EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 6, 1998
AMONG
XXXX-XXXXXXXXX FOODS CO.,
SAFEWAY INC.
AND
ACG MERGER SUB, INC.
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TABLE OF CONTENTS
Page
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ARTICLE 1 THE MERGER.........................................................1
SECTION 1.1. The Merger............................................1
SECTION 1.2. Effective Time........................................1
SECTION 1.3. Closing of the Merger.................................1
SECTION 1.4. Effects of the Merger.................................2
SECTION 1.5. Certificate of Incorporation and Bylaws...............2
SECTION 1.6. Directors.............................................2
SECTION 1.7. Officers..............................................2
SECTION 1.8. Conversion of Shares..................................2
SECTION 1.9. Appraisal Rights......................................3
SECTION 1.10. Payment of Merger Consideration......................3
SECTION 1.11. Stock Options.......................................4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................5
SECTION 2.1. Organization and Qualification; Subsidiaries..........5
SECTION 2.2. Capitalization of the Company and its Subsidiaries....5
SECTION 2.3. Authority Relative to this Agreement;
Recommendation......................................6
SECTION 2.4. SEC Reports; Financial Statements.....................7
SECTION 2.5. Information Supplied..................................7
SECTION 2.6. Consents and Approvals; No Violations.................8
SECTION 2.7. No Default............................................8
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes........9
SECTION 2.9. Litigation...........................................10
SECTION 2.10. Compliance with Applicable Law......................10
SECTION 2.11. Employee Benefit Plans; Labor Matters...............11
SECTION 2.12. Environmental Laws and Regulations..................12
SECTION 2.13. Taxes...............................................15
SECTION 2.14. Intellectual Property; Software.....................16
SECTION 2.15. Vote Required.......................................17
SECTION 2.16. Opinion of Financial Adviser........................17
SECTION 2.17. Brokers.............................................17
SECTION 2.18. Related Party Transactions..........................17
SECTION 2.19. Assets..............................................18
SECTION 2.20. Contracts...........................................18
SECTION 2.21. Shared Appreciation Agreement.......................19
SECTION 2.22. Payments............................................20
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.........20
SECTION 3.1. Organization ........................................20
SECTION 3.2. Authority Relative to this Agreement.................20
SECTION 3.3. SEC Reports; Financial Statements....................21
SECTION 3.4. Information Supplied.................................21
SECTION 3.5. Consents and Approvals; No Violations................21
SECTION 3.6. No Default...........................................22
SECTION 3.7. Litigation...........................................22
SECTION 3.8. Brokers..............................................22
SECTION 3.9. No Prior Activities..................................22
SECTION 3.10. Financing...........................................22
ARTICLE 4 COVENANTS.........................................................23
SECTION 4.1. Conduct of Business..................................23
SECTION 4.2. Preparation of the Proxy Statement...................25
SECTION 4.3. Other Potential Acquirers............................25
SECTION 4.4. Comfort Letter.......................................26
SECTION 4.5. Meeting of Stockholders..............................27
SECTION 4.6. Access to Information................................27
SECTION 4.7. Additional Agreements; Commercially Reasonable
Efforts.............................................27
SECTION 4.8. Employee Benefits....................................28
SECTION 4.9. Public Announcements.................................28
SECTION 4.10. Indemnification.....................................29
SECTION 4.11 Resignation of Officers and Directors................30
SECTION 4.12 Notice of Certain Events.............................30
SECTION 4.13 SAA..................................................30
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER..........................31
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger..............................................31
SECTION 5.2. Conditions to the Obligations of the Company.........31
SECTION 5.3. Conditions to the Obligations of Parent and
Acquisition.........................................32
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER....................................33
SECTION 6.1. Termination..........................................33
SECTION 6.2. Effect of Termination................................34
SECTION 6.3. Fees and Expenses....................................34
SECTION 6.4. Amendment............................................34
SECTION 6.5. Extension; Waiver....................................34
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ARTICLE 7 MISCELLANEOUS.....................................................35
SECTION 7.1. Nonsurvival of Representations and Warranties........35
SECTION 7.2. Entire Agreement; Assignment.........................35
SECTION 7.3. Validity.............................................35
SECTION 7.4. Notices..............................................35
SECTION 7.5. Governing Law........................................36
SECTION 7.6. Descriptive Headings.................................36
SECTION 7.7. Parties in Interest..................................36
SECTION 7.8. Certain Definitions..................................36
SECTION 7.9. Personal Liability...................................37
SECTION 7.10. Counterparts........................................38
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TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
SCHEDULE TITLE
-------- -----
1.11 Amendment to Company Plans
2.1 Company Subsidiaries
2.2 Limitations or Restrictions on Transfer of Subsidiary Stock
2.6 Consents and Approvals; Conflicts
2.7 Defaults
2.8 Undisclosed Liabilities; Absence of Changes
2.9 Litigation
2.11 Employee Benefit Plans; Labor Matters
2.12 Environmental Matters
2.18 Related Party Transactions
2.19 Real Property; Leases
2.20 Contracts
4.1 Conduct of Business
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TABLE OF DEFINED TERMS
Cross Reference
Term In Agreement Page
---- --------------- ----
1991 Stock Option ...................Section 1.11......................... 5
1991 Stock Options ..................Section 1.11......................... 5
1994 Stock Option ...................Section 1.11......................... 5
1994 Stock Options ..................Section 1.11......................... 5
Acquisition Board ...................Section 3.2.......................... 22
Acquisition .........................Preamble............................. 1
affiliate ...........................Section 7.8(a)....................... 38
beneficial owner ....................Section 7.8(b)....................... 38
beneficial ownership ................Section 7.8(b)....................... 38
business day ........................Section 7.8(c)....................... 38
capital stock .......................Section 7.8(d)....................... 38
Certificates ........................Section 1.10(b)...................... 4
Closing Date ........................Section 1.3.......................... 2
Closing .............................Section 1.3.......................... 2
Code ................................Section 7.8(e)....................... 38
Company Board .......................Section 2.3(a)....................... 7
Company Disclosure Schedule .........Section 1.11......................... 5
Company Financial Adviser ...........Section 2.16......................... 18
Company Intellectual Property .......Section 2.14(a)...................... 17
Company Permits .....................Section 2.10......................... 11
Company Plans .......................Section 1.11......................... 5
Company .............................Preamble............................. 1
Company SEC Reports .................Section 2.4(a)....................... 7
Company Securities ..................Section 2.2(a)....................... 6
Company Stock Options ...............Section 1.11......................... 5
Contracts ...........................Section 2.20......................... 19
Current Premium .....................Section 4.10(b)...................... 31
D&O Insurance .......................Section 4.10(b)...................... 31
DCMI ................................Section 2.2(c)....................... 7
DGCL ................................Section 1.1.......................... 1
Dissenting Shares ...................Section 1.9.......................... 3
Effective Time ......................Section 1.2.......................... 2
Employee Plans ......................Section 2.11(a)...................... 12
ERISA Affiliate .....................Section 2.11(a)...................... 12
ERISA ...............................Section 2.11(a)...................... 12
Exchange Act ........................Section 2.4(a)....................... 7
Facility ............................Section 2.12(b)...................... 14
Facility ............................Section 2.19(b)...................... 19
Form 10-K ...........................Section 3.3.......................... 22
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Cross Reference
Term In Agreement Page
---- --------------- ----
Governmental Entity .................Section 2.6.......................... 8
HSR Act .............................Section 2.6.......................... 8
Indemnified Liabilities .............Section 4.10(a)...................... 30
Indemnified Persons .................Section 4.10(a)...................... 30
IRS .................................Section 2.11(a)...................... 12
knowledge ...........................Section 7.8(f)....................... 38
known ...............................Section 7.8(f)....................... 38
LGA .................................Section 5.3(f)....................... 34
Lien ................................Section 2.2(b)....................... 6
Material Adverse Effect .............Section 2.1(b)....................... 6
Material Adverse Effect .............Section 3.1(b)....................... 21
Merger Certificate ..................Section 1.2.......................... 1
Merger Consideration ................Section 1.8(a)....................... 3
Merger Fund .........................Section 1.10(a)...................... 3
Merger ..............................Section 1.1.......................... 1
MSA .................................Section 5.3(f)....................... 34
officer .............................Section 7.8(g)....................... 38
Parent Board ........................Section 3.2.......................... 22
Parent Disclosure Schedule ..........Section 3............................ 21
Parent ..............................Preamble............................. 1
Parent SEC Reports ..................Section 3.3.......................... 22
Payment Agent .......................Section 1.10(a)...................... 3
Permitted Liens .....................Section 7.8(h)....................... 38
person ..............................Section 7.8(i)....................... 39
Property ............................Section 2.19(b)...................... 19
Proxy Statement .....................Section 2.5.......................... 8
Related Parties .....................Section 2.18......................... 18
reporting tail coverage .............Section 4.10(b)...................... 31
SAA .................................Section 2.21......................... 20
SEC .................................Section 2.4(a)....................... 7
Securities Act ......................Section 2.4(a)....................... 7
Share ...............................Section 1.8(a)....................... 2
Shares ..............................Section 1.8(a)....................... 2
Stockholder .........................Preamble............................. 1
subsidiaries ........................Section 7.8(j)....................... 39
subsidiary ..........................Section 7.8(j)....................... 39
Superior Proposal ...................Section 4.3(b)....................... 27
Surviving Corporation ...............Section 1.1.......................... 1
Tax Return ..........................Section 2.13(a)(ii).................. 16
Taxes ...............................Section 2.13(a)(i)................... 16
Third Party Acquisition .............Section 4.3(b)....................... 27
Third Party .........................Section 4.3(b)....................... 27
vi
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
August 6, 1998, is among XXXX-XXXXXXXXX FOODS CO., a Delaware corporation (the
"Company"), SAFEWAY INC., a Delaware corporation ("Parent"), and ACG MERGER SUB,
INC., a Delaware corporation and a wholly owned subsidiary of Parent
("Acquisition").
WHEREAS the Boards of Directors of the Company, Parent and Acquisition
have each (i) determined that the Merger (as defined below) is fair and in the
best interests of their respective stockholders and (ii) approved the Merger in
accordance with this Agreement; and
WHEREAS, as a condition of Parent's entering into this Agreement and
incurring the obligations set forth herein, concurrently with the execution and
delivery of this Agreement, Parent is entering into a Stockholder Support
Agreement with Green Equity Investors, L.P., a Delaware limited partnership (the
"Stockholder"), pursuant to which, among other things, the Stockholder has
agreed, subject to the terms thereof, to vote all shares of capital stock owned
by it in favor of this Agreement, the Merger and the transactions contemplated
thereby;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), Acquisition shall be
merged with and into the Company (the "Merger"). Following the Merger, the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
SECTION 1.2. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, a Certificate of Merger (the "Merger Certificate")
shall be duly executed by the Company and thereafter delivered to the Secretary
of State of the State of Delaware for filing pursuant to the DGCL on the Closing
Date (as defined in Section 1.3). The Merger shall become effective at such time
as the Merger Certificate is duly filed with the Secretary of State of the State
of Delaware in accordance with the DGCL or such later time as Parent and the
Company may agree upon and set forth in the Merger Certificate (the time the
Merger becomes effective being referred to herein as the "Effective Time").
SECTION 1.3. CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the
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latest to occur of the conditions set forth in Section 5.1, and which shall be
held at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, unless another time, date or place is agreed to in
writing by the parties hereto.
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time all the rights, privileges, powers,
franchises and properties of the Company and Acquisition shall vest in the
Surviving Corporation and all debts, liabilities and duties of each of the
Company and Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate
of incorporation of Acquisition in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of Acquisition in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 1.6. DIRECTORS. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 1.7. OFFICERS. The officers of Acquisition at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 1.8. CONVERSION OF SHARES.
(a) At the Effective Time, each share of common stock, par value $.01
per share, of the Company (individually a "Share" and collectively the
"Shares")issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held in the Company's treasury or by any of the Company's
subsidiaries, (ii) Shares held by Parent, Acquisition or any other subsidiary of
Parent and (iii) Dissenting Shares (as defined in Section 1.9)) shall, by virtue
of the Merger and without any action on the part of Acquisition, the Company or
the holder thereof, be converted into and represent the right to receive $12.50
in cash, without interest (the "Merger Consideration"). Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time, the
Shares shall have been changed into a different number of shares or a different
class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, then the Merger
Consideration contemplated by the Merger shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(b) At the Effective Time, each outstanding share of the common
stock, par value $.01 per share, of Acquisition shall be converted into one
share of common stock, par value $.01 per share, of the Surviving Corporation.
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(c) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled and cease to exist
and no payment shall be made with respect thereto.
SECTION 1.9. APPRAISAL RIGHTS. Notwithstanding any provision of this
Agreement to the contrary, Shares with respect to which appraisal rights have
been demanded and perfected in accordance with Section 262(d) of the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration, and the holders thereof shall be entitled only to such rights as
are granted by the DGCL. Notwithstanding the preceding sentence, if any holder
of Shares who demands appraisal of such Shares under the DGCL shall effectively
withdraw such holder's demand for appraisal in accordance with Section 262(k) of
the DGCL or becomes ineligible for such appraisal through failure to perfect or
otherwise, then, as of the Effective Date or the occurrence of such event,
whichever last occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration. The Company shall give Parent prompt notice of any
written demands for appraisal and any other instrument received by the Company
in connection therewith, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 1.10. PAYMENT OF MERGER CONSIDERATION.
(a) Concurrent with the Effective Time, Parent shall deposit with
ChaseMellon Shareholder Services or such other agent or agents as may be
appointed by Parent and Acquisition (the "Payment Agent") for the benefit of the
holders of Shares cash in the aggregate amount necessary to pay the Merger
Consideration (such cash is hereinafter referred to as the "Merger Fund")
payable pursuant to Section 1.8 in respect of outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose Shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.8: (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 Payment Agent and shall be in such form and have such other
provisions as Parent and the Company 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 Payment Agent together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing the Merger Consideration which such holder has the right to
receive pursuant to the provisions of this Article I and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company,
payment of the Merger Consideration may be made to a transferee if the
Certificate representing such Shares is presented to the Payment Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this
3
Section 1.10, 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 as contemplated by this Section 1.10.
(c) In the event that any Certificate for Shares shall have been
lost, stolen or destroyed, the Payment Agent shall issue in exchange therefor,
upon the making of an affidavit of that fact by the holder thereof, such Merger
Consideration as may be required pursuant to this Agreement; PROVIDED, HOWEVER,
that Parent or its Payment Agent may, in its discretion, require the delivery of
a suitable bond or indemnity.
(d) All Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation for any reason they shall be canceled and
exchanged as provided in this Article I.
(e) Any portion of the Merger Fund that remains unclaimed by the
holders of Shares six months after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged such holder's
Shares for the Merger Consideration in accordance with this Section 1.10 prior
to that time shall thereafter look only to Parent for payment of the Merger
Consideration in respect of such holder's Shares. Notwithstanding the foregoing,
Parent shall not be liable to any holder of Shares for any amount paid to a
public official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of Shares two years after the Effective Time (or
such earlier date immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Entity) shall, to the extent
permitted by applicable law, become the property of Parent free and clear of any
claims or interest of any person previously entitled thereto.
(f) Parent shall have the right to demand that the Payment Agent
return to Parent such portion of the Merger Fund that represents the Merger
Consideration payable for Shares for which appraisal rights have been perfected
and for which payment has been made pursuant to Section 262 of the DGCL.
SECTION 1.11. STOCK OPTIONS. On the business day following the
Effective Time, each outstanding option to purchase Shares (a "1994 Stock
Option" or collectively "1994 Stock Options") issued pursuant to the Company's
1994 Outside Directors Stock Option Plan as amended as of August 5, 1998 to the
extent vested in accordance with its terms shall be canceled and the Company
shall pay to each holder of a 1994 Stock Option in exchange therefor cash in an
amount equal to the product of (x) the difference between the Merger
Consideration and the exercise price of such 1994 Stock Option, multiplied by
(y) the number of Shares subject to such 1994 Stock Option (subject to any tax
withholding obligations). Pursuant to the terms of the Company's 1991 Stock
Option Plan, each outstanding option to purchase Shares (a "1991 Stock Option"
and collectively, the "1991 Stock Options") issued pursuant to the 1991 Stock
Option Plan or any amendment thereto shall remain outstanding after the
Effective Time and shall be exercisable for the Merger Consideration the holder
would have received had such 1991 Stock Option been exercised prior to the
Effective Time. In connection with the transactions contemplated by this
Agreement, the Company will use its commercially
4
reasonable efforts to obtain consent from each holder of a 1991 Stock Option to
the cancellation of such 1991 Stock Option on the business day following the
Effective Time and the payment by the Company to each such holder of a 1991
Stock Option cash in an amount equal to the product of (x) the difference
between the Merger Consideration and the exercise price of such 1991 Stock
Option, multiplied by (y) the number of Shares subject to such 1991 Stock Option
(subject to any tax withholding obligations). The 1991 Stock Options and the
1994 Stock Options are referred to collectively as the "Company Stock Options."
The 1991 Stock Option Plan and the 1994 Outside Directors Stock Option Plan are
referred to collectively as the "Company Plans." Prior to the Effective Time,
the Company shall cause to be effected amendments to the Company Plans
consistent with Section 1.11 of the Disclosure Schedule delivered by the Company
to Parent concurrently with the execution and delivery of this Agreement (the
"Company Disclosure Schedule").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent
and Acquisition as follows:
SECTION 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Section 2.1 of the Company Disclosure Schedule identifies each
subsidiary of the Company as of the date hereof and its respective jurisdiction
of incorporation or organization, as the case may be. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. The Company has heretofore
delivered to Acquisition or Parent accurate and complete copies of the
certificate of incorporation and bylaws (or similar governing documents),
as currently in effect, of the Company and its subsidiaries.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not individually or in the aggregate have a Material Adverse
Effect (as defined below) on the Company. When used in connection with the
Company or its subsidiaries, the term "Material Adverse Effect" means any change
or effect (i) that is or is reasonably likely to be materially adverse to the
business, assets, results of operations or financial condition of the Company
and its subsidiaries, taken as a whole, other than any change or effect arising
out of general economic conditions unrelated to any businesses in which the
Company is engaged, or (ii) that would, or would be reasonably likely to, impair
or materially delay the ability of the Company to consummate the transactions
contemplated hereby.
SECTION 2.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
5
(a) The authorized capital stock of the Company consists of
25,000,000 Shares, of which, as of June 20, 1998, 8,241,152 Shares were issued
and outstanding and 1,439,094 Shares were held as treasury stock, and 10,000,000
shares of preferred stock, par value $.01 per share, no shares of which are
outstanding. All of the outstanding Shares have been validly issued and are
fully paid, nonassessable and free of preemptive rights. As of June 20, 1998,
909,270 Shares were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding Company Stock Options
issued pursuant to the Company Plans. Since June 20, 1998 no shares of the
Company's capital stock have been issued other than pursuant to Company Stock
Options already in existence on such date, and since June 20, 1998 no stock
options have been granted. Except as set forth above, as of the date hereof
there are outstanding (i) no shares of capital stock of the Company, (ii) no
securities of the Company or its subsidiaries convertible into or exchangeable
for shares of capital stock of the Company, (iii) no options or other rights to
acquire from the Company or its subsidiaries and no obligations of the Company
or its subsidiaries to issue any capital stock or securities convertible into or
exchangeable for capital stock of the Company and (iv) no equity equivalent
interests in the ownership or earnings of the Company or its subsidiaries or
other similar rights (collectively "Company Securities"). There are no
outstanding obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company or any preemptive
rights with respect thereto.
(b) Except as set forth in Section 2.2 of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below) or any other limitation or restriction (including any restriction
on the right to vote or sell the same except as may be provided as a matter of
law). For purposes of this Agreement, "Lien" means, with respect to any asset
(including without limitation any security), any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such
asset.
(c) The Company owns 10,000 shares of common stock of Denali
Commercial Management Inc., an Alaska corporation ("DCMI"), representing 33-1/3%
of the outstanding shares of DCMI. The owner of the remaining shares of capital
stock of DCMI is identified on Section 2.2 of the Company Disclosure Schedule.
Except as set forth on Section 2.2 of the Company Disclosure Schedule, there are
no stockholder agreements, voting trusts or other agreements to which the
Company or any of its subsidiaries is a party relating to DCMI or obligations or
liabilities of the Company or any of its subsidiaries to DCMI.
SECTION 2.3. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board") and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
except the approval and adoption of this Agreement by the holders of a majority
of the outstanding Shares. The Company Board has taken all
6
necessary corporate actions to render the provisions of Section 203 of the DGCL
inapplicable to this Agreement, the Merger, the Stockholder Support Agreement
and the other transactions contemplated hereby and thereby. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
valid, legal and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (i) as rights to indemnity
hereunder may be limited by federal or state securities laws or the public
policies embodied therein, (ii) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally, and (iii) as the remedy of specific
performance and other forms of injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) The Company Board has resolved to recommend that the stockholders
of the Company approve and adopt this Agreement, the Merger and the other
transactions contemplated hereby.
SECTION 2.4. SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the Securities and Exchange Commission (the "SEC")
since January 1, 1995, each of which has complied in all material respects with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder each as in effect on
the dates such forms, reports and documents were filed. None of such Company SEC
Reports, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained when filed any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included or
incorporated by reference in the Company SEC Reports are in accordance with the
books and records of the Company and its subsidiaries and fairly present in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as permitted by Form 10-Q of the SEC),
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements which would not be material in amount or effect).
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any amendments
or modifications to any Company SEC Reports filed prior to the date hereof which
are required to be filed with the SEC but have not yet been filed
with the SEC.
SECTION 2.5. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
proxy statement relating to the meeting of the Company's stockholders to be held
in connection with the Merger (including any amendments and supplements thereto,
the "Proxy Statement") will, at the date mailed to stockholders of the Company
and at the time of the
7
meeting of stockholders of the Company to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they are made not misleading.
The Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 2.6. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth in Schedule 2.6 of the Company Disclosure Schedule and for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Exchange Act, state securities or blue sky
laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the filing and recordation of the Merger Certificate as required
by the DGCL, no filing with or notice to and no permit, authorization, consent
or approval of any court or tribunal, or federal, state or local administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Assuming compliance
with the matters referred to in the preceding sentence, neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective certificate of
incorporation or bylaws (or similar governing documents) of the Company or any
of its subsidiaries, (ii) except as set forth in Section 2.6 of the Company
Disclosure Schedule, result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound, (iii) except as set forth
in Section 2.6 of the Company Disclosure Schedule, violate any order, writ,
injunction or decree applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, or (iv) except as set forth in Section
2.6 of the Company Disclosure Schedule, violate any law, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, including, without limitation, the Alaska
Takeover Bid Disclosure Act except, in the case of clause (ii) or (iv), for
violations, breaches or defaults which individually or in the aggregate would
not have a Material Adverse Effect on the Company.
SECTION 2.7. NO DEFAULT. None of the Company or its subsidiaries is in
breach, default or violation (and no event has occurred or not occurred through
the Company's action or inaction or, to the knowledge of the Company, through
the action or inaction of any third parties, which with notice or the lapse of
time or both would constitute a breach, default or violation) of any term,
condition or provision of (i) its certificate of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound, (iii) any order, writ,
injunction or decree applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, or (iv) any law, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, except,
8
in the case of clause (ii) or (iv), for violations, breaches or defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
SECTION 2.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES.
(a) Except as set forth on Schedule 2.8 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has any debts,
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or disclosed or
reserved against in, a consolidated balance sheet of the Company and its
subsidiaries or in the notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied, except for (i) debts,
liabilities and obligations that were so reserved on, or disclosed or reflected
in, the consolidated balance sheet of the Company and its subsidiaries as of
March 29, 1998 and the notes thereto, included in the Quarterly Report on Form
10-Q of the Company for the quarter then ended and (ii) debts, liabilities or
obligations arising in the ordinary course of business since March 29, 1998.
(b) Except as set forth in Section 2.8 of the Company Disclosure
Schedule or as expressly contemplated by this Agreement, since March
29, 1998 there has not been:
(i) any damage, destruction or loss to any of the assets or
properties of the Company or any of its subsidiaries that, individually or in
the aggregate, has a Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of any dividend
or distribution or capital return in respect of any shares of the Company's
capital stock or any redemption, purchase or other acquisition by the Company or
any of its subsidiaries of any shares of the Company's capital stock;
(iii) any sale, assignment, transfer, lease or other
disposition or agreement to sell, assign, transfer, lease or otherwise dispose
of any of the assets of the Company or any of its subsidiaries for consideration
in the aggregate in excess of $500,000 or other than in the ordinary course of
business;
(iv) any acquisition (by merger, consolidation, or acquisition
of stock or assets) by the Company or any of its subsidiaries of any
corporation, partnership or other business organization or division thereof or
any equity interest therein for consideration or any loans or advances to any
people in excess of $50,000 in the aggregate;
(v) any incurrence of or guarantee with respect to any
indebtedness for borrowed money by the Company or any of its subsidiaries other
than pursuant to the Company's existing credit facilities in the ordinary course
of business;
(vi) any material change in any method of accounting or
accounting practice used by the Company or any of its subsidiaries, other than
such changes required by a change in law or generally accepted accounting
principles;
9
(vii) any events with respect to the Company or its
subsidiaries which, individually or in the aggregate, have or which would
reasonably be expected to have, a Material Adverse Effect on the Company;
(viii) (A) any employment, deferred compensation, severance or
similar agreement entered into or amended by the Company or any of its
subsidiaries and any employee, (B) any increase in the compensation payable or
to become payable by it to any of its directors, officers or employees, (C) any
increase in the coverage or benefits available under any vacation pay, company
awards, salary continuation or disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with such directors,
officers or employees or (D) severance pay arrangements made to, for or with
such directors, officers or employees other than, in the case of (B) and (C)
above, increases in the ordinary course of business consistent with past
practice and that in the aggregate have not resulted in a material increase in
the benefits or compensation expense of the Company or any of its subsidiaries;
(ix) revaluing in any material respect any of its assets,
including without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business;
(x) any loan or advance made by the Company or any of its
subsidiaries to any officer or director of the Company or any of its
subsidiaries, other than loans and advances of the Company made in the ordinary
course of business consistent with past practices;
(xi) any material transaction with a Related Party (other
than compensation for services rendered in the ordinary course of business); or
(xii) any agreement to take any actions specified in this Section
2.8, except for this Agreement.
SECTION 2.9. LITIGATION. Except as disclosed in the Company SEC
Reports and as set forth in Section 2.9 of the Company Disclosure Schedule,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect on the Company or would reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement. Except as disclosed in the Company SEC Reports and as set
forth in Section 2.9 of the Company Disclosure Schedule, none of the Company or
its subsidiaries nor any of their respective properties is subject to any
outstanding order, writ, injunction or decree which individually or in the
aggregate insofar as can be reasonably foreseen in the future would reasonably
be expected to have a Material Adverse Effect on the Company or would reasonably
be expected to prevent or delay the consummation of the transactions
contemplated hereby.
SECTION 2.10. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in
the Company SEC Reports, the Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for
10
the lawful conduct of their respective businesses (the "Company Permits"),
except in cases in which failures to hold such permits, licenses, variances,
exemptions, orders and approvals individually or in the aggregate would not have
a Material Adverse Effect on the Company. Except as disclosed in the Company SEC
Reports, the Company and its subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply individually or in
the aggregate would not have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Reports, the businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except that no representation or warranty
is made in this Section 2.10 with respect to Environmental Laws (as defined in
Section 2.12 below) and except for violations which individually or in the
aggregate would not have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or its subsidiaries is pending
or, to the knowledge of the Company, threatened nor, to the knowledge of the
Company, has any Governmental Entity indicated an intention to conduct the same,
other than such investigations or reviews as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 2.11 of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements and any current or former employment or executive compensation or
severance agreements, written or otherwise, maintained or contributed to or with
respect to which there is any obligation or liability for the benefit of or
relating to any employee or former employee of the Company, any trade or
business (whether or not incorporated) which is a member of a controlled group
including the Company or which is under common control with the Company within
the meaning of Section 414 of the Code (an "ERISA Affiliate"), excluding former
agreements or plans under which the Company has no remaining obligations
(together, the "Employee Plans"). The Company has made available to Parent a
copy of (i) the most recent annual report on Form 5500 filed with the Internal
Revenue Service (the "IRS") for each disclosed Employee Plan where such report
is required, (ii) the documents and instruments governing each such Employee
Plan, and (iii) the latest determination letter from the IRS with respect to
each Employee Plan which is intended to be qualified under Section 401(a) of the
Code. No event has occurred, and to the Company's knowledge, there exists no
condition or set of conditions, in connection with which the Company or any of
its subsidiaries could be subject to any liability under the terms of any
Employee Plans, ERISA, the Code or any other applicable law, including, without
limitation, any liability under Title IV of ERISA, which would individually or
in the aggregate have a Material Adverse Effect on the Company. Except as set
forth in Section 2.11(a) of the Company Disclosure Schedule or as would not
reasonably be expected to have a Material Adverse Effect on the Company, (i) all
payments required to be made by or under any Employee Plan, any related trusts
or any collective bargaining agreement have been made or are being processed in
accordance with normal operating procedures, and all amounts required to be
reflected in the Company's financial statements have been properly accrued to
date as liabilities under or with respect to each Employee Plan, (ii) the
Company has performed all obligations required to be performed by it under any
Employee Plan, (iii) each Employee Plan has been administered in compliance with
its terms and the requirements of applicable law,
11
(iv) each Employee Plan which is intended to be qualified within the meaning of
Section 401(a) of the Code has been determined by the IRS to be so qualified and
the Company knows of no fact which would adversely affect the qualified status
of any such Employee Plan, and (v) if as of the Effective Time the Company were
to suffer a "complete withdrawal" under all Employee Plans which are
"multiemployer plans" as defined in Section 3(37) of ERISA, the Company would
not incur a material liability until Title IV of ERISA.
(b) Section 2.11 of the Company Disclosure Schedule sets forth a list
of (i) all employment agreements with employees of the Company; (ii) all
agreements with consultants obligating the Company to make annual cash payments
in an amount exceeding One Hundred Thousand Dollars ($100,000) or that have a
remaining term in excess of one year or are not cancelable (without material
penalty, cost or other liability) within one year; (iii) all severance
agreements, programs and policies of the Company with or relating to its
employees except programs and policies required to be maintained by law; and
(iv) all plans, programs, agreements and other arrangements of the Company with
or relating to its employees which contain change in control provisions. The
Company has made available to Parent copies (or descriptions in detail
reasonably satisfactory to Parent) of all such agreements, plans, programs and
other arrangements.
(c) Except as disclosed in Section 2.11 of the Company Disclosure
Schedule, there will be no payment, accrual of additional benefits, acceleration
of payments or vesting in any benefit under any Employee Plan or any agreement
or arrangement disclosed under this Section 2.11 solely by reason of the
Company's entering into this Agreement or in connection with the
transactions contemplated by this Agreement.
(d) No Employee Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA provides benefits to former employees of the
Company or its ERISA Affiliates other than pursuant to Section 4980B of the
Code.
(e) There are no controversies pending or, to the knowledge of the
Company, threatened between the Company or any of its subsidiaries and any of
their respective employees, which controversies have or would reasonably be
expected to have a Material Adverse Effect on the Company. Neither the Company
nor any of its subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or its
subsidiaries except as disclosed in Section 2.11 of the Company Disclosure
Schedule. There are no strikes, slowdowns, work stoppages, lockouts or, to the
Company's knowledge, threats thereof by or with respect to any employees of the
Company or any of its subsidiaries.
(f) There are no pending or, to the knowledge of the Company,
threatened charges or complaints against the Company or its subsidiaries by
the National Labor Relations Board or any comparable state agency which, if
adversely determined, would have a Material Adverse Effect on the Company.
SECTION 2.12. ENVIRONMENTAL LAWS AND REGULATIONS.
12
(a) DEFINITIONS. The following terms, when used in this Section 2.12,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending
on the reference.
(i) "COMPANY." For purposes of this Section 2.12, the term
"Company" shall include all of its subsidiaries.
(ii) "RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment of any Hazardous Substance, and as otherwise
defined in any Environmental Law.
(iii) "HAZARDOUS SUBSTANCE" means any pollutant, contaminant,
chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive,
ignitable or flammable chemical or chemical compound or hazardous substance,
material or waste, whether solid, liquid or gas, including, without limitation,
any quantity of asbestos in any form, urea formaldehyde, PCBs, radon gas, crude
oil or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives. radioactive substance or material, pesticide waste
waters, sludges, slag and any other substance, material or waste that is subject
to regulation, control or remediation under any Environmental Laws.
(iv) "ENVIRONMENTAL LAWS" means all laws, statutes, ordinances,
regulations, rules, notice requirements, agency guidelines and orders of any
foreign, federal, state or local government and any governmental department or
agency which regulate or relate to the protection or clean-up of the
environment, the use, treatment, storage, transportation, generation,
manufacture, processing, distribution, handling or disposal of, or emission,
discharge or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether, gas,
liquid or solid), the preservation or protection of waterways, groundwater,
drinking water, air, wildlife, plants or other natural resources. Environmental
Laws shall include, without limitation, the Federal Insecticide, Fungicide, and
Rodenticide Act, Resource Conservation and Recovery Act, Clean Water Act, Safe
Drinking Water Act, Atomic Energy Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know Act, Hazardous Materials
Transportation Act and all analogous or related federal, state or local laws,
each as amended.
(iv) "ENVIRONMENTAL CONDITIONS" means the introduction
into the environment of any pollution, including, without limitation, any
contaminant, irritant or pollutant or other Hazardous Substance (whether or not
upon any Facility or former Facility or other property and whether or not such
pollution constituted at the time thereof a violation of any Environmental Law)
as a result of which the Company has or may become liable to any person or by
reason of which any Facility, former Facility or any of the Company's assets may
suffer or be subjected to any lien, whether under any Environmental Law or
common law.
(b) FACILITIES. Except as disclosed in Schedule 2.12 of the Company
Disclosure Schedule, in the Company SEC Reports or in the reports referred to in
paragraph (d) of this Section 2.12, each store, office, plant or warehouse
currently owned, operated or leased by the Company (a "Facility") is, and at all
times while owned, operated or leased by the Company, has been, and each
Facility formerly owned, operated
13
or leased by the Company was, at all times when so owned, operated or leased,
owned, leased and operated in compliance with all applicable Environmental Laws
and in a manner that will not give rise to liability under any applicable
Environmental Laws or common law, except in any such case which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Without limiting the foregoing, except as set forth in Section 2.12(b) of the
Company Disclosure Schedule, in the Company SEC Reports or in the audits and
assessments referred to in paragraph (d) of this Section 2.12, during such times
as the Company owned, leased or operated the Facilities or Facilities formerly
owned, operated or leased by the Company, (i) there is not and has not been any
Hazardous Substance used, generated, created, stored, transported, disposed of
at, or handled on, under, or about any Facility or any Facility formerly owned,
operated or leased by the Company, except for quantities of any such Hazardous
Substances stored or otherwise held on, under or about any such Facility in
compliance with all applicable Environmental Laws, (ii) the Company has at all
times used, generated, treated, stored, transported, disposed of or otherwise
handled Hazardous Substances in compliance with all applicable Environmental
Laws and in a manner that will not result in liability of the Company under any
Environmental Law or common law, and (iii) there is not now and has not been at
any time in the past during the Company's ownership, operation or tenancy any
underground or above-ground storage tank or pipeline at any Facility or Facility
formerly owned, operated or leased by the Company where the installation, use,
maintenance, repair, testing, closure or removal of such tank or pipeline was
not in compliance with all applicable Environmental Laws, except in the case of
each of clauses (i), (ii) or (iii) which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) NOTICE OF VIOLATION. Except as disclosed in Schedule 2.12 of the
Company Disclosure Schedule, in the Company SEC Reports or in the reports
referred to in paragraph (d) of this Section 2.12, (i) since July 31, 1993 the
Company has not received any written notice of alleged, actual or potential
responsibility for, or any written inquiry or investigation regarding any
Release or threatened Release of any Hazardous Substance at any Facilities or
any Facilities formerly owned, operated or leased by the Company or at any
offsite location where Hazardous Substances generated by the Company have been
disposed, which notice, investigation or inquiry has not been withdrawn or
terminated and (ii) the Company has received no written notice of any other
claim, demand or action by any individual or entity alleging any actual or
threatened injury or damage to any person, property, natural resource or the
environment arising from or relating to any Release or threatened Release of any
Hazardous Substances at, on, under, in, to or from any Facilities or any
Facilities formerly owned, operated or leased by the Company, or in connection
with any operations or activities of the Company, except in the case of each of
clauses (i) and (ii) which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(d) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and correct
copies of the written reports of all environmental audits or assessments which
have been conducted since January 1, 1993 at any Facility or any Facility
formerly owned, operated or leased by the Company on behalf of the Company and
which are in the possession or control of the Company have been delivered to
Parent and Acquisition, and a list of all such reports is set forth in Section
2.12 of the Company Disclosure Schedule.
(e) ENVIRONMENTAL CONDITIONS. Except as disclosed in Schedule 2.12 of
the Company Disclosure Schedule, in the Company SEC Reports or in the reports
referred to in paragraph (d) of this Section 2.12, there are no present or past
14
Environmental Conditions in any way relating to the Company's business or, to
the Company's knowledge, at any Facility or former Facility, except in any such
case which would not, individually or in the aggregate, have a Material
Adverse Effect.
(f) RELEASES OR WAIVERS. The Company has not released any other
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition, except in any such case which would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.13 TAXES.
(a) DEFINITIONS. For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means all federal,
state, local, foreign and other net income, net worth, gross income, gross
receipts, value added, sales, use, ad valorem, transfer and gains, capital
stock, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, social security, workers or unemployment compensation,
excise, severance, stamp, utility, occupation, premium, real or personal
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto; and
(ii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document required to be filed
with any Tax authority or agency.
(b) The Company and its subsidiaries have accurately prepared and
timely filed all Tax Returns they are required to have filed (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so). Such Tax Returns are true and correct in all material
respects and do not contain a disclosure statement under Section 6662 of the
Code (or any predecessor provision or comparable provision of state, local or
foreign law). The Company and its subsidiaries have paid all Taxes due in
connection with or with respect to the periods or transactions covered by such
Tax Returns and have paid all other material Taxes as are due from the Company
and its subsidiaries or for which they could be liable (whether to taxing
authorities or to other persons or entities), except Taxes that are being
contested in good faith by appropriate proceedings and for which the Company has
established and is maintaining reserves to the extent currently required by
GAAP.
(c) No material claim for assessment or collection of Taxes is
presently being asserted against the Company or its subsidiaries and neither the
Company nor any of its subsidiaries is a party to any pending action,
proceeding, or investigation by any governmental or other taxing authority nor
does the Company have knowledge of any such threatened action, proceeding or
investigation. There are no other material Taxes that would be due from the
Company or its subsidiaries if assessed by a taxing authority, except Taxes with
respect to which the Company has established and is maintaining reserves to the
extent required by GAAP.
(d) Except as set forth in Schedule 2.13, neither the Company nor any
of its subsidiaries has (i) granted any waiver of any statute of limitations
with respect to,
15
or any extension of a period for the assessment of, any Tax, or (ii) requested
any extension of time within which to file any federal income Tax Return or any
state income or franchise Tax Return, which Tax Return has not been filed as of
the date hereof,
(e) The Tax Returns of the Company and its subsidiaries have been
audited or settled or are closed to assessment for the periods and to the
extent set forth in Schedule 2.13(e).
(f) Neither the Company nor any of its subsidiaries (i) is a party to
or bound by (nor will it become a party to or become bound by) any Tax
indemnity, Tax sharing, Tax allocation or similar agreement or arrangement (or
administrative or accounting practice having substantially the same effect);
(ii) has filed a consent under section 341(f) of the Code (or any corresponding
provision of state, local or foreign income tax law) or agreed to have section
341(f) of the Code (or any corresponding provision of state, local, or foreign
income tax law) apply to any disposition of any asset owned by it; (iii) has
agreed to make or is required to make any material adjustment under section
481(a) of the Code; (iv) has been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code (other than the
affiliated group of which the Company is the common parent corporation); (v)
owns material assets that directly; indirectly secure debt the interest on which
is tax-exempt under section 103(a) of the Code, (vi) is obligated under any
agreements in connection with industrial development bonds or other obligations
with respect to which the excludability from gross income of the holder for
federal or state income tax purposes would be affected by the transactions
contemplated hereunder, or (vii) owns any property of a character, the indirect
transfer of which pursuant to this Agreement, would give rise to any material
documentary, stamp or other transfer tax.
(g) Neither the Company nor any of its subsidiaries is, or has been,
a United States real property holding corporation (as defined in section
897(c)(2) of the Code) during the applicable period specified in section
897(c)(1)(A)(ii) of the Code, and, to the knowledge of the Company, no foreign
person directly or indirectly holds (within the meaning of section 897(c)(3) of
the Code) more than five percent of the stock of the Company.
(h) All material Taxes that the Company is required by law to
withhold and collect have been duly withheld or collected and have been timely
paid over to the appropriate governmental authorities to the extent due and
payable.
(i) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in connection with this Agreement or any change
of control of the Company or any of its subsidiaries, in the payment of any
material "excess parachute payments" within the meaning of Section 28OG of
the Code.
SECTION 2.14. INTELLECTUAL PROPERTY; SOFTWARE.
(a) Each of the Company and its subsidiaries owns or possesses
adequate licenses or other valid rights to use all existing United States and
foreign patents, trademarks, trade names, service marks, copyrights, trade
secrets and applications therefor (the "Company Intellectual Property Rights"),
except where the failure to own or
16
possess valid rights to use such Company Intellectual Property Rights would not
have a Material Adverse Effect on the Company.
(b) The validity of the Company Intellectual Property Rights and the
title thereto of the Company or any subsidiary, as the case may be, is not being
questioned in any pending litigation proceeding to which the Company or any
subsidiary is a party nor, to the knowledge of the Company, is any such
litigation proceeding threatened. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company and except as set forth in Section 2.14 of the Company Disclosure
Schedule, the conduct of the business of the Company and its subsidiaries as now
conducted does not, to the knowledge of the Company, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others, and the
consummation of the transactions completed by this Agreement will not result in
the loss or impairment of any Company Intellectual Property Rights.
SECTION 2.15. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve and adopt this
Agreement.
SECTION 2.16. OPINION OF FINANCIAL ADVISER. Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation (the "Company Financial Adviser") has delivered
to the Company Board its written opinion dated the date of this Agreement to the
effect that as of such date the Merger Consideration is fair to the holders of
Shares from a financial point of view.
SECTION 2.17. BROKERS. No broker, finder or investment banker (other
than the Company Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has made available to Parent a true and complete copy of the letter
agreement dated March 20, 1998 between the Company and the Company Financial
Advisor, which is the only agreement pursuant to which the Company is obligated
to make payments to the Company Financial Advisor in connection with the
transactions contemplated by this Agreement.
SECTION 2.18. RELATED PARTY TRANSACTIONS. Except as set forth in the
Company SEC Reports or Section 2.18 of the Company Disclosure Schedule, no
beneficial owner of 5% or more of the Company's outstanding capital stock or
officer or director of the Company or any person (other than the Company) in
which any such beneficial owner owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all such persons) (collectively, "Related
Parties") has any interest in: (i) any contract, arrangement or understanding
with, or relating to, the business or operations of, the Company or any of its
subsidiaries; (ii) any loan, arrangement, understanding. agreement or contract
for or relating to indebtedness of the Company or any of its subsidiaries; or
(iii) any property (real, personal or mixed), tangible or intangible, used in
the business or operations of the Company or any of its subsidiaries, excluding
any such contract, arrangement, understanding or agreement constituting an
Employee Plan. Following the Effective Time, except for obligations set forth in
this Agreement, neither the Company nor any of its subsidiaries will have any
obligations to any Related Party except for (i) accrued salary for the pay
period commencing immediately prior to the Effective Time and (ii) the
17
obligations set forth in the Company SEC Reports and Section 2.18 of the Company
Disclosure Schedule.
SECTION 2.19. ASSETS.
(a) The assets and properties of the Company and its subsidiaries,
considered as a whole, constitute all of the assets and properties which are
reasonably required for the business and operations of the Company and its
subsidiaries as presently conducted. The Company and its subsidiaries have good
and marketable title to or a valid leasehold estate in (i) all personal
properties and assets reflected on the Company's balance sheet at March 29, 1998
(except for properties or assets subsequently sold in the ordinary course of
business consistent with past practice), except as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company, and (ii) (A) all
Carrs Quality Centers (other than the Carrs Quality Center located in Kenai),
(B) the distribution center owned by the Company located in Anchorage, Alaska
and (C) other stores operated by the Company and its subsidiaries which
accounted for not less than 90% of the revenues generated by all such other
stores for the twelve month period ended June 30, 1998, in each case, free and
clear of all Liens (other than Permitted Liens and rights, obligations and
encumbrances arising under the SAA).
(b) Section 2.19 of the Company Disclosure Schedule sets forth (i) a
complete and accurate list of each improved and unimproved real property (a
"Property") and Facility owned or leased by the Company or any of its
subsidiaries, and the current use of such Property or Facility and indicating
whether the Property or Facility is owned or leased, (ii) a complete and
accurate list of all leases pursuant to which the Company or any of its
subsidiaries lease personal property and which require an annual expenditure by
the Company or any of its subsidiaries individually in excess of $250,000 or
which are not cancelable (without material penalty, cost or other liability)
within one year and (iii) with respect to each lease for real property, the term
(including renewal options) and current fixed rent.
(c) There are no pending or, to the knowledge of the Company,
threatened condemnation or similar proceedings relating to any of the Properties
or Facilities of the Company and its subsidiaries, except for such proceedings
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
SECTION 2.20. CONTRACTS. Section 2.20 of the Company Disclosure
Schedule contains a complete and accurate list of all contracts (written or
oral), undertakings, commitments or agreements (other than contracts,
undertakings, commitments or agreements for employee benefit matters set forth
in Section 2.11 of the Company Disclosure Schedule and real property leases set
forth in Section 2.19 of the Company Disclosure Schedule) of the following
categories to which the Company or any of its subsidiaries is a party or by
which any of them is bound (collectively, and together with the contracts,
undertakings, commitments or agreements for employee benefit matters set forth
in Section 2.11 of the Company Disclosure Schedule and the real property leases
set forth in Section 2.19 of the Company Disclosure Schedule, the "Contracts"):
(a) Contracts made in the ordinary course of business requiring
annual expenditures by or liabilities of the Company and its subsidiaries in
excess of $500,000 which have a remaining term in excess of one hundred eighty
(180) days or are not
18
cancelable (without material penalty, cost
or other liability) within one hundred eighty (180) days;
(b) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money, whether as
borrower, lender or guarantor, in excess of $250,000.
(c) Contracts containing covenants limiting the freedom of the
Company or any of its subsidiaries to engage in any line of business or compete
with any person or operate at any location;
(d) joint venture or partnership agreements or joint development or
similar agreements pursuant to which any third party is entitled to develop any
Property and/or Facility on behalf of the Company or its subsidiaries;
(e) Contracts with any federal, state or local government which have
a remaining term in excess of one year or are not cancelable (without material
penalty, cost or other liability) within one year; and
(f) any other Contract that is material to the Company and its
subsidiaries, taken as a whole.
Except as set forth in Schedule 2.20 of the Company Disclosure
Schedule, true and complete copies of the written Contracts and descriptions of
verbal Contracts, if any, have been delivered or made available to Parent. Each
of the Contracts is a valid and binding obligation of the Company and, to the
Company's knowledge without any investigation, the other parties thereto,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization, arrangement or similar laws affecting creditors' rights
generally and by general principles of equity. To the knowledge of the Company,
except for the execution of this Agreement and the Stockholder Support Agreement
and the consummation of the transactions contemplated hereby and thereby, no
event has occurred which would, on notice or lapse of time or both, entitle the
holder of any indebtedness issued pursuant to a Contract identified in Schedule
2.20 of the Company Disclosure Schedule in response to paragraph (b) above to
accelerate, or which does accelerate, the maturity of any such indebtedness.
Section 2.21. SHARED APPRECIATION AGREEMENT.
(a) The Company has delivered to Parent a true and complete copy of
the Shared Appreciation Agreement (the "SAA") referred to in the Company SEC
Reports and has made available to Parent books and records of the Company
reflecting the information required by Section 1.3 of the SAA and the draft
appraisals prepared in 1994, which are the most recent appraisals undertaken on
behalf of the Company with respect to the Properties (as defined in the SAA).
(b) Neither the Company nor its Affiliates (as defined in the SAA)
has paid or has been obligated to pay any amounts pursuant to Section 1.2 of the
SAA and no
19
amount shall be due or payable pursuant to Section 1.2 of the SAA as a result of
consummation of the transactions contemplated by this Agreement.
SECTION 2.22. PAYMENTS. Neither the Company nor any of its
subsidiaries, nor, to the knowledge of the Company, any of their respective
representatives acting on their behalf, have paid or delivered any fee,
commission or other sum of money or property to any finder, agent, government
official or other party, in the United States or any other country which the
Company has any reason to believe to have been illegal under any federal, state
or local laws of the United States or to the Company's knowledge, any other
country having jurisdiction. Neither the Company nor any of its subsidiaries
nor, to the knowledge of the Company, any of their respective representatives
acting on their behalf, have accepted or received any unlawful contributions,
payments, gifts or expenditures. Neither the Company nor any of its subsidiaries
have participated in any boycotts.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted.
Parent has heretofore delivered to the Company accurate and complete copies of
the certificate of incorporation and bylaws (or similar governing document) as
currently in effect of Parent and Acquisition.
(b) Each of Parent and Acquisition is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on Parent. When used in connection with
Parent or Acquisition the term "Material Adverse Effect" means any change or
effect that (i) is or is reasonably likely to be materially adverse to the
business, assets, results of operations or financial condition of Parent and its
subsidiaries, taken as a whole, other than any change or effect arising out of
general economic conditions unrelated to any business in which Parent,
Acquisition or Parent's other subsidiaries are engaged or (ii) that would, or
would be reasonably likely to, impair or materially delay the ability
of Parent and/or Acquisition to consummate the transactions contemplated hereby.
SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated
20
hereby have been duly and validly authorized by the boards of directors of
Parent (the "Parent Board") and Acquisition (the "Acquisition Board") and by
Parent (or a wholly owned subsidiary of Parent) as the sole stockholder of
Acquisition and no other corporate proceedings on the part of Parent or
Acquisition are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition
enforceable against each of Parent and Acquisition in accordance with its
terms, except (i) as rights to indemnity hereunder may be limited by federal
or state securities laws or the public policies embodied therein, (ii) as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally, and (iii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
SECTION 3.3. SEC REPORTS; FINANCIAL STATEMENTS. Parent's most recent
annual report on Form 10-K (the "Form 10-K" ) filed with the SEC, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, did not contain when filed any untrue
statement of a material fact or omit to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading. The audited consolidated financial statements of Parent included in
the Form 10-K fairly present in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto) the consolidated financial position of Parent and its
consolidated subsidiaries as of the date thereof and their consolidated results
of operations and changes in financial position for the period then ended.
SECTION 3.4. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent or Acquisition for inclusion or incorporation by
reference to the Proxy Statement will, at the date mailed to stockholders and at
the times of the meeting or meetings of stockholders of the Company to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading.
SECTION 3.5. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under and other applicable requirements of the Exchange Act, state securities or
blue sky laws, the HSR Act and the filing and recordation of the Merger
Certificate as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Acquisition of this Agreement or the
consummation by Parent or Acquisition of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not, individually or
in the aggregate, have a Material Adverse Effect on Parent. Neither the
execution, delivery and performance of this Agreement by Parent or Acquisition
nor the consummation by Parent or Acquisition of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or bylaws (or similar governing
documents) of Parent or Acquisition, (ii) to the knowledge of the Parent, result
in a violation or breach of or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of
21
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or Acquisition is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Parent or Acquisition or
any of their respective properties or assets except, in the case of clause (ii)
or (iii), for violations, breaches or defaults which would not, individually or
in the aggregate, have a Material Adverse Effect on Parent.
SECTION 3.6. NO DEFAULT. None of Parent, Acquisition, or any of
Parent's other subsidiaries is in breach, default or violation (and, to the
knowledge of the Parent, no event has occurred which with notice or the lapse of
time or both would constitute a breach, default or violation) of any term,
condition or provision of (i) its certificate of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent,
Acquisition, or any of Parent's other subsidiaries is now a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent, Acquisition, or any of Parent's other subsidiaries or any
of their respective properties or assets, except for violations, breaches or
defaults that do not and would not, or would not be reasonably likely to,
individually or in the aggregate, impair or materially delay the ability of
Parent and/or Acquisition to consummate the transactions contemplated hereby.
SECTION 3.7. LITIGATION. Except as disclosed in the Parent SEC
Reports, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of Parent, threatened against Parent, Acquisition, or any
of Parent's other subsidiaries or any of their respective properties or assets
before any Governmental Entity which individually or in the aggregate would
reasonably be expected to prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as disclosed in the Parent SEC Reports,
none of Parent, Acquisition, or Parent's other subsidiaries is subject to any
outstanding order, writ, injunction or decree which insofar as can be reasonably
foreseen in the future would reasonably be expected to prevent or delay the
consummation of the transactions contemplated hereby.
SECTION 3.8. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Acquisition.
SECTION 3.9. NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization of the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
SECTION 3.10. FINANCING. Parent or Acquisition has sufficient
capital resources to enable Acquisition to effect the Merger as contemplated
herein at the Effective Time.
22
ARTICLE 4
COVENANTS
SECTION 4.1. CONDUCT OF BUSINESS. Except as contemplated by this
Agreement or as described in Section 4.1 of the Company Disclosure Schedule,
during the period from the date hereof to the Effective Time the Company will
and will cause each of its subsidiaries to conduct its operations in the
ordinary course of business consistent with past practice and seek to preserve
its relationships with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement, or as described in Section 4.1 of the
Company Disclosure Schedule, prior to the Effective Time, neither the Company
nor any of its subsidiaries will, without the prior written consent of Parent
and Acquisition:
(a) amend its certificate of incorporation or bylaws (or
other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver 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)
any stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights) except for the issuance and sale of Shares pursuant to
options previously granted under the Company Plans;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution or capital
return (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any of
its securities or any securities of any of subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure of ownership of any
subsidiary;
(f) (A) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under the Company's existing
credit facilities in the ordinary course of business; (B) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person (other than
obligations of subsidiaries of the Company incurred in the ordinary course of
business) except pursuant to existing credit facilities; (C) make any loans,
advances or capital contributions to or investments in any other person (other
than to subsidiaries of the Company in the ordinary course of business
consistent with past practice); (D) pledge or otherwise encumber shares of
capital stock of the Company or any of its subsidiaries; or (E) mortgage or
pledge any of its material
23
assets, tangible or intangible, or create or suffer to exist any Lien thereupon
(other than Tax Liens for Taxes not yet due);
(g) except as may be required by law, enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee or increase in any manner the
compensation or fringe benefits payable or to become payable to any director,
officer or employee, or increase the coverage or benefits available under any
severance pay, termination pay, vacation pay, salary continuation or disability,
sick leave, deferred compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with such directors, officers or employees, or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); PROVIDED, HOWEVER, that this paragraph (g) shall not prevent
the Company or any of its subsidiaries from (A) entering into employment
agreements with new officers hired to replace departing employees, provided that
any such new officer, upon termination of employment, shall be entitled only to
the benefits provided under the Xxxx-Xxxxxxxxx Foods Co. 1998 Severance Plan or
(B) increasing annual compensation and/or providing for or amending bonus
arrangements for employees in connection with promotions or advancements of such
employees or the assumption by such employees of significant additional
responsibilities, in each case in amounts consistent with past practice;
(h) sell, assign, transfer, lease or dispose of any assets in
any single transaction or series of related transactions for consideration
individually in excess of Two Hundred Fifty Thousand Dollars
($250,000), other than in the ordinary course of business;
(i) except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(j) revalue in any material respect any of its assets
including without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business;
(k) (A) acquire (by merger, consolidation or acquisition
of stock or assets) any corporation, partnership or other business organization
or division thereof or any equity interest therein; (B) enter into any contract
or agreement which requires annual expenditures by the Company or its
subsidiaries in excess of Five Hundred Thousand Dollars ($500,000) or which has
a term in excess of one year or is not cancelable (without material penalty cost
or liability) within one year; (C) enter into or renew, without the prior
consent of Parent which shall not be unreasonably withheld, or amend or modify,
any agreement with any collective bargaining agent relating to its business,
except for agreements with respect to routine employee grievance matters in the
ordinary course of business; (D) make any material amendments or modifications
to any Contract (other than collective bargaining agreements, which shall be
covered by clause (k)(C)), any agreement with a Related Party or other agreement
filed as an exhibit
24
to any of the Company SEC Reports; (E) make any payment to a Related Party,
except in accordance with the terms of any contract or compensation to employees
in the ordinary course of business; or (F) authorize any new capital expenditure
or expenditures which in the aggregate are in excess of Five Million Dollars
($5,000,000); PROVIDED that the capital expenditures shall be consistent with
the capital plans set forth on Section 4.1 of the Company Disclosure Schedule;
and PROVIDED FURTHER that the foregoing shall not limit any capital expenditure
required pursuant to existing contracts or purchase orders;
(l) make any tax election or settle or compromise any income
tax liability which involves cost or liability to the Company in excess of
$250,000;
(m) settle or compromise any pending or threatened suit,
action or claim (A) which relates to the transactions contemplated by this
Agreement, (B) is listed on Section 2.9 of the Company Disclosure Schedule or
(C) the settlement or compromise of which could have a Material Adverse Effect
on the Company; or
(n) take or agree in writing or otherwise to take any of the
actions described in Sections 4.1(a) through 4.1(m) or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect.
SECTION 4.2. PREPARATION OF THE PROXY STATEMENT. The Company shall
promptly prepare and file with the SEC the Proxy Statement. Parent and
Acquisition agree to cooperate in such preparation and to provide promptly to
the Company all information with respect to Parent, Acquisition and the
transactions contemplated by this Agreement required to be included or
incorporated by reference therein. The Company will use its reasonable best
efforts to have cleared by the SEC and thereafter mail to its stockholders as
promptly as practicable the Proxy Statement and all other proxy materials for
the meeting of its stockholders to consider and vote upon this Agreement. Parent
shall have a right to review and comment on the Company Proxy Statement and
other proxy materials before filing with the SEC. Each of the Company and Parent
shall notify each other after the receipt by it of any written or oral comments
of the SEC, and shall promptly supply the other with copies of all
correspondence between it or any of its representatives and the SEC with respect
to any of the foregoing filings.
SECTION 4.3. OTHER POTENTIAL ACQUIRERS.
(a) The Company agrees that neither it nor any of its subsidiaries,
nor any officer, director or employee of the Company or its subsidiaries shall,
and that it shall direct and use its best efforts to cause its and its
subsidiaries' agents and representatives (including investment bankers,
attorneys or accountants) not to, directly or indirectly, encourage, solicit,
initiate, enter into or conduct discussions or negotiations with or provide any
non-public information to any person or group (other than Parent and Acquisition
or any designees of Parent and Acquisition) concerning any Third Party
Acquisition (as defined in Section 4.3(b)); PROVIDED, HOWEVER, that (i) nothing
herein shall prevent the Company Board from taking and disclosing to the
Company's stockholders a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer and otherwise
complying with such rules, PROVIDED that the Company Board shall not recommend
that the stockholders of the Company tender their Shares in connection with such
tender offer unless the Company Board by a majority vote determines in good
faith, after consultation with and based upon the advice
25
of legal counsel that there is a substantial likelihood that it is required to
do so in order to comply with its fiduciary duties; and (ii) if the Company
Board by a majority vote determines in good faith, after consultation with and
based upon the advice of legal counsel, that there is a substantial likelihood
that it is required to do so in order to comply with its fiduciary duties, the
Company Board may, and may authorize or permit any of its or its subsidiaries'
respective officers, directors, employees, representatives or agents to respond
to inquiries from, discuss with, negotiate with, and provide non-public
information to, any other person concerning a Third Party Acquisition. The
Company shall promptly notify Parent in the event it receives any proposal or
inquiry concerning a Third Party Acquisition including the terms and conditions
thereof and the identity of the party submitting such proposal.
(b) Except as set forth in this Section 4.3(b), the Company Board
shall not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if the
Company Board by a majority vote determines in good faith, after consultation
with and based upon the advice of legal counsel that there is a substantial
likelihood that it is required to do so in order to comply with its fiduciary
duties, the Company Board may withdraw its recommendation of the transactions
contemplated hereby or approve or recommend a Superior Proposal; PROVIDED,
HOWEVER, that the Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until this Agreement is terminated
pursuant to Section 6.1 and the Company has paid all amounts due pursuant to
Section 6.3. For the purposes of this Agreement, "Third Party Acquisition" means
the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) other than Parent,
Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of more than 35% of the total assets of the Company and its
subsidiaries taken as a whole; (iii) the acquisition by a Third Party of
beneficial ownership of 35% or more of the outstanding Shares; (iv) the adoption
by the Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by the Company or any of its
subsidiaries of more than 35% of the outstanding Shares; or (vi) the acquisition
by the Company or any subsidiary by merger, purchase of stock or assets, joint
venture or otherwise of a direct or indirect ownership interest or investment in
any business the annual revenues, net income or assets of which is equal or
greater than 35% of the annual revenues, net income or assets of the Company.
For purposes of this Agreement a "Superior Proposal" means any bona fide
proposal to acquire directly or indirectly for consideration consisting of cash
and/or securities more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Company Board by a majority vote determines in its good faith judgment (taking
into consideration advice of a financial adviser of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger.
SECTION 4.4. COMFORT LETTER. The Company shall use all reasonable
efforts to cause KPMG Peat Marwick LLP to deliver a letter dated not more than
five days prior to the date on which the Proxy Statement shall be mailed to the
stockholders of the Company and addressed to itself and Parent and their
respective boards of directors in form and substance reasonably satisfactory to
Parent and customary in scope and substance for agreed-upon procedures letters
delivered by independent public accountants in connection with proxy statements
similar to the Proxy Statement.
26
SECTION 4.5. MEETING OF STOCKHOLDERS. The Company shall take all
action necessary in accordance with the DGCL and its certificate of
incorporation and bylaws to duly call, give notice of, convene and hold a
meeting of its stockholders as promptly as practicable to consider and vote upon
the adoption and approval of this Agreement and the transactions contemplated
hereby. The stockholder vote required for the adoption and approval of this
Agreement is the affirmative vote of a majority of the outstanding Shares. The
Company will, through the Company Board, recommend to its stockholders approval
of such matters; PROVIDED, HOWEVER, that the Company Board may withdraw its
recommendation in accordance with the provisions of Section 4.3(b).
SECTION 4.6. ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time, the Company will
give Parent and its authorized representatives reasonable access to plants,
offices, warehouses and other facilities upon reasonable notice and to all books
and records of itself and its subsidiaries, will permit the Parent to make such
inspections as the Parent may reasonably require and will cause its officers and
those of its subsidiaries to furnish the Parent with such financial and
operating data and other information with respect to the business and properties
of the Company and its subsidiaries as the Parent may from time to time
reasonably request; PROVIDED, HOWEVER, the parties hereto agree that no such
data or other information shall be made available to Parent or Acquisition to
the extent that it is competitively sensitive or the exchange of such
information between competitors would result in a violation of any applicable
law, rule or regulation.
(b) Parent and Acquisition will hold and will cause their consultants
and advisers to hold in confidence all documents and information furnished to
them by or on behalf of the Company in connection with the transactions
contemplated by this Agreement in accordance with the terms of that certain
letter agreement regarding confidentiality from the Company Financial Advisor
dated April 8, 1998 and executed by Parent on April 9, 1998 (the
"Confidentiality Agreement"), provided that obligations regarding public
disclosures with respect to the transactions contemplated by this Agreement
shall be governed by Section 4.9 hereof and Parent, Acquisition and their
consultants and advisors may communicate directly with the Company's Chief
Executive Officer, Chief Financial Officer and Senior Vice President-Store
Operations. The Company will hold and will cause its consultants and advisors to
hold in confidence all documents and information furnished to it by or on behalf
of Parent in connection with the transactions contemplated by this Agreement, to
the extent such documents and information would constitute "Evaluation Material"
(as defined in the Confidentiality Agreement) of Parent, in the same manner in
which Parent and Acquisition are required to treat Evaluation Material of the
Company.
SECTION 4.7. ADDITIONAL AGREEMENTS; COMMERCIALLY REASONABLE EFFORTS.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use commercially reasonable efforts to take or cause to
be taken all action and to do or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) cooperating in the preparation and filing of the Proxy
Statement, any filings that may be required under the HSR Act and any amendments
to any thereof; (ii) obtaining consents of all third parties
27
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement, estoppel certificates from lessors of the
Company and its subsidiaries and the quitclaim deed contemplated by Section 2.9
of the SAA and a certificate in form and substance reasonably satisfactory to
Parent with respect to the SAA; PROVIDED THAT neither party shall incur any
significant expense or liability or agree to any significant modification to any
contractual arrangement to obtain such consents, certificates or deed; (iii)
obtaining consents of any Governmental Entities necessary, proper or advisable
for the consummation of the transactions contemplated by this Agreement; (iv)
contesting any legal proceeding relating to the Merger and (v) executing any
additional instruments necessary to consummate the transactions contemplated
hereby. Subject to the terms and conditions of this Agreement, the Company,
Parent and Acquisition agree to use commercially reasonable efforts to cause the
Effective Time to occur as soon as practicable after the Company stockholder
vote with respect to the Merger. If at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
(b) Between the date hereof and the Effective Time, the
Company shall cooperate with Parent's efforts to negotiate and enter into
written agreements affecting Company's real estate, as Parent may deem necessary
or desirable, including, without limitation, modifications and extensions of
real estate leases and other agreements; PROVIDED, HOWEVER, that no such
agreements shall be binding on the Company prior to the Effective Time; and
provided, further, that Parent's obtaining any such modifications, extensions
and agreements shall not be a condition to the obligations of Parent and
Acquisition to consummate the Merger and the other transactions contemplated by
this Agreement. Parent will, from time to time, upon request of the Company,
advise the Company of all material agreements or arrangements entered into in
connection with the negotiation of any such modifications, extensions or
agreements.
SECTION 4.8. EMPLOYEE BENEFITS. As of the Closing, employees of the
Company will become employees of Parent or a subsidiary of Parent. Parent will
or will cause such subsidiary to provide the eligible employees of the Company
and its subsidiaries from the Effective Time until the first anniversary of the
Effective Time with compensation and employee benefits of the type described in
Section 2.11 of this Agreement (other than stock option or other plans involving
the potential issuance or purchase on the open market of securities of the
Company or of Parent) which, in the aggregate, are at least as favorable as
those currently provided by Parent and its subsidiaries, as the case may be, to
their respective employees in the markets in which the Company and its
subsidiaries operate. Parent agrees and will cause the Surviving Corporation to
agree that all obligations of the Company or any subsidiary under any "change of
control" or similar provisions relating to employees contained in any existing
contracts and all termination or severance agreements with executive officers
identified in Section 2.11 of the Company Disclosure Schedule (subject to
Section 1.11 hereof) will be honored in accordance with their terms as of the
date hereof. Notwithstanding the foregoing, except as provided in the preceding
sentence nothing contained herein shall be construed as requiring Parent or the
Surviving Corporation to continue any specific employee benefit plans or to
continue the employment of any specific person.
SECTION 4.9. PUBLIC ANNOUNCEMENTS. Parent, Acquisition and the
Company, as the case may be, will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation, the
Merger, and shall not
28
issue any such press release without the prior written consent of the other
parties, which consent shall not be unreasonably withheld, or make any such
public statement prior to consultation, except in each case as may be required
by applicable law or by obligations pursuant to any listing agreement with the
NYSE as determined by Parent, Acquisition or the Company, as the case may be
(provided that such party has used reasonable efforts to consult with and, where
necessary, seek the consent of, the other party and allow such other party to
comment thereon).
SECTION 4.10. INDEMNIFICATION.
(a) After the Effective Time, the Surviving Corporation shall
indemnify and hold harmless (and shall also advance expenses as incurred to the
fullest extent permitted under applicable law to, upon receipt of an undertaking
to repay such advances as required by the DGCL) each person who is now or has
been prior to the date hereof or who becomes prior to the Effective Time an
officer or director of the Company or any of the Company's subsidiaries (the
"Indemnified Persons") against (i) all losses, claims, damages, costs, expenses
(including, without limitation, reasonable counsel fees and expenses),
settlement payments or liabilities arising out of or in connection with any
claim, demand, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was an officer or director of the Company or any of its subsidiaries whether or
not pertaining to any matter existing or occurring at or prior to the Effective
Time and whether or not asserted or claimed prior to or at or after the
Effective Time ("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on or arising in whole or in part out of or pertaining
to this Agreement or the transactions contemplated hereby, in each case to the
fullest extent required or permitted under applicable law or under the Surviving
Corporation's certificate of incorporation or bylaws. This Section 4.10 shall
not limit or otherwise adversely affect any rights any Indemnified Person may
have under any agreement with the Company or under the Company's certificate of
incorporation or bylaws and from and after the Effective Time, the Surviving
Corporation shall fulfill, assume and honor in all respects the obligations of
the Company pursuant to the Company's certificate of incorporation, bylaws and
any indemnification agreement between the Company and any of the Company's
directors and officers existing and in force as of the date of this Agreement,
to the extent permitted under applicable law. The Surviving Corporation shall
not be liable for any settlement effected without its written consent, which
consent shall not be unreasonably withheld. The Indemnified Persons as a group
may retain only one law firm to represent them with respect to any single action
unless there are one or more defenses available to an Indemnified Person which
may be inconsistent with those of any other Indemnified Person or there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Persons,
in which case this limitation shall not apply. The Surviving Corporation shall
not be liable for any settlement effected without its written consent, which
consent shall not be unreasonably withheld. Parent hereby guarantees the payment
and performance of the Surviving Corporation's obligations in this Section 4.10.
Each Indemnified Person (and their respective heirs and estates) is intended to
be a third party beneficiary of this Section 4.10 and may specifically enforce
its terms.
(b) Parent or the Surviving Corporation shall purchase a six-year
extended reporting period endorsement ("reporting tail coverage") under the
Company's existing directors' and officers' liability insurance coverage (or as
much coverage as can be obtained for a total not in excess of 150% of the
Current Premium), PROVIDED THAT such reporting tail coverage shall extend the
director and officer liability coverage in force as
29
of the date hereof from the Effective Time on terms, that in all material
respects, are no less advantageous to the intended beneficiaries thereof than
the existing officers' and directors' liability insurance. "Current Premium"
shall mean the last annual premium paid prior to the date hereof for the
existing officers' and directors' liability insurance.
(c) If the Parent or the Surviving Corporation or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then, and in each such case, proper provisions shall be made so
that the respective successors and assigns of Parent and the Surviving
Corporation shall assume all of the obligations set forth in this Section.
SECTION 4.11 RESIGNATION OF OFFICERS AND DIRECTORS. Each of the
directors and officers of the Company and its subsidiaries shall tender their
resignations effective on or before the Effective Time.
SECTION 4.12 NOTICE OF CERTAIN EVENTS. Each of Parent and the
Company shall promptly notify each other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting such party which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 2.9 or Section 3.8, as the case may be, or which relate to the
consummation of the transactions contemplated by this Agreement; or
(d) the occurrence or nonoccurrence of any event which would
reasonably be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect; provided that the
delivery of any notice pursuant to this Section 4.13 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 4.13. SAA. The Company will comply with the terms,
conditions and provisions of the SAA prior to the Effective Time. In connection
therewith, the Company will (a) select appraisers for the Properties (as defined
in the SAA) that are reasonably acceptable to Parent, (b) provide Parent with
copies of preliminary appraisals no later than 60 days prior to the Closing, and
(c) consult with Parent regarding the contents of the appraisals prior to
finalizing such appraisals in order to assure the accuracy, completeness and
reasonableness thereof. The Company and Parent will promptly deliver to each
other copies of any written communications and reports of any non-written
communications received between the date hereof and the
30
Effective Time by the Company or any of its Affiliates on the one hand (as
defined in the SAA) or Parent or any of its affiliates on the other hand
relating to the SAA.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or Governmental Entity which prohibits, restrains, enjoins or restricts
the consummation of the Merger, and no legal proceeding shall be pending in
which a Governmental Entity seeks to prohibit, restrain, enjoin or restrict the
consummation of the Merger; and
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received.
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement or in any other document delivered pursuant hereto
shall be true and correct at and as of the Effective Time (except to the extent
such representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date) and, at the
Closing, Parent and Acquisition shall have delivered to the Company a
certificate to that effect;
(b) each of the covenants and obligations of Parent and Acquisition
to be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition
shall have delivered to the Company a certificate to that effect;
(c) Parent shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not, in the reasonable
opinion of the Company, individually or in the aggregate, have a
Material Adverse Effect on Parent.
31
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION.
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of the Company contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct at and
as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent such representations specifically related
to an earlier date, in which case such representations shall be true and correct
as of such earlier date) and, at the Closing, the Company shall have delivered
to Parent and Acquisition a certificate to that effect;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect;
(c) the Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any subsidiary of the Company
under any loan or credit agreement, note, mortgage, indenture, lease, license or
other agreement or instrument, except for those for which failure to obtain such
consents and approvals would not, in the reasonable opinion of Parent,
individually or in the aggregate, have a Material Adverse Effect on the Company;
PROVIDED THAT with respect to real property leases, this condition shall be
deemed satisfied only if the Company shall have obtained landlord consents for
real property leases with respect to (i) all leased Carrs Quality Centers (other
than the Carrs Quality Center located in Kenai) and (ii) other leased stores
operated by the Company and its subsidiaries which, together with other owned
stores, account for not less than 90% of the revenues generated by all such
other stores, based on the twelve month period ended as of the date of the most
recent quarter-end as of the date of determination;
(d) the Stockholder Support Agreement shall be in full force and
effect;
(e) the Management Services Agreement (the "MSA") between the Company
and Xxxxxxx Xxxxx & Associates ("LGA") shall be terminated concurrent with the
Effective Time and the Company shall have no liability or obligation of any
nature, whether or not accrued, contingent or otherwise under the MSA or
otherwise to LGA, or any of its affiliates, except for the unpaid pro rata
portion of the annual $450,000 fee payable under the MSA through the Effective
Time; and
(f) since the date of this Agreement, there shall not have occurred
any change, event, occurrence, development or circumstance which, individually
or in the aggregate, has had, or would reasonably be expected to have, a
Material Adverse Effect on the Company.
32
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. TERMINATION. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time whether
before or after approval and adoption of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) there shall be
any law or regulation that makes consummation of the Merger illegal or otherwise
prohibited; (ii) any court of competent jurisdiction or other Governmental
Entity shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable; or
(iii) the Merger has not been consummated by January 31, 1999 (or, if as of
January 31, 1999, all necessary approvals or consents of Governmental Entities
under the HSR Act or any other antitrust statute, law, rule or regulation
required for the consummation of the transactions contemplated by this Agreement
have not been obtained, May 31, 1999); PROVIDED that no party may terminate this
Agreement pursuant to this clause (b)(iii) if such party's failure to fulfill
any of its obligations under this Agreement shall have been the reason that the
Merger shall not have been consummated on or before said date;
(c) by the Company if (i) there shall have been a material breach of
any representation or warranty on the part of Parent or Acquisition set forth in
this Agreement or if any representation or warranty of Parent or Acquisition
shall have become untrue in any material respect, in either case such that the
conditions set forth in Section 5.2(a) would be incapable of being satisfied by
January 31, 1999 (or such other date to which the date set forth in Section
6.1(b)(iii) may be extended) or (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder having
a Material Adverse Effect on Parent or materially adversely affecting (or
materially delaying) the consummation of the Merger, and, if such breach is
capable of being cured, Parent or Acquisition, as the case may be, has not cured
such breach within twenty business days after written notice by the Company
thereof; PROVIDED that the Company has not breached any of its obligations
hereunder in any material respect;
(d) by the Company, if the Company Board by a majority vote
determines in its good faith judgment, after consultation with and taking into
consideration the advice of legal counsel, that it is likely to be required to,
in order to comply with its fiduciary duties, and does, withdraw its
recommendation of the transactions contemplated hereby or approve or recommend a
Superior Proposal as provided in Section 4.3(b) of this Agreement; or
(e) by Parent and Acquisition if (i) there shall have been a breach
of any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Company shall have become
untrue in any material respect in either case such that the conditions set forth
in Section 5.3(a) would be
33
incapable of being satisfied by January 31, 1999 (or such other date to which
the date set forth in Section 6.1(b)(iii) may be extended), (ii) there shall
have been a breach by the Company of its covenants or agreements hereunder
having a Material Adverse Effect on the Company or materially adversely
affecting (or materially delaying) the consummation of the Merger, and, if such
breach is capable of being cured, the Company has not cured such breach within
twenty business days after written notice by Parent or Acquisition thereof,
PROVIDED that neither Parent nor Acquisition has breached any of their
respective obligations hereunder in any material respect, (iii) the Company
Board shall have recommended to the Company's stockholders a Superior Proposal,
(iv) the Company Board shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Merger or shall not have opposed a Third
Party Acquisition in a Schedule 14D-9 filing, (v) the Company shall have entered
into a definitive agreement with respect to a Third Party Acquisition, or (vi)
the Company shall have convened a meeting of its stockholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its stockholders.
SECTION 6.2. EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 6.2 and Section 4.6(b). Nothing contained in
this Section 6.2 shall relieve any party from liability for any breach of this
Agreement.
SECTION 6.3. FEES AND EXPENSES.
(a) In the event that this Agreement shall be terminated pursuant to
Section 6.1(d) or Section 6.1(e)(iii), (e)(iv), (e)(v) or, if another bona fide
proposal to acquire directly or indirectly for consideration consisting of cash
and/or securities more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company is outstanding on the date of the
stockholder meeting referred to in Section 6.1(e)(vi), (e)(vi), the Company
shall pay to Parent a termination fee in the amount of Four Million Dollars
($4,000,000) within five (5) business days of such a termination and, within
five business days of presentation of statements therefor, Parent's reasonable
out-of-pocket-expenses incurred in connection with the transactions contemplated
by this Agreement, PROVIDED that no such amount shall be payable if Parent shall
have materially breached its obligations hereunder.
(b) Except as otherwise provided in Section 6.3(a), each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 6.4. AMENDMENT. This Agreement may be amended by action taken
by the Company, Parent and Acquisition at any time before or after approval of
the Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement (including the schedules
hereto) may be amended only by an instrument in writing signed on behalf of the
parties hereto.
SECTION 6.5. EXTENSION; WAIVER. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies in
the
34
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
SECTION 7.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
the schedules hereto) (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise; PROVIDED, HOWEVER, that Acquisition may assign any or all
of its rights and obligations under this Agreement to any subsidiary of Parent,
but no such assignment shall relieve Acquisition of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 7.3. VALIDITY. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 7.4. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by a national overnight delivery service (E.G., Federal Express) or
by registered or certified mail (postage prepaid, return receipt requested) to
each other party as follows:
if to the Company to: XXXX-XXXXXXXXX FOODS, CO.
0000 X Xxxxxx
Xxxxxxxxx, Xxxxxx 00000
Telecopier: (000) 000-0000
Attention: President and
Chief Executive Officer
35
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to Parent or Acquisition to: SAFEWAY INC.
0000 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Senior Vice President and
General Counsel
with a copy to: XXXXXX & XXXXXXX
000 XXXXXXXXXX XXXXXX
XXXXX 0000
XXX XXXXXXXXX, XXXXXXXXXX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
SECTION 7.6. DESCRIPTIVE HEADINGS. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 7.7. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as provided in Sections 4.8, 4.10 and 7.2, nothing
in this Agreement express or implied is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 7.8. CERTAIN DEFINITIONS. For the purposes of this Agreement
the term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common control
with the first-mentioned person;
(b) "beneficial owner" or "beneficial ownership" shall have the
meaning set forth in Rule 13d-3 promulgated under the Exchange Act;
36
(c) "business day" means any day other than a day on which the New
York Stock Exchange is closed;
(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(e) "Code" means the Internal Revenue Code of 1986, as amended;
(f) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of an officer of the Company or Parent, as the
case may be;
(g) "officer" means the director of human resources, the director of
distribution, the director of the Eagle Stores and any person holding the title
of vice president or any title senior thereto;
(h) "Permitted Liens" means any lien resulting from (i) all statutory
or other liens for Taxes or assessments which not yet due or delinquent or the
validity of which are being contested in good faith by appropriate proceedings
for which adequate reserves are being maintained in accordance with GAAP; (ii)
all cashiers', workers' and repairers' liens, and other similar liens imposed by
law, incurred in the ordinary course of business, (iii) all laws and
governmental rules, regulations, ordinances and restrictions; (iv) all leases,
subleases, licenses, concessions or service contracts to which the Company or
any of its subsidiaries is a party; (v) liens identified on title policies or
preliminary title reports delivered or made available for inspection to Parent
prior to the date hereof, (vi) liens and encumbrances arising under the SAA,
(vii) liens or mortgages that secure indebtedness described in the Company
Disclosure Schedule, and (viii) all other liens, mortgages, covenants,
imperfections in title, charges, easements, restrictions and other Liens which
do not materially detract from or materially interfere with the value or present
use of the asset subject thereto or affected thereby;
(i) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(j) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
SECTION 7.9. PERSONAL LIABILITY. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
37
SECTION 7.10. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
38
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
XXXX-XXXXXXXXX FOODS CO.
By: /s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
SAFEWAY INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President and
General Counsel
ACG MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President and Secretary
39
