff. MGI will notify Parent promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between MGI or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
at any time prior to the MGI Stockholders Meeting there shall occur any event
that should be set forth in an amendment or supplement to the Proxy Statement,
MGI will promptly prepare and mail to MGI Stockholders such an amendment or
supplement. MGI will not mail any Proxy Statement, or any amendment or
supplement thereto, to which Parent reasonably objects.
(e) MGI covenants that none of the information supplied, or to be
supplied, by MGI specifically for inclusion or incorporation by reference in the
MGI Proxy Statement, including, without limitation, information concerning MGI
or any of its affiliates, directors, officers, employees, agents or
representatives will, at the time of mailing of the MGI Proxy Statement or any
amendment or supplement thereto to the MGI Stockholders, contain any untrue
statement of any material fact, or omit to state any material fact necessary in
order to make the
35
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the date of the MGI Stockholders'
Meeting, any event with respect to MGI or any of the Subsidiaries, or with
respect to other information supplied by MGI specifically for inclusion in
the MGI Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, the MGI Proxy Statement, such event shall
be so described, and such amendment or supplement shall be promptly filed
with the Commission and, as required by law, disseminated to the MGI
Stockholders. All documents that MGI is responsible for filing with the
Commission in connection with the transactions contemplated herein, including
the Schedule 14D-9 or the MGI Proxy Statement, insofar as it relates to MGI
or the Subsidiaries or other information supplied by MGI specifically for
inclusion therein, will comply as to form, in all material respects, with the
provisions of the Securities Act, the Exchange Act or the rules and
regulations thereunder, and each such document required to be filed with any
Governmental Authority other than the Commission will comply in all material
respects with the provisions of applicable law as to the information required
to be contained therein, except that no covenant is made by MGI with respect
to statements made therein based on information supplied by Parent
Acquisition or any of their affiliates, directors, officers, employees,
agents or representatives in writing expressly for inclusion therein.
(f) Parent and Acquisition covenant that none of the information
supplied, or to be supplied, by Parent and Acquisition specifically for
inclusion or incorporation by reference in the MGI Proxy Statement, including,
without limitation, information concerning Parent, Acquisition or any of their
respective affiliates, directors, officers, employees, agents or representatives
supplied by Acquisition in connection with MGI's preparation of the MGI Proxy
Statement will, at the time of mailing of the MGI Proxy Statement or any
amendment or supplement thereto to the MGI Stockholders, contain any untrue
statement of any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If, at any time prior to the date of the MGI
Stockholders' Meeting, any event with respect to Parent or Acquisition, or with
respect to other information supplied by Parent or Acquisition for inclusion in
the MGI Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, the MGI Proxy Statement, such event shall be
so described, and the information required to be filed in such amendment or
supplement shall be promptly delivered to MGI for filing with the Commission
and, as required by law, dissemination to the MGI Stockholders. All documents
that Parent or Acquisition is responsible for filing with the Commission in
connection with the transactions contemplated herein, including the Schedule
14D-1, insofar as it relates to Parent or Acquisition or other information
supplied by Parent or Acquisition specifically for inclusion therein, will
comply as to form, in all material respects, with the provisions of the
Securities Act, Exchange Act or the rules and regulations thereunder, and each
such document required to be filed with any Governmental Authority other than
the Commission will comply in all material respects with the provisions of
applicable law as to the information required to be contained therein, except
that no covenant is made by Parent or Acquisition with respect to statements
made therein based on information supplied by MGI or any of the Subsidiaries or
any of their respective affiliates, directors, officers, employees, agents or
representatives in writing for inclusion therein.
36
(g) Parent and Acquisition agree to cause all MGI Shares purchased
pursuant to the Offer and all other MGI Shares owned by Parent, Acquisition or
any Subsidiary thereof to be voted in favor of the approval and adoption of this
Agreement and the Merger.
Section 5.04. Access by Acquisition. The directors, officers, employees,
lenders, accountants, counsel and other representatives of Parent and
Acquisition (collectively, the "Representatives") shall be permitted full
access, during usual business hours during the period prior to the Closing Date
to the properties, accounts, books, contracts, commitments, tax returns and
records of MGI and the Subsidiaries, and such other information relating to MGI
and the Subsidiaries as Parent shall reasonably request; provided, that no
investigation pursuant to this Section 5.04 shall affect any representation or
warranty given by MGI to Parent and Acquisition hereunder; and provided,
further, that any information provided to Parent and/or Acquisition pursuant to
this Section 5.04 shall be subject to a confidentiality agreement in customary
form, the terms of which shall continue to apply, except as otherwise agreed by
MGI, unless and until Parent and Acquisition shall have purchased a majority of
the outstanding Shares pursuant to the Offer and notwithstanding termination of
this Agreement. The Representatives shall be permitted to discuss the business
affairs, finances and accounts of MGI and the Subsidiaries with the officers,
directors, executives, counsel, auditors and actuaries of MGI and the
Subsidiaries.
Section 5.05 Government Filings; Xxxx Xxxxx Xxxxxx Filing. Each party
hereto shall file or cause to be filed with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") any notification required to be filed by their respective "ultimate
parent" companies under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all reasonable efforts to make such filings within five business days
after commencement of the Offer, and to respond on a timely basis to any
requests for additional information made by either of such agencies. Each of
the parties hereto agrees to furnish the other with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its affiliates and their respective
representatives, on the one hand, and the FTC, the Antitrust Division or any
other Governmental Authority or members or their respective staffs, on the other
hand, with respect to this Agreement and the transactions contemplated hereby,
other than personal financial information filed therewith. Each party hereto
agrees to furnish the others with such necessary information and reasonable
assistance as such other parties and their respective affiliates may reasonably
request in connection with their preparation of necessary filings, registrations
or submissions of information to any Governmental Authorities, including without
limitation any filings necessary under the provisions of the HSR Act.
Section 5.06. No Breach of Representations and Warranties. Each of MGI,
Parent and Acquisition shall not knowingly and MGI shall not knowingly permit
any Subsidiary to take any action which would be reasonably likely to cause or
constitute a material breach, or knowingly take any action which, if it had been
taken prior to the date hereof, would have caused or constituted a material
breach of, any of its representations and warranties set forth in Articles III
and IV, respectively. Each of MGI, Parent and Acquisition shall, in the event
of, or promptly after the occurrence of, or promptly after obtaining knowledge
of the occurrence of or the
37
impending or threatened occurrence of, any fact or event which would cause or
constitute a breach of any of the representations and warranties set forth in
Articles III and IV, respectively, as of the Closing Date, give detailed
notice thereof to each other non-breaching party; and each of MGI, Parent and
Acquisition shall use its reasonable best efforts to prevent or promptly to
remedy such breach whether or not caused by any action knowingly taken.
Section 5.07. Consents; Notices. Each of MGI, Parent and Acquisition
shall use its reasonable efforts to obtain and deliver to each other party all
written consents, in form and substance satisfactory to each other party,
required in connection with this Agreement, the other Operative Agreements or
the transactions hereby and thereby contemplated. Each of MGI and Acquisition
shall also deliver all notices to Governmental Authorities and third parties
required to be delivered in connection with the execution of this Agreement and
the transactions hereby contemplated.
Section 5.08. Reasonable Efforts. Each of MGI, Parent and Acquisition
shall use its reasonable efforts to effectuate the transactions contemplated by
the Operative Agreements and to fulfill the conditions to the obligations of
each under the Operative Agreements, including cooperating fully with the other
party, including by provision of information and making of all necessary filings
in connection with, among other things, approvals under the HSR Act. MGI will
use all reasonable efforts to obtain any consent from third parties necessary to
allow MGI and the Subsidiaries to continue operating their business as presently
conducted as a result of the consummation of the transactions contemplated
hereby or thereby. In case at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of the Operative
Agreements or to vest the Surviving Corporation with full title to all
properties, assets, rights, approval, immunities and franchises of either of MGI
or Acquisition, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
Section 5.09. Indemnification; Directors' and Officers' Insurance.
(a) Parent and Acquisition agree that all rights to indemnification
existing as of the date hereof in favor of the present or former directors,
officers, employees, fiduciaries and agents of MGI or any of the Subsidiaries as
provided in MGI's certificate of incorporation or by-laws or pursuant to other
agreements, arrangements or the certificate of incorporation, by-laws or similar
documents of any of the Subsidiaries as in effect on the date hereof with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect pursuant to the terms
thereof. Parent agrees that it will cause the Surviving Corporation to pay the
amount of the deductible for the directors' and officers' liability insurance
referred to below. The Surviving Corporation shall, unless Parent agrees to
provide, upon the same terms and up to the same extent and the same amount,
coverage as provided by the policies of directors' and officers' liability
insurance referred to below, cause to be maintained in effect for not less than
six years from the Effective Time the policies of directors' and officers'
liability insurance maintained by MGI and the Subsidiaries, each as in effect on
the date hereof (provided that they may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less advantageous
and shall not be required to expend an amount in
38
excess of 150% of the annual premiums currently paid by MGI (which MGI
represents is approximately $55,000)), with respect to matters occurring
prior to the Effective Time.
(b) It is understood and agreed that MGI shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and after the Effective Time,
the Surviving Corporation and Parent shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director, officer and fiduciary of MGI or any of the Subsidiaries
(collectively, the "Indemnified Parties") against any fees, costs or expenses
(including reasonable attorneys' fees) and judgments, fines, losses, damages,
liabilities and amounts paid in settlement (collectively, "Losses"), in
connection with any pending, threatened or completed claim, action, suit,
proceeding or investigation arising out of any actions or omissions occurring
at or prior to the Effective Time that are in whole or in part based on or
arising out of the fact that such person is or was a director, officer or
fiduciary of MGI or pertaining to any of the transactions contemplated
hereby. In no event shall MGI or the Surviving Corporation be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). Any Indemnified Party wishing to claim
indemnification under this Section 5.09(b), upon learning of any such claim,
action, suit, proceeding or investigation, shall notify MGI (or after the
Effective Time, the Surviving Corporation) (but the failure so to notify
shall not relieve a party from any liability which it may have under this
Section 5.09(b) except to the extent such failure prejudices such party's
position with respect to such claims) and shall deliver to MGI (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 0-000-000 of the BCA. MGI (or, after the Effective Time, the
Surviving Corporation) shall be entitled to assume and control the defense of
any such action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party; provided, however, that any
Indemnified Party may at its own expense retain separate counsel to
participate in such defense. If MGI or the Surviving Corporation does not
elect to assume such defense, then the Indemnified Parties may assume such
defense with one counsel (and, if required, one local counsel) of their own
choosing reasonably acceptable to MGI or the Surviving Corporation.
(c) If any action, suit, proceeding or investigation relating hereto
or to the transactions contemplated hereby is commenced, whether before or after
the Effective Time, MGI and, after the Effective Time, the Surviving
Corporation, shall agree to use their commercially reasonable efforts to defend
against and respond thereto.
(d) This Section 5.09 shall survive for a period of six years (and
thereafter with respect to claims then pending) following the Effective Time and
is intended to benefit MGI, the Surviving Corporation and the Indemnified
Parties. In the event MGI, Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties to any person, then, and in each case, proper provision shall be made
so that the successors and assigns of MGI and the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 5.09.
39
Section 5.10. Options. Prior to the Effective Time, MGI shall amend (i)
the 1996 Stock Option and Stock Bonus Plan and the Senior Executive Incentive
Stock Option Plan and any other program pursuant to which there are holders of
options (the "Options") to purchase Shares granted by MGI (collectively, the
"Stock Option Plans") to provide that all outstanding, unexercised Options shall
be immediately exercisable and that if the optionees do not exercise their
unexercised Options, each optionee shall receive, at such optionee's option (i)
in settlement of each Option held by such optionee, a "Cash Amount" (less any
applicable withholding taxes) with respect to the number of previously
unexercised Shares underlying the Option immediately prior to the Effective
Time, or (ii) an option (a "Parent Option") to purchase the number of shares of
common stock, par value $.01 per share, of Parent equal to 1/20 of the number
of MGI Shares underlying the Options at the exercise price equal to the
aggregate exercise price of the 20 MGI Options in respect of which the Parent
Option was granted and upon terms and conditions substantially similar to those
contained in the applicable Stock Option Plan. Such election must be made in
writing at least 10 days prior to the Effective Time and, if not made, the
optionee shall be deemed to have elected to receive the Cash Amount. The Stock
Option Plans shall also be amended to provide that each Option shall terminate
as of the Effective Time. The Cash Amount payable for each Option shall equal
the product of (i) the Merger consideration minus the exercise price per Share
of each such Option and (ii) the number of previously unexercised Shares covered
by each such Option.
(b) Prior to the Effective Time, MGI shall provide notice to
participants in the Stock Option Plans and other holders of Options to purchase
shares granted by MGI that MGI proposes to merge with another corporation; that
the Optionee under the plans or program may exercise his Options in full for all
shares not theretofore purchased by him prior to the Effective Time or receive
Parent Options as described above; and that the plans and program have been
amended to provide that to the extent an optionee does not exercise such Options
prior to the Effective Time or elect to receive Parent Options, the optionee
shall receive, in settlement of each Option held by the optionee, a "Cash
Amount" (less any applicable withholding taxes) with respect to the number of
previously unexercised Shares underlying the Option immediately prior to the
Effective Time; that each Option shall terminate as of the Effective Time; and
that the Cash Amount payable for each Option shall equal the product of (i) the
Merger Consideration minus the exercise price per Share of each such Option and
(ii) the number of previously unexercised Shares offered by each such Option and
that number of Parent Options which may be received is 1\20 of the number of
Options not exercised for the Cash Amount and the method of calculating the
exercise price of such Parent Options.
(c) Except as may be otherwise agreed to be Parent or Acquisition and
MGI, MGI's Stock Option Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of MGI or any of
the Subsidiaries shall be deleted as of the Effective Time.
(d) MGI shall use its best efforts such that following the Effective
Time no holder of employee stock options will have any right to receive MGI
Shares upon exercise of an employee stock option.
40
(e) Notwithstanding anything to the contrary herein, if it is
determined that compliance with any of the foregoing would cause any individual
subject to Section 16 of the Exchange Act to become subject to the profit
recovery provisions thereof, any Options held by such individual will be
canceled or purchased, as the case may be, at the Effective Time or at such
later time as may be necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive from MGI or the
Surviving Corporation an amount in cash or other consideration satisfactory to
the Surviving Corporation and such individual equal to the excess, if any, of
the Merger Consideration over the per Share exercise price of such Option
multiplied by the number of Shares subject thereto (less any applicable
withholding taxes), and the parties hereto will cooperate and take any and all
necessary actions so as to achieve the intent of the foregoing without giving
rise to such profit recovery.
Section 5.11. Directors. Provided that the Minimum Tender Condition
(as such term is defined in Exhibit A) has been satisfied, promptly upon the
acceptance for payment of, and payment by Acquisition for, all MGI Shares
tendered and not withdrawn pursuant to the Offer, Acquisition shall be
entitled to designate such number of directors on the Board of Directors of
MGI as will give Acquisition, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such directors and MGI shall, at such time, cause
Acquisition's designees to be so elected; provided, however, that in the
event that Acquisition's designees are appointed or elected to the Board of
Directors of MGI, until the Effective Time such Board of Directors shall have
at least two directors who are directors on the date hereof or who are
otherwise not officers, directors or affiliates of Acquisition and are
independent directors under any applicable rules of the Boston Stock Exchange
or the NASDAQ Smallcap Market (the "Independent Directors"); and provided
further that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, any remaining Independent
Directors (or Independent Director, if there shall be only one remaining)
shall be entitled to designate a person to fill such vacancy who shall be
deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, stockholders or
affiliates of Acquisition and who shall be independent directors under the
rules of the Boston Stock Exchange, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Subject to applicable
law, MGI shall take all action requested by Parent necessary to effect any
such election, including mailing to its Stockholders the Information
Statement containing the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, and MGI agrees to make
such mailing with the mailing of the Schedule 14D-9 (provided that
Acquisition shall have provided to MGI on a timely basis all information
required to be included in the Information Statement with respect to
Acquisition's designees). In connection with the foregoing, MGI will
promptly, at the option of Acquisition, either increase the size of MGI's
Board of Directors or obtain the resignation of such number of its current
directors as is necessary to enable Acquisition's designees to be elected to
MGI's Board of Directors as provided above.
41
Section 5.12. Notification of Certain Matters. MGI and Parent shall
promptly notify each other of :
(a) any notice or other communication from any person alleging that
the consent of such person is required or contemplated by this Agreement;
(b) any notice or other communication from any Government Authority
or governmental entity in connection with the transactions contemplated by this
Agreement;
(c) any action, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party or any of the Subsidiaries;
(d) an administrative or other order or notification relating to any
material violation or claimed violation of law;
(e) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing Date; and
(f) any material failure of any party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.12
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.13. Fees and Expenses. In addition to any other amounts
which may be payable or become payable pursuant to any other paragraph of
this Section 5.13, (i) in the event that this Agreement is terminated
pursuant to Section 8.01(b), 8.01(c) or 8.01(f) hereof, MGI shall promptly
reimburse the Parent or Acquisition, as the case may be, up to $1.5 million,
or (ii) in the event that this Agreement is terminated pursuant to Section
8.01(e) hereof, Parent or Acquisition shall promptly reimburse MGI, up to
$250,000, for all out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to all Governmental Authorities,
banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents, experts
and consultants to Parent and its affiliates), whether incurred prior to, on
or after the date hereof, in connection with the Merger and the consummation
of all transactions contemplated by this Agreement.
(b) Except as otherwise specifically provided for herein, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(c) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and
42
expenses (including attorneys' and expert witness fees and expenses) incurred
in connection with such action.
Section 5.14. Certain Litigation. MGI agrees that it will not settle any
litigation commenced after the date hereof against MGI or any of its directors
by any stockholder of MGI relating to the Offer, the Merger or this Agreement,
without the prior written consent of Parent. In addition, MGI will not
voluntarily cooperate with any Third Party which may hereafter seek to restrain
or prohibit or otherwise oppose the Offer or the Merger and will cooperate with
Parent and Acquisition to resist any such effort to restrain or prohibit or
otherwise oppose the Offer or the Merger, unless the Board of Directors of MGI
determines in good faith, after consultation with outside counsel, that failing
so to cooperate with such Third Party or cooperating with Parent or Acquisition,
as the case may be, would constitute a breach of the director's fiduciary duty
under applicable law.
Section 5.15. Insurance. As soon as practicable after the date hereof,
but in no event later than ten business days thereafter, MGI shall deliver to
Parent (i) a true and complete list of all policies or binders of fire,
liability, workmen's compensation, vehicular or other insurance held by or on
behalf of MGI and/or the Subsidiaries (specifying the insurer, the policy
number or covering note number with respect to binders, and describing each
pending claim thereunder of more than $5,000, setting forth the aggregate
amounts paid out under each such policy through the date of delivery of such
list and the aggregate limit of any of the insurer liability thereunder) and
(ii) Schedule 3.11.
Section 5.16. Purchase Agreements. MGI agrees to deliver to the Escrow
Agent the closing documents, exhibits and schedules under the Purchase
Agreements (as such term is defined in the Option Agreement) that are
referred to in Section 4 of the Option Agreement on or before the close of
business on January 9, 1998.
ARTICLE
CONDITIONS TO PARENT'S AND ACQUISITION'S OBLIGATIONS
All obligations of Parent and Acquisition under this Agreement to effect
the Merger are subject solely to the fulfillment at or prior to the Closing Time
of each of the following conditions (any of which may be waived in writing by
Parent or Acquisition):
Section 6.01. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of any of Acquisition's material obligations under
Article II and no statute, rule, regulation, executive order, decree or
injunction shall have after the date of this Agreement been enacted, entered,
promulgated or enforced by any United States court or Governmental Authority
of competent jurisdiction which prohibits the consummation of the Merger;
provided, however, that Parent and Acquisition shall have used their
commercially reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
43
Section 6.02. Stockholder Approval. The Merger, this Agreement and the
transactions contemplated hereby shall have been approved in a manner
required by applicable law, and by the applicable regulations of any stock
exchange or other regulatory body; provided, however, that Acquisition and
its affiliates shall have voted all MGI Shares owned by them in favor of this
Agreement; and provided further, that each of Acquisition and MGI shall have
used its commercially reasonable efforts to cause such approval to be
obtained.
Section 6.03. Consummation of the Offer. Acquisition shall have
accepted for purchase and paid for MGI Shares tendered pursuant to the Offer.
Section 6.04. Representations and Warranties. The representations and
warranties of MGI contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time, with the same force
and effect as if made at and as of the Effective Time, other than such
representations and warranties as are expressly made as of another date, and
Parent and Acquisition shall have received a certificate of MGI to that
effect signed by a duly authorized officer thereof.
Section 6.05. HSR Approvals. The applicable waiting periods under the
HSR Act shall have expired or been terminated.
Section 6.06. Employment Agreements. Each of the employment agreements
entered into by MGI with its employees, directors or officers shall have been
terminated except for the employment agreements between MGI and each of X.X.
Xxxxxx and Xxxxxxx X. Xxxxxxxxxxxx.
ARTICLE
CONDITIONS TO MGI'S OBLIGATIONS
All obligations of MGI under this Agreement to effect the Merger are
subject solely to the fulfillment, at the Closing Time, of each of the following
conditions (any of which may be waived in writing by MGI):
Section 7.01. Injunctions. No, court, agency or other authority shall
have issued any order, decree or judgment to set aside, retrain, enjoin or
prevent the performance of MGI's obligations under Article II hereof. No
statute, rule, regulation, executive order, degree or injunction shall have
after the date of this Agreement been enacted, entered, promulgated or
enforced by any United States court or Governmental Authority of competent
jurisdiction which prohibits the consummation of the Merger.
Section 7.02. Stockholder Approval. The Merger, this Agreement and the
transactions contemplated hereby shall have been approved in a manner
required by applicable law.
Section 7.03. Consummation of the Offer. Acquisition shall have
accepted for purchase and paid for MGI Shares tendered pursuant to the Offer.
44
Section 7.04. HSR Approvals. The applicable waiting periods under the
HSR Act shall have expired or been terminated.
ARTICLE
TERMINATION
Section 8.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the MGI Stockholders or by
Acquisition:
(a) by the mutual consent of Acquisition and MGI;
(b) by Acquisition, if prior to consummation of the Offer (i) the
Board of Directors of MGI fails to make, or withdraws or materially modifies or
changes in a manner adverse to Acquisition, its recommendation to the MGI
Stockholders to accept the Offer, the Merger or this Agreement and the
transactions contemplated hereby, or resolves to do the foregoing or (ii) the
Board of Directors of MGI shall have recommended that the MGI Stockholders
accept or approve an Acquisition Proposal with a Third Party, or resolves to do
the foregoing or (iii) a tender or exchange offer for any of the outstanding
shares of capital stock of MGI is commenced (other than by Parent, Acquisition
or their affiliates) and the Board of Directors of MGI fails to timely recommend
against MGI Stockholders' tendering their MGI Shares into such tender or
exchange offer;
(c) by MGI, if, prior to the Effective Time, any Third Party has made
a bona fide fully financed written offer relating to an Acquisition Proposal, or
has commenced a tender or exchange offer for MGI Shares, and MGI's Board
determines in good faith (i) after consultation with its financial advisors, and
that such transaction constitutes a Superior Proposal and (ii) after having
received the written opinion of outside legal counsel to MGI, that the failure
to engage in such negotiations or discussions or provide such information would
result in a breach of the fiduciary duties of the Board of Directors of MGI
under applicable law;
(d) by MGI or Acquisition, if the Offer shall not have been
consummated on or before June 30, 1998, or the Offer is terminated by
Acquisition or allowed to expire with no MGI Shares being accepted for payment;
provided, however, that neither Acquisition or MGI may terminate this Agreement
pursuant to this Section 8.01(d) if such party shall have materially breached
this Agreement; or if prior to such day a reasonable, well-informed person would
conclude that any condition set forth in Exhibit A shall be incapable of being
satisfied by such date (except that a party whose breach of covenant has caused
such failure to consummate shall not be entitled to so terminate this
Agreement), or the Merger has not been consummated by December 31, 1998; or
(e) by MGI, if there has been a violation or breach by Parent or
Acquisition of any representation, warranty or agreement contained in this
Agreement specifically qualified by materiality, or a material violation or
breach by Acquisition of any material representation, warranty or agreement not
so qualified contained in this Agreement (which violation or breach is
45
not cured by Parent or Acquisition within 30 days after written notice by MGI
to Parent or Acquisition reasonably describing such breach);
(f) by Acquisition prior to consummation of the Offer, if there has
been a violation or breach by MGI of any representation, warranty or agreement
contained in this Agreement or any other Operative Agreement as though such
representations, warranties and agreements were made without reference to a MGI
Material Adverse Effect (which violation or breach is not cured by MGI within 30
days after written notice by Acquisition to MGI reasonably describing such
breach), except in all cases where the failure or failures of such
representations and warranties to be so true and correct or such agreements to
be performed or complied with would not have, singly or in the aggregate, a MGI
Material Adverse Effect; provided, however, that any such violation or breach
that occurs during the 15 business day period referred to in Section 1.01(a)(D)
hereof shall be deemed not to constitute an MGI Material Adverse Effect if such
violation or breach shall be as a result of a decline in the financial
performance or operations of MGI, provided that MGI has operated its business in
accordance with Section 5.02 hereof and otherwise consistent with its past
practices; or
(g) by either Acquisition or MGI, if the stockholder approval shall
not have been obtained at the MGI Stockholders' Meeting, if required pursuant to
the terms thereof.
Section 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void and all obligations and liabilities of the parties hereunder
shall terminate, except obligations of the parties pursuant to Sections 5.13,
9.03, 9.08, 9.11, 9.16 and this Section 8.02.
ARTICLE
MISCELLANEOUS
Section 9.01. Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval of the matters presented in
connection with the Merger by the MGI Stockholders, but, after any such
approval, no amendment shall be made which by law requires further approval
by the MGI Stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto. Following the election or appointment of the
Acquisition's designees pursuant to Section 5.11 and prior to the Effective
Time, the affirmative vote of a majority of the Independent Directors then in
office shall be required by MGI to (i) amend or terminate this Agreement by
MGI, (ii) exercise or waive any of MGI's rights or remedies under this
Agreement or (iii) extend the time for performance of Parent and
Acquisition's respective obligations under this Agreement
Section 9.02. Extension: Waiver. At any time prior to the Effective
Time, Acquisition and MGI may, to the extent legally allowed (i) extend the
time for the performance of any of the obligations or other acts of the other
party hereto, (ii) waive any inaccuracies in the representation and
warranties of the other party contained herein or in any document delivered
46
pursuant hereto and (iii) waive compliance by the other party with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of Acquisition and MGI. The failure
of any party hereto to assert any of its rights hereunder shall not constitute
a waiver of such rights.
Section 9.03. Non-Survival. The representations, warranties, covenants
and agreements in this Agreement shall terminate at the Effective Time, except
that the agreements set forth in Article II, Section 5.09 and in this Article
IX, any other covenant or agreement that contemplates performance after the
Effective Date shall survive the Effective Time, and no claim may be brought
after the Effective Time against any person alleging a breach of any
representation or warranty or a failure to comply with the terms and provisions
of this Agreement except those agreements set forth in Article II, Section 5.09
and in this Article IX.
Section 9.04. Further Assurances. Each of the parties agrees and
covenants promptly to execute and deliver, or cause to be executed and
delivered, to the other party such documents or instruments, in addition to
those expressly required by this Agreement to be executed and delivered, as the
other party may reasonably deem necessary or desirable to carry out or implement
any provision of this Agreement and the transaction contemplated hereby.
Section 9.05. Entire Agreement. All prior or contemporaneous agreements,
contracts, promises, representations and statements, if any, between the parties
hereto as to the subject matter hereof, are merged into this Agreement. This
Agreement, together with all agreements, Schedules, documents and other
instruments to be attached hereto or delivered hereunder sets forth the entire
understanding between the parties, and there are no terms, conditions,
representations, warranties or covenants other than those contained herein and
in such agreements, Schedules, documents and other instruments to be attached
hereto or delivered hereunder.
Section 9.06. Notices. All notices, consents, demands or other
communications required or permitted to be given pursuant to the Agreement shall
be in writing and shall be deemed sufficiently given on (i) the day on which
delivered personally during a business day to the appropriate location listed as
the address below, (ii) three business days after the posting thereof by United
States registered or certified first class mail, return receipt requested with
postage and fees prepaid, or (iii) one business day after deposit thereof for
overnight delivery. Such notices, consents, demands or other communications
shall be addressed respectively:
As to MGI: MetroGolf Incorporated
0000 Xxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx
Fax: (000) 000-0000
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with a copy to: Xxxxxxxxxx Hyatt Xxxxxx & Xxxxxxxxxx,
P.C.
000 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
As to Parent or Acquisition: Family Golf Centers, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Fax: (000) 000-0000
with a copy to: Squadron, Ellenoff, Plesent &
Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
or to any other address which such party may have subsequently communicated to
the other parties in writing.
Section 9.07. Successors and Assigns. Each and every representation,
warranty, covenant, agreement, indemnification, and provision of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto. Except as otherwise
expressly provided herein, this Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto, except that
Acquisition may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent. Any purported assignment in violation of this Agreement
shall be void.
Section 9.08. Governing Law. This Agreement and any other agreement
entered into in connection herewith shall be governed by, and construed under
and in accordance with, the laws of the State of Colorado, as to matters of
corporate law, and the laws of the State of New York, as to matters applicable
to contracts made and wholly to be performed therein by residents thereof,
without giving effect to the conflict of law principles thereof.
Section 9.09. Gender and Person. Wherever the context so requires, the
masculine pronoun shall include the feminine and the neuter, and the singular
shall include the plural.
Section 9.10. Captions. The captions and the table of contents appearing
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope or intent of this Agreement or
any of the provisions hereof.
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Section 9.11. Confidentiality of Disclosures. Any corporate information,
records, documents, descriptions or other disclosures of whatsoever nature or
kind made or disclosed by either of the parties to the other party, or to the
authorized representatives thereof, or learned or discovered by such other party
or by any representatives thereof in connection with the transactions
contemplated by this Agreement (whether prior to or after the date of the
execution of this Agreement) and not known by or available to the public at
large, shall be received in confidence and neither of the parties nor any such
authorized representative shall disclose or make use of such information or
authorize anyone else to disclose or make use thereof without the written
consent of the other party hereto, except (a) as necessary to consummate the
transactions contemplated hereby or (b) as compelled by judicial or
administrative process or by other requirements of applicable law including any
disclosure under Federal securities laws; provided, however, that in the case of
any disclosure contemplated pursuant to this clause (b), the party seeking to
disclose such information shall give the other party reasonable prior written
notice thereof in order to afford such other party reasonable opportunity to
seek a protective order or other limitation under such disclosure.
Section 9.12. Publicity. Any communications and notices to third parties
and all other publicity concerning the transactions contemplated by the
Agreement (other than governmental or regulatory filings) shall be planned and
coordinated by and between the parties. Unless required by applicable law or
the rules of the NASDAQ National Market, the Boston Stock Exchange or The NASDAQ
Smallcap Market, neither of the parties shall disseminate or make public or
cause to be disseminated or made public any information regarding the
transactions contemplated hereunder without the prior approval of the other
party, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, either party to this Agreement may, without the prior approval of the
other, make public statements that are not inconsistent with public documents
filed with the Commission in connection therewith.
Section 9.13. Third Parties. Other than the parties hereto and as
provided in Section 5.09, no person shall have any right under or to enforce any
provision of this Agreement.
Section 9.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement and shall become effective when two
or more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the same
counterpart.
Section 9.15. Interpretation. When a reference is made in this Agreement
to an Article or a Section, such reference shall be to an Article or a Section
of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
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Section 9.16. 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 United States
located in the State of New York or in a New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit to the personal
jurisdiction of any Federal court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (iii) agrees that such party will
not bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the State
of New York or a New York state court and (iv) waives any right to trail by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
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IN WITNESS WHEREOF, Parent, Acquisition and MGI have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
FAMILY GOLF CENTERS, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
Title:
FAMILY GOLF ACQUISITION, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
Title:
METROGOLF INCORPORATED
By: /s/ Xxxxxxx Xxxxxxxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxxxxxxx
Title:
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Exhibit A
Conditions of the Offer
Reference is made to the Agreement and Plan of Merger, dated as of
December 23, 1997 (the "Agreement"), by and among Parent, Acquisition and
MetroGolf Incorporated ("MGI"). Capitalized terms defined in the Agreement
and not otherwise defined herein are used herein with the meanings so defined.
Notwithstanding any other term of the Offer or this Agreement and in
addition to (and not in limitation of) Acquisition's right to extend and amend
the Offer at any time in its sole discretion (subject to the provisions of this
Agreement), Acquisition shall not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to Acquisition's obligation to pay for
or return tendered MGI Shares after the termination or withdrawal of the Offer),
to pay for and may delay the acceptance for payment of or, subject to the
restriction referred to above, any MGI Shares tendered pursuant to the Offer
unless (a) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer a number of MGI Shares which, when added to any other
MGI Shares beneficially owned by Parent, Acquisition or their affiliates, shall
equal at least a majority of the number of MGI Shares outstanding on a
fully-diluted basis (excluding (i) shares underlying any options, warrants,
convertible notes or contract rights with an exercise price per share of $2.00
or greater and (ii) shares underlying options or warrants if the holders thereof
have agreed (A) not to exercise or convert such options or warrants prior to the
consummation of the Offer and (B) to vote in favor of the Merger if such options
or warrants are exercised or converted following the consummation of the Offer)
immediately after the termination of the Offer (the "Minimum Tender Condition")
and (b) all waiting periods under the HSR Act applicable to the purchase of MGI
Shares pursuant to the Offer shall have expired or have been terminated.
Furthermore, notwithstanding any other term of the Offer or this Agreement,
Acquisition shall not be required to accept for payment or, subject as
aforesaid, to pay for any MGI Shares not theretofore accepted for payment or
paid for, and may, terminate or amend the Offer, if at any time on or after the
date of this Agreement and before the acceptance of such MGI Shares for payment
or the payment therefor, any of the following conditions exists and shall be
continuing:
(a) there shall be threatened by any Governmental Authority or
instituted or pending by any Person or Governmental Authority any suit, action,
investigation or proceeding (i) challenging the acquisition by Parent or
Acquisition of any MGI Shares under the Offer or seeking to restrain or prohibit
the making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by this Agreement, or seeking to obtain
from MGI, Parent or Acquisition any damages that are material in relation to MGI
and the Subsidiaries taken as a whole, (ii) seeking to prohibit or impose any
material limitations on Parent's or Acquisition's ownership or operation (or
that of any of their respective subsidiaries or affiliates) of all or a material
portion of their or MGI's businesses or assets, or to compel Parent
52
or Acquisition or their respective subsidiaries and affiliates to dispose of
or hold separate any material portion of the business or assets of MGI or
Parent and their respective subsidiaries, in each case taken as a whole,
(iii) challenging the acquisition by Parent or Acquisition of any MGI Shares
under the Offer, seeking to restrain or prohibit the making or consummation
of the Offer or the Merger or the performance of any of the other
transactions contemplated by this Agreement, or seeking to obtain from MGI,
Parent or Acquisition any damages that are material in relation to MGI and
the Subsidiaries taken as a whole, (iv) seeking to impose material
limitations on the ability of Acquisition, or render Acquisition unable, to
accept for payment, pay for or purchase some or all of the MGI Shares
pursuant to the Offer and the Merger, (v) seeking to impose material
limitations on the ability of Acquisition or Parent effectively to exercise
full rights of ownership of the MGI Shares, including, without limitation,
the right to vote the MGI Shares purchased by it on all matters properly
presented to MGI Stockholders, or (vi) which otherwise is reasonably likely
to have a MGI Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by the Governmental
Entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act that is reasonably likely to
result, indirectly or indirectly, in any of the consequences referred to in
clause (i) through (vi) of paragraph (a) above;
(c) there shall have occurred any events after the date of this
Agreement that, either individually or in the aggregate, have caused or are
reasonably likely to cause a MGI Material Adverse Effect other than a change
resulting from the announcement of the Offer or the Merger.
(d) (i) the Board of Directors of MGI or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent or Acquisition its
approval or recommendation of the Offer, the Merger or the Agreement, or
approved or recommended any Acquisition Proposal, (ii) MGI shall have entered
into any agreement (other than an agreement that solely gives a party access to
documents under conditions of confidentiality) with respect to any Superior
Proposal in accordance with Section 5.01(a) of the Agreement or (iii) the Board
of Directors of MGI or any committee thereof shall have resolved to take any of
the foregoing actions;
(e) there has been a violation or breach by MGI of any
representation, warranty or agreement contained in the Agreement or any of the
Operative Agreements as though such representations, warranties and agreements
were made without reference to an MGI Material Adverse Effect, except in all
cases where the failure or failures of such representations and warranties to be
so true and correct or such agreements to be performed or complied with would
not have, singly or in the aggregate, an MGI Material Adverse Effect.
(f) the Agreement shall have been terminated in accordance with
its terms;
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(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock Exchange
or on the NASDAQ Market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving in the armed forces of the United States, (iv) any
general limitation (whether or not mandatory) by any governmental authority on
the extension of credit by banks or other lending institutions, (v) in the case
of any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof, (vi) a decline of at least twenty
percent (20%) in the Dow Xxxxx Industrial Average or the Standard and Poors 500
Index from the date of this Agreement to the expiration or termination of the
Offer or (vii) a change in general financial, bank or capital market conditions
which materially and adversely affects the ability of financial institutions in
the United States to extend credit or syndicate loans;
(h) any Third Party acquires beneficial ownership (as defines in Rule
13d-3 promulgated under the Exchange Act), of at least 15% of the outstanding
Common Stock of MGI (other than any person not required to file a Schedule 13D
under the rules promulgated under the Exchange Act); or
(i) The Stockholders Agreement of even date herewith, among Parent,
Acquisition and the stockholders of MGI set forth in Schedule A thereto (the
"Principal Stockholders") shall no longer be in full force and effect, or any of
the Principal Stockholders shall have breached any material obligation
thereunder.
(j) The Option Agreement and Pledge Agreement, each of even date
herewith, between Parent and MGI shall no longer be in full force and effect or
MGI shall have breached any material obligation thereunder; provided, however,
that if all conditions to the Offer set forth in this Exhibit A other than this
clause (j) have been satisfied or waived, Parent and Acquisition shall
consummate the Offer.
(k) Parent shall have received from each Landlord and any
overlandlord of each landlord of the properties set forth in Schedule I hereto,
an estoppel certificate in the form annexed as Exhibit B, except that with
respect to the Illinois center golf facilities, Parent shall have received from
its Landlord an estoppel certificate substantially in the form of Exhibit C;
provided, however, that, in any case, if MGI or any of the Subsidiaries obtains
any consent as a result of a default to which Parent has consented, this
condition shall be waived as to such property.
(l) With respect to the properties set forth in Schedule I hereto,
Parent shall have received from each of MGI's or its Subsidiaries' lenders whose
loan is secured by a mortgage or deed of trust encumbering any of such
properties (each a "Mortgage Lender"), other than any Mortgage Lender whose loan
is in default or has gone into default with the consent of Parent, a statement
to the effect that to its knowledge no default under its mortgage or deed of
trust exists nor is such lender aware of the occurrence or non-occurrence of any
event which, with notice of the passage of time, or both, would constitute such
a default.
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(m) Parent shall have promptly ordered and received from the title
company or companies it selects to report the condition of the title to the
properties set forth in Schedule I hereto a commitment for title instrument with
premiums at ordinary rates showing that the condition of title is such as
represented by MGI under Sections 3.07(a) or 3.07(b).
(n) Any environmental site assessment commissioned by parent with
respect to any of the properties set forth on Schedule I hereto shall show that
the representations set forth in Section 3.18 are true in all material respects.
(o) With respect to the properties set forth in Schedule I hereto,
Parent shall have received consents to a change of control contemplated by the
consummation of the Offer and/or the Merger from (i) each Landlord and any
overlandlord of each Landlord whose consent to the Merger is required by any
lease and (ii) each Mortgage Lender whose consent to the Merger is required by
applicable loan documents or whose loan would be in default as a result of the
Merger.
The foregoing conditions are for the sole benefit of Parent and
Acquisition and may be asserted by Parent and Acquisition regardless of the
circumstances giving rise to any such condition (other than a breach by Parent
or Acquisition of the Agreement) and may be waived by Parent or Acquisition, in
whole or in part, at any time and from time to time, in the sole discretion of
Parent and Acquisition. The failure by Parent or Acquisition at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time.
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