Annex 1
AGREEMENT AND PLAN OF MERGER
Dated as of July 2, 1997
Among
BAA PLC,
W & G ACQUISITION CORPORATION
And
DUTY FREE INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
ARTICLE I The Offer
SECTION 1.01. The Offer..................................................2
SECTION 1.02. Company Actions............................................4
ARTICLE II
The Merger
SECTION 2.01. The Merger.................................................6
SECTION 2.02. Closing....................................................6
SECTION 2.03. Effective Time.............................................6
SECTION 2.04. Charter and By-Laws........................................6
SECTION 2.05. Directors..................................................7
SECTION 2.06. Officers...................................................7
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations Exchange of Certificates
SECTION 3.01. Effect on Stock............................................7
SECTION 3.02. Exchange of Certificates...................................8
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01. Standing and Corporate Power...............................10
SECTION 4.02. Subsidiaries...............................................10
SECTION 4.03. Capital Structure..........................................11
SECTION 4.04. Authority; Noncontravention................................12
SECTION 4.05. SEC Documents; Undisclosed Liabilities.....................13
SECTION 4.06. Information Supplied.......................................14
SECTION 4.07. Absence of Certain Changes or Events.......................15
SECTION 4.08. Litigation.................................................15
SECTION 4.09. Absence of Changes in Benefit Plans........................16
SECTION 4.10. ERISA Compliance...........................................16
SECTION 4.11. Taxes......................................................18
SECTION 4.12. No Excess Parachute Payments...............................19
SECTION 4.13. Voting Requirements........................................20
SECTION 4.14. State Takeover Statutes....................................20
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SECTION 4.15. Brokers; Schedule of Fees and Expenses.....................20
SECTION 4.16. Opinion of Financial Advisor...............................20
SECTION 4.17. Intellectual Property......................................21
SECTION 4.18. Compliance with Laws.......................................21
SECTION 4.19. Environmental Protection...................................22
SECTION 4.20. Labor Relations and Employment.............................24
SECTION 4.21. Contracts..................................................25
SECTION 4.22. Inventory..................................................26
SECTION 4.23. Balance Sheet Reserves.....................................26
SECTION 4.24. Foreign Corrupt Practices Act..............................26
ARTICLE V
Representations and Warranties of Parent and Sub
SECTION 5.01. Standing and Corporate Power...............................27
SECTION 5.02. Authority; Noncontravention................................27
SECTION 5.03. Information Supplied.......................................28
SECTION 5.04. Brokers....................................................28
SECTION 5.05. Financing..................................................29
ARTICLE VI
Covenants Relating to Conduct of Business
SECTION 6.01. Conduct of Business.......................................29
SECTION 6.02. No Solicitation...........................................32
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement......34
SECTION 7.02. Access to Information; Confidentiality....................35
SECTION 7.03. Reasonable Efforts; Notification..........................35
SECTION 7.04. Stock Options.............................................36
SECTION 7.05. Indemnification...........................................37
SECTION 7.06. Directors.................................................39
SECTION 7.07. Fees and Expenses.........................................40
SECTION 7.08. Public Announcements......................................41
SECTION 7.09. Transfer Taxes............................................42
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ARTICLE VIII
Conditions Precedent 42
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. Termination...............................................43
SECTION 9.02. Effect of Termination.....................................45
SECTION 9.03. Amendment.................................................45
SECTION 9.04. Extension; Waiver.........................................45
SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver.45
ARTICLE X
General Provisions
SECTION 10.01. Nonsurvival of Representations and Warranties.............46
SECTION 10.02. Notices...................................................46
SECTION 10.03. Definitions...............................................47
SECTION 10.04. Interpretation............................................48
SECTION 10.05. Counterparts..............................................48
SECTION 10.06. Entire Agreement; No Third-Party Beneficiaries............48
SECTION 10.07. Governing Law.............................................48
SECTION 10.08. Assignment................................................49
SECTION 10.09. Enforcement...............................................49
Exhibit A Conditions of the Offer
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AGREEMENT AND PLAN OF MERGER, dated as of July 2, 1997, among BAA plc, a
corporation organized under the laws of England ("Parent"), W & G Acquisition
Corporation, a Maryland corporation ("Sub") and a wholly owned subsidiary of
Parent, and Duty Free International, Inc., a Maryland corporation (the
"Company").
WHEREAS, the respective Board of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase all the issued and outstanding
shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock"), at a price per share of Common Stock of $24, net to the seller in cash,
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Sub and certain stockholders of the Company (the "Stockholders"), are
entering into a stockholder agreement (the "Stockholders Agreement") pursuant to
which the Stockholders shall agree to take certain actions to support the
transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent and the Company are entering into a stock option agreement (the "Option
Agreement"), pursuant to which the Company has granted to Parent an irrevocable
option to purchase up to 5,434,367 newly issued shares of Common Stock (the
"Option Shares"), upon the terms and subject to the conditions of the Option
Agreement, at a price of $24 per Option Share.
WHEREAS, the Board of Directors of the Company has (a) determined that the
Offer and the Merger (as defined below) are advisable and fair to and in the
best interests of the stockholders of the Company, (b) approved (i) the
acquisition of the Company by Parent on the terms and subject to the conditions
set forth in this Agreement, (ii) the transactions contemplated by the
Stockholder Agreement and (iii) the transactions contemplated by the Option
Agreement (collectively, the "Transactions"), (c) approved the execution,
delivery and performance of this Agreement and (d) resolved to recommend accep
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tance of the Offer and approval of the Merger by such stockholders;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company (the "Merger"), on the terms
and subject to the conditions set forth in this Agreement, whereby each issued
and outstanding share of Common Stock not owned directly or indirectly by Parent
or the Company shall be converted into the right to receive the per share
consideration paid pursuant to the Offer; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Offer
SECTION 1.01. The Offer. (a) Subject to the provisions of this Agreement,
as promptly as practicable but in no event later than five business days after
the announcement of the execution of this Agreement, Sub shall, and Parent shall
cause Sub to, commence the Offer. The obligation of Sub to and of Parent to
cause Sub to, accept for payment, and pay for, any shares of Common Stock
tendered pursuant to the Offer shall be subject to the conditions set forth in
Exhibit A attached hereto and to the other conditions of this Agreement. Sub
expressly reserves the right to modify the terms of the Offer and to waive any
condition of the Offer, except that, without the consent of the Company, Sub
shall not (i) reduce the number of shares of Common Stock subject to the Offer,
(ii) reduce the price per share of Common Stock to be paid pursuant to the
Offer, (iii) modify or add to the conditions set forth in Exhibit A or otherwise
amend the Offer in any manner materially adverse to the Company's stockholders,
(iv) except as provided in the next two sentences, extend the Offer, or (v)
change the form of consideration payable in the Offer. Notwithstanding the
foregoing, Sub may, without the consent of the Company, (i) extend the Offer for
a period of not more than 10 business days beyond the initial expiration date of
the Offer (which initial expiration date shall be 20 business days following
commencement of the Offer), if on the date of such extension less than 90% of
the outstanding shares of Common Stock have been validly tendered and not
properly withdrawn pursuant to the Offer, (ii) extend the Offer from time to
time if at the initial expiration date or any extension thereof the Minimum
Tender Condition (as defined in Exhibit A) or any of the other conditions to
Sub's obligation to purchase shares of Common Stock set forth in paragraphs (a),
(b) and (e) of Exhibit A shall not be satisfied or waived, until such time as
such conditions are satisfied or waived, (iii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iv) extend the Offer for any reason for a period of not more than 10
business days beyond the latest expiration date that would otherwise be
permitted under clause (i), (ii) or (iii) of this sentence. In addition, Sub
shall at the request of the Company extend the Offer for five business days if
at any scheduled expiration date of the Offer any of the conditions to Sub's
obligation to purchase shares of Common Stock shall not be satisfied; provided,
however, that Sub shall not be required to extend the Offer beyond December 31,
1997. On the terms and subject to the conditions of the Offer and this
Agreement, Sub shall, and Parent shall cause Sub to, pay for all shares of
Common Stock validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to purchase pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer shall be made, together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or Sub with
respect to information
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supplied by the Company for inclusion in the Offer Documents. Each of Parent,
Sub and the Company shall promptly correct any information provided by it for
use in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and each of Parent and Sub
shall take all steps necessary to amend or supplement the Offer Documents and to
cause the Offer Documents as so amended or supplemented to be filed with the SEC
and to be disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Parent and Sub shall
provide the Company and its counsel in writing with any comments Parent, Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely basis
all funds necessary to purchase any shares of Common Stock that Sub becomes
obligated to purchase pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company
(the "Company Board"), at a meeting duly held, has unanimously duly adopted
resolutions (i) determining that the Offer ,the Merger and the Transactions are
advisable and fair to and in the best interests of the stockholders of the
Company, (ii) approving (A) the acquisition of the Company by Parent on the
terms and subject to the conditions set forth in this Agreement and (B) the
Offer, the Merger and the other Transactions, (iii) approving this Agreement,
(iv) amending the Company's Bylaws such that Section 3-702 of the Maryland
General Corporation Law ("MGCL") is inapplicable to the Offer, the Merger, and
the Transactions and exempting the Offer, the Merger and the Transactions from
Section 3-602 of the MGCL and (v) recommending that the stockholders of the
Company accept the Offer, tender their shares of Common Stock pursuant to the
Offer and approve the Merger; provided, however, that such approval,
determination, recommendation or other action may be withdrawn, modified or
amended in accordance with Section 6.02(b) and Section 7.01.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the recommendations described in Section
1.02(a) and shall as promptly as practicable thereafter mail the Schedule 14D-9
to the stockholders of the Com
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pany. The Schedule 14D-9 shall comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. Each of the Company, Parent
and Sub shall promptly correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company shall take all
steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company shall provide Parent
and its counsel in writing with any comments the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments.
(c) In connection with the Offer, the Company shall either (i) cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Common Stock as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and other
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Common Stock and shall furnish to Sub such
information and assistance, and of stockholders, security position listings
(including updated lists of stockholders, security position listings and
computer files) as Parent may reasonably request in communicating the Offer to
the Company's stockholders or (ii) make available to Sub the services of the
Company's transfer agent for purposes of the dissemination of the Offer
Documents and any other documents necessary to consummate the Merger. Subject to
the requirements of applicable law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent and Sub shall hold in confidence the information
contained in any such labels, listings and files, shall use such information
only in connection with the Offer, the Merger and, if this Agreement shall be
terminated, shall,
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upon request, promptly deliver to the Company any copies of such information
then in their possession.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the MGCL, Sub shall be merged
with and into the Company at the Effective Time of the Merger (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the MGCL.
SECTION 2.02. Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
Xxxxxx Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. On the Closing Date, the parties shall file
articles of merger or other appropriate documents (in any such case, the
"Articles of Merger") executed in accordance with the relevant provisions of the
MGCL and shall make all other filings or recordings required under the MGCL. The
Merger shall become effective at such time as the Articles of Merger are
accepted for record by the State Department of Assessment and Taxation of
Maryland ("SDAT"), or at such other time as Sub and the Company shall agree and
shall specify in the Articles of Merger (the time the Merger becomes effective
being the "Effective Time of the Merger").
SECTION 2.04. Charter and By-Laws. (a) The Restated Certificate of
Incorporation of the Company (the "Charter"), as in effect immediately prior to
the Effective Time shall be the charter of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
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(b) The Bylaws of Sub as in effect at the Effective Time of the Merger
shall be the Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
SECTION 2.05. Directors. The directors of Sub at the Effective Time of the
Merger shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 2.06. Officers. The officers of the Company at the Effective Time
of the Merger shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
Effect of the Merger on the Stock of the Constituent Corporations;
Exchange of Certificates
SECTION 3.01. Effect on Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock or any shares of capital stock of Sub:
(a) Each issued and outstanding share of the stock of Sub shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Each share of Common Stock that is owned by any subsidiary of the
Company and each share of Common Stock that is owned by Parent, Sub or any
other subsidiary of Parent shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) Each issued and outstanding share of Common Stock shall be
converted into the right to receive from the Surviving Corporation in cash,
without interest, the price per share of Common Stock paid pursuant to the
Offer (the "Merger Consideration"). As of the Effective Time of the Merger,
all such shares of Common Stock shall no longer be outstanding and shall
automatically be canceled
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and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration,
without interest.
SECTION 3.02. Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration upon surrender of certificates representing
Common Stock.
(b) Parent To Provide Funds. Parent shall take all steps necessary to
enable and cause the Surviving Corporation to provide to the Paying Agent on a
timely basis, immediately following the Effective Time of the Merger, all the
funds necessary to pay for the shares of Common Stock pursuant to Section 3.01,
it being understood that any and all interest earned on funds made available to
the Paying Agent in accordance with this Agreement shall be turned over to
Parent.
(c) Exchange Procedure. As soon as reasonably practicable after the
Effective Time of the Merger, the Paying Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time of the Merger represented outstanding shares of Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 3.01 (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares of Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Common Stock which is not registered
in the transfer records of the Company, payment may be made to a per
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son other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.02, each Certificate shall
be deemed at any time after the Effective Time of the Merger to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No interest
shall be paid or accrue on the cash payable upon the surrender of any
Certificate.
(d) No Further Ownership Rights in Common Stock. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Common Stock theretofore represented by such Certificates, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Common Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article
III.
(e) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time of the Merger (or immediately prior to such earlier date on
which any payment pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 4.04)),
the payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
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ARTICLE IV
Representations and Warranties
of the Company
The Company represents and warrants to Parent and Sub, except as disclosed
in the SEC Documents (as defined below) or in the Disclosure Schedule attached
hereto (the "Disclosure Schedule") as follows:
SECTION 4.01. Standing and Corporate Power. Each of the Company and each of
its Significant Subsidiaries (as defined below) is a corporation validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its Significant
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect on
the business, properties, assets, condition (financial or otherwise), or results
of operations or prospects of the Company and its subsidiaries taken as a whole
other than as the result of currency exchange rate fluctuations, customs, tax
and duty law changes and changes relating to the economy generally or to the
Company's industry in general and not specifically relating to the Company or
any of its Subsidiaries (a "Company Material Adverse Effect"). The Company has
delivered to Parent complete and correct copies of its Restated Charter and
By-laws and the certificates of incorporation and by-laws of its Significant
Subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "Significant Subsidiary" means any subsidiary of
the Company that constitutes a significant subsidiary within the meaning of Rule
1-02 of Regulation S-X of the SEC.
SECTION 4.02. Subsidiaries. Section 4.02 of the Disclosure Schedule lists
each subsidiary of the Company and indicates those subsidiaries that constitute
Significant Subsidiaries. All the outstanding shares of capital stock of, or
other equity interests in, each such Significant Subsidiary
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have been validly issued and are fully paid and nonassessable and, except as set
forth in Section 4.02 of the Disclosure Schedule, are owned by the Company, by
another wholly owned subsidiary of the Company or by the Company and another
such wholly owned subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of its subsidiaries and
except for the ownership interests set forth in Section 4.02 of the Disclosure
Schedule hereto, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, joint venture
or other entity.
SECTION 4.03. Capital Structure. The authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock, par value $0.01 per
share. As of July 1, 1997, (i) 27,340,088 shares of Common Stock were issued and
outstanding, and (ii) 1,572,316 shares of Common Stock were reserved for
issuance pursuant to the outstanding employee stock options ("Plan Options")
granted pursuant to the Stock Plans (as defined in Section 7.04), and other
options ("Other Options" and, together with the Plan Options, the "Stock
Options") granted to employees, directors and consultants and former employees,
directors and consultants of the Company. Except as set forth above, as of the
date of this Agreement, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans or pursuant to the agreements representing
outstanding Other Options described in clause (iii) above shall be, when issued
and paid for in accordance with the terms of the applicable Stock Plan or Other
Option, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are not any bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth in Section 4.03
of the Disclosure Schedule hereto, as of the date of this Agreement, there are
not any securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Significant Subsidiaries is a party or by which any of them is bound obligating
the Company or any of its Significant Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any of its Significant Subsidiaries or
obligating the Company or any of its Sig
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nificant Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are not any outstanding contractual
obligations of the Company or any of its Significant Subsidiaries to purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Significant Subsidiaries or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any Significant Subsidiary
or any other entity.
SECTION 4.04. Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
adoption of this Agreement by the holders of a majority of the outstanding
shares of Common Stock, to consummate the Transactions. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly authorized by all necessary corporate action on
the part of the Company, subject to approval of the Merger and the adoption of
this Agreement by the holders of a majority of the outstanding shares of Common
Stock. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. The execution and delivery of this
Agreement by the Company does not, and the consummation of the Transactions and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any of its Significant Subsidiaries under, (i) the Charter or By-Laws of the
Company or the comparable charter or organizational documents of any of its
Significant Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Significant
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Significant Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights or Liens or judgments,
orders, decrees, statutes, law ordinances, rules or regulations that
individually or in the aggregate would not
12
(x) have a Company Material Adverse Effect, (y) materially impair the
ability of the Company to perform its obligations under this Agreement or (z)
prevent the consummation of any of the Transactions. No consent, approval, order
or authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company or any of
its Significant Subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
Transactions, except for (i) the filing of a premerger notification and report
form by the Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
0000 (xxx "XXX Xxx"), (xx) the filing with the SEC of (x) the Schedule 14D-9,
(y) a proxy or information statement relating to the approval by the Company's
stockholders of the Merger and this Agreement, if such approval is required by
law (as amended or supplemented from time to time, the "Proxy Statement"), and
(z) such reports under Section 13(a) of the Exchange Act as may be required in
connection with the Operative Agreements and the Transactions, (iii) the filing
of the Articles of Merger with the SDAT and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iv) all necessary consents and approvals from each of the Customs
Service Bureau and Bureau of Alcohol, Tobacco and Firearms applicable to the
Merger and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Significant Subsidiaries
conducts any business or owns any property or assets, the failure to obtain or
make would not have a Material Adverse Effect.
SECTION 4.05. SEC Documents; Undisclosed Liabilities. The Company has filed
all required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1994 (the "SEC Documents"). As of their respective dates,
the SEC Documents complied as to form in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any SEC
Document was revised or superseded by a later filed XXX
00
Xxxxxxxx, xxxx of the SEC Documents contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto in effect at the time of the filing
of the respective SEC Documents were prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved and fairly presented the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the SEC Documents hereto, neither the
Company nor any of its subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the notes
thereto, except for liabilities and obligations incurred in the ordinary course
of business consistent with past practice since the date of the most recent
consolidated balance sheet included in the SEC Documents which, individually or
in the aggregate, could not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 4.06. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Schedule 14D-9, the information statement to be filed by
the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under Exchange Act (the "Information Statement") or the Proxy Statement will, in
the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Proxy Statement, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the meeting of the Company's stockholders held to vote on adoption
of this Agreement, 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
14
therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub for inclusion or incorporation by reference therein.
SECTION 4.07. Absence of Certain Changes or Events. Except as set forth in
Section 4.07 of the Disclosure Schedule, from January 26, 1997 to the date of
this Agreement, the Company has conducted its business only in the ordinary
course, and there has not been (i) any Company Material Adverse Effect, (ii)
except for regular quarterly dividends payable, any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, Stock or
property) with respect to the Common Stock, (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) (A) any granting by the
Company or any of its Significant Subsidiaries to any executive officer of the
Company or any Significant Subsidiaries of any increase in compensation, except
as was required under employment agreements in effect as of the date of the most
recent audited financial statements included in the SEC Documents, (B) any
granting by the Company or any of its Significant Subsidiaries to any such
executive officer of any increase in severance or termination pay, except as was
required under employment, severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the SEC
Documents or (C) any entry by the Company or any of its Significant Subsidiaries
into any employment, severance or termination agreement with any such executive
officer, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or could reasonably be expected to have a Company Material
Adverse Effect on the Company and its subsidiaries taken as a whole, (vi) any
change in accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles or (vii) any
action which would have been prohibited without Parent's approval under Section
6.01(a) if taken between the date of this Agreement and the Effective Time of
the Merger.
15
SECTION 4.08. Litigation. Except as set forth in Section 4.08 of the
Disclosure Schedule, as of the date of this Agreement (i) there is no single or
series of related suits, actions or proceedings pending or, to the knowledge of
the Company, threatened against the Company or any of its Significant
Subsidiaries, or any unsatisfied judgment against the Company or any of its
Significant Subsidiaries, relating to or involving an amount greater than
$500,000 and (ii) there is not any judgment, decree, injunction or similar order
of any Governmental Entity or arbitrator outstanding against the Company or any
of its Significant Subsidiaries or other single or series of related suits,
actions or proceedings pending or, to the knowledge of the Company, threatened
that, individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect or prevent the consummation of the Transactions.
SECTION 4.09. Absence of Changes in Benefit Plans. From January 26, 1997,
to the date of this Agreement, there has not been any adoption or amendment in
any material respect by the Company or any of its Significant Subsidiaries of
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its Significant
Subsidiaries (other than with respect to a Foreign Benefit Plan, as defined in
Section 4.10(v)) (collectively, the "Benefit Plans"). Except as set forth in
Section 4.09 of the Disclosure Schedule, there are no employment, consulting,
severance, termination or indemnification agreements, arrangements or
understandings between the Company or any of its Significant Subsidiaries and
any current or former employee, officer or director of the Company or any of its
Significant Subsidiaries.
SECTION 4.10. ERISA Compliance. (i) Section 4.10 of the Disclosure Schedule
hereto contains a list of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(l) of ERISA) and all other Benefit Plans
(other than Foreign Benefit Plans) maintained, or contributed to, by the
Company, any entity which is under common control with the Company under Code
Section 414 ("ERISA Affiliate"), or any of the Company's Sig
16
nificant Subsidiaries for the benefit of any current or former employees,
officers or directors of the Company or any of its ERISA Affiliates or
Significant Subsidiaries. The Company has made available to Parent true,
complete and correct copies of (A) each (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (B) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan
(if any such report was required), (C) the most recent actuarial valuations, if
any, for the Benefit Plans, (D) the most recent description for each Benefit
Plan for which such summary plan description is required and (C) each trust
agreement and group annuity contract relating to any Benefit Plan.
(ii) All Pension Plans (other than Foreign Benefit Plans as defined in
Section 4.10(v)) ("U.S. Pension Plans) have been the subject of determination
letters from the Internal Revenue Service to the effect that such Pension Plans
are qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"), or are standardized prototype plans which properly rely on such
determination letters of the plans' sponsor and no such determination letter has
been revoked nor, to the knowledge of the Company, has revocation been
threatened, nor has any event occurred, nor has any such U.S. Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualifications.
(iii) Each Benefit Plan has been administered in compliance with its terms
and applicable provisions of ERISA and the Code except for any instances of
non-compliance that, individually or in the aggregate, are not reasonably
expected to have a Company Material Adverse Effect. Neither the Company nor any
Benefit Plans have engaged in any prohibited transaction as defined in ERISA
Section 406 or Code Section 4975 that could have a Company Material Adverse
Effect. No conditions exist in connection with any Benefit Plan (other than
claims for benefits or contributions in the ordinary course) that could give
rise to liability under ERISA or the Code that would reasonably be expected to
have a Company Material Adverse Effect. None of the U.S. Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, and all minimum
funding obligations have been made when due. Neither any of such Benefit Plans
nor any of such trusts has been terminated, nor has there been any "reportable
event" (as that term is defined in Section 4043 of ERISA) with respect thereto,
17
during the last six years which could give rise to liability that would
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company, any of its subsidiaries nor any entity required to be aggregated with
the Company under Section 414 of the Code has incurred any liability under Title
IV of ERISA (other than insurance premiums) that could reasonably be expected to
have a Company Material Adverse Effect and that has not been satisfied as of the
date hereof. Neither the Company nor any ERISA Affiliates has had any obligation
to contribute to a multiemployer plan (as defined in ERISA Section 3(37) or Code
Section 414(f)) in the past six years.
(iv) With respect to any Benefit Plan that is an employee welfare benefit
plan, except as disclosed in the Disclosure Schedule, each such Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of its
ERISA Affiliates or Significant Subsidiaries on or at any time after the
consummation of the Offer.
(v) With respect to any employee benefit plan, program or arrangement
maintained the Company by an ERISA Affiliate or Significant Subsidiary that is
maintained outside the United States primarily for the benefit of persons
substantially all of whom are nonresident aliens as to the United States (a
"Foreign Benefit Plan"), each such Foreign Benefit Plan has been maintained in
compliance with all applicable law other than any noncompliance that would not
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has incurred any obligation in connection
with the termination of or withdrawal from any Foreign Benefit Plan other than
any obligation that would not reasonably be expected to have a Company Material
Adverse Effect. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Benefit Plan which is required to be funded,
determined as of the end of the most recently ended fiscal year of the Company
on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the assets of such Foreign Benefit Plan unless such
excess would not reasonably be expected to have a Company Material Adverse
Effect, and for each Foreign Benefit Plan which is not required to be funded,
the obligations of such Foreign Benefit Plan are properly accrued on the balance
sheets of the Company or the Significant Subsidiary unless such nonaccrual of
the balance sheets would not reasonably be expected to have a Company Material
Adverse Effect.
18
SECTION 4.11. Taxes. Each of the Company and each of its Significant
Subsidiaries has filed all Federal income tax returns and all other tax returns
and reports required to be filed by it, except to the extent that a failure to
file, in the individual or in the aggregate, would not reasonably be expected to
result in a Company Material Adverse Effect. All such returns are complete and
correct in all respects, other than any inaccuracy or incompleteness that, in
the individual or in the aggregate, would not reasonably be expected to result
in a Company Material Adverse Effect. The Company and each of its Significant
Subsidiaries has paid (or the Company has paid on its subsidiaries' behalf) all
taxes shown to be due on such returns and reports except to the extent that a
failure to pay, in the individual or in the aggregate, would not reasonably be
expected to result in a Company Material Adverse Effect. The Company and each of
its Significant Subsidiaries has paid (or the Company has paid on its
subsidiaries' behalf) all taxes for which no return was required to be filed,
except to the extent that a failure to pay, in the individual or in the
aggregate, would not reasonably be expected to result in a Company Material
Adverse Effect. All taxes not previously paid do not exceed the reserve in the
most recent financial statements contained in the SEC Documents for taxes
payable by the Company and its Significant Subsidiaries for all taxable periods
and portions thereof through the date of such financial statements by an amount
that would reasonably be expected to result in a Company Material Adverse
Effect. All liabilities for taxes incurred by the Company or any of its
Significant Subsidiaries since the date of the most recent consolidated balance
sheet included in the SEC Documents have been incurred in the ordinary course of
business consistent with past practice, other than any liabilities for taxes
that, individually or in the aggregate, would not reasonably be expected to
result in a Company Material Adverse Effect. No deficiencies for any taxes have
been proposed, asserted or assessed against the Company or any of its
Significant Subsidiaries in writing that would reasonably be expected to have a
Company Material Adverse Effect, and no requests for waivers of the time to
assess any such taxes are pending. The Federal income tax returns of the Company
and each of its Significant Subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service for all
years since 1994. As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, franchise, property, sales, excise and other
taxes, tariffs or governmental charges of any nature whatsoever.
19
SECTION 4.12. No Excess Parachute Payments. Other than payments that may be
made to the persons previously disclosed in writing to Parent, any amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the Transactions by any employee, officer or director of the
Company or any of its affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Benefit Plan currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
SECTION 4.13. Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock approving the Merger is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger and the Transactions.
SECTION 4.14. State Takeover Statutes. The Board of Directors of the
Company has (i) duly adopted a resolution exempting the Offer, the Merger and
the Transactions from Section 3-602 of the MGCL and (ii) has amended the
Company's By-laws such that the Offer, the Merger and the Transactions are
exempt from the provisions of 3-702 of the MGCL. To the best of the Company's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Offer, the Merger, this Agreement or any of
the Transactions.
SECTION 4.15. Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Compass Partners
International, LLC ("Compass"), the fees and expenses of which shall be paid by
the Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Company. The Company's current estimate
of fees and expenses incurred and to be incurred by the Company in connection
with this Agreement and the Transactions (including the fees of the Company's
legal counsel) are set forth in Section 4.15 of the Disclosure Schedule hereto.
A true and complete copy of the engagement letter between the Company and
Compass has been provided to Parent.
SECTION 4.16. Opinion of Financial Advisor. The Company has received the
opinion of Compass, dated July 2, 1997, to the effect that, as of such date and
based upon and subject to the matters set forth therein, the consideration to
20
be received in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders from a financial point of view, and a signed copy of
such opinion has been delivered to Parent.
SECTION 4.17. Intellectual Property.
(i) The Company and its Significant Subsidiaries own, license or otherwise
have the right to use all copyrights, trade names, trademarks, service marks,
trade secrets, know-how, designs, software, patents, licenses and other
intellectual property rights (collectively, the "Intellectual Property") that
are necessary to conduct the business of the Company and its Significant
Subsidiaries as presently conducted free and clear of all Liens, other than
those rights the absence of which individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect. Section 4.17
of the Disclosure Schedule contains a list setting forth all material registered
patents and trademarks and applications therefor that are owned by the Company
or any of its Significant Subsidiaries. There are no material trade names,
trademarks or service marks owned by the Company or any of its Significant
Subsidiaries that are not registered or the subject of applications therefor.
(ii) As of the date of this Agreement, there is no suit, action or
proceeding pending or, to the Company's knowledge, threatened against or
affecting the Company or any of its Significant Subsidiaries, which challenges
the legality, validity, enforceability of, or the Company's or any of its
Significant Subsidiaries' use or ownership of any of the Intellectual Property
owned by the Company or any of its Significant Subsidiaries or, to the Company's
knowledge, licensed to the Company or to any of its Significant Subsidiaries,
other than any such suit, action or proceeding that individually or in the
aggregate would not reasonably be expected to have a Company Material Adverse
Effect.
(iii) The conduct of the Company's and its Significant Subsidiaries'
business, the Intellectual Property owned or used by the Company and its
Significant Subsidiaries, and the products or services produced, sold or
licensed by the Company and its Significant Subsidiaries do not infringe,
violate or misappropriate any Intellectual Property right or any other
proprietary right of any person or give rise to any obligations to any person as
a result of co-authority, co-authorship, co-inventorship, or any express or
implied contract for any use or transfer, other than any such infringement,
violation or appro
21
priation that individually or in the aggregate would not reasonably be expected
to have a Company Material Adverse Effect.
SECTION 4.18. Compliance with Laws. The Company and its Significant
Subsidiaries are in material compliance with, and have not violated any
applicable law, rule or regulation of any United States federal, state, local,
or foreign government or agency thereof which materially affects the business,
properties or assets of the Company and its Significant Subsidiaries, and no
notice, charge, claim, action or assertion has been received by the Company or
any of its Significant Subsidiaries or has been filed, commenced or, to the
Company's knowledge, threatened against the Company or any of its Significant
Subsidiaries alleging any such violation, except for any matter which could not
reasonably be expected to have a Company Material Adverse Effect. All material
licenses, permits and authorizations which are required under all laws, rules
and regulations to conduct the Company's and its Significant Subsidiaries'
operations as presently conducted are in full force and effect, no appeal nor
any other action is pending to revoke any such permit, license or authorization,
and the Company and its Significant Subsidiaries are in full compliance with all
terms and conditions of all such permits, licenses and authorizations, except
where the failure to have all such permits, licenses and other authorizations,
the failure to be in full force and effect and in compliance therewith or the
existence of any such appeal or other action would not reasonably be expected to
have a Company Material Adverse Effect or prevent consummation of the
Transactions.
SECTION 4.19. Environmental Protection.
(i) The Company and its Significant Subsidiaries have obtained all permits,
licenses and other authorizations which are required under the Environmental
Laws (as defined below) for the ownership, use and operation of each property
owned, operated or leased by the Company and its Significant Subsidiaries (the
"Property"), all such permits, licenses and authorizations are in full force and
effect, no appeal nor any other action is pending to revoke any such permit,
license or authorization, and the Company and its Significant Subsidiaries are
in full compliance with all material terms and conditions of all such permits,
licenses and authorizations, except where the failure to have all such permits,
licenses and other authorizations, the failure to be in full force and effect
and in compliance therewith or the existence of any such appeal or other action
would not reasonably be expected to have a Company Material Adverse Effect.
22
(ii) The Company and its Significant Subsidiaries are in compliance in all
respects with all Environmental Laws, except where the failure to be in
compliance therewith is not reasonably expected to individually or in any series
of related occurrences result in a Company Material Adverse Effect.
(iii) There is no suit, action, demand, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
Significant Subsidiaries nor, to the knowledge of the Company, is there any
investigation by any Governmental Entity under way, in any case relating in any
way to alleged noncompliance by the Company or any of its Significant
Subsidiaries with, or liability of the Company or any of its Significant
Subsidiaries under Environmental Laws.
(iv) The Company and its Significant Subsidiaries have not, and to the
Company's knowledge, no other person has, Released (as defined below), placed,
stored, buried or dumped any material quantities of Hazardous Substances (as
defined below) on, beneath or adjacent to the Property or, to the knowledge of
the Company, any property formerly owned, operated or leased by the Company or
its Significant Subsidiaries, except for the presence of such Hazardous
Substances as could not reasonably be expected to have a Company Material
Adverse Effect.
(v) Neither the Company nor any of its Significant Subsidiaries has entered
into any agreement that requires them to pay to, reimburse, guarantee, pledge,
defend, indemnify or hold harmless any person for or against any liabilities or
costs in connection with any currently pending or, to the Company's knowledge,
currently threatened suit, action, notice, proceeding or investigation relating
to alleged noncompliance with, or liability under, Environmental Laws.
(vi) The Company and its Significant Subsidiaries have not received any
written notice or written order from any Governmental Entity or private entity
advising them that they are responsible for or potentially responsible for
cleanup or paying for the cost of Cleanup of any Hazardous Substances and
neither the Company nor any Significant Subsidiary has entered into any
agreements concerning such Cleanup, nor is the Company aware of any material
facts which the Company has specific grounds to believe will give rise to such
notice, order or agreement.
(vii) As used in this Agreement: "Cleanup" shall mean all actions required
to (a) cleanup, remove, treat or remediate Hazardous Substances in the indoor or
outdoor environment, (b)
23
prevent the Release of Hazardous Substances so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care, (d) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Substances in the indoor or outdoor environment or (e) any administrative,
judicial, or other proceedings related to the above. "Environmental Laws" shall
mean all applicable foreign, federal, state and local laws, regulations, rules
and ordinances relating to pollution or protection of the environment or human
health and safety, including laws relating to Releases or threatened Releases of
Hazardous Substances into the indoor or outdoor environment including ambient
air, surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, release, transport or handling of Hazardous Substances and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances, and all laws relating to
endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources; "Hazardous Substance" means: (a) any petrochemical
or petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls and radon gas; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "restricted hazardous materials", "extremely hazardous
substances", "toxic substances", "contaminants" or "pollutants" or words of
similar meaning and regulatory effect; or (c) any other chemical, material or
substance exposure to which is prohibited, limited or regulated by any
Environmental Law; and "release" shall mean any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, dispersal, Leaching
or migration into the indoor or outdoor environment including ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Substances through or in the
air, soil, surface water, groundwater or property.
24
SECTION 4.20. Labor Relations and Employment. Except as set forth in
Section 4.20 of the Disclosure Schedule, (i) there is no labor strike, or
material dispute, slowdown, stoppage or lockout actually pending, or to the
knowledge of the Company, threatened against or affecting the business of the
Company and its Significant Subsidiaries and during the past five years there
has not been any such action that was material to the Company; (ii) to the
knowledge of the Company, no union claims to represent the employees of the
Company and its Significant Subsidiaries; (iii) neither the Company nor any
Significant Subsidiary of the Company is a party to or bound by any collective
bargaining or similar agreement with any labor organization, and no work rules
or practices agreed to with any labor organization or employee association are
applicable to employees of the Company or any Significant Subsidiary; (iv) to
the knowledge of the Company, none of the employees of the Company or any
Significant Subsidiary is represented by any labor organization; (v) there is no
unfair labor practice charge or complaint against the Company or any Significant
Subsidiary pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency which, if
adversely determined, would reasonably be expected to have a Company Material
Adverse Effect; (vi) there is no grievance arising out of any collective
bargaining agreement or other grievance procedure which, if adversely
determined, would reasonably be expected to have a Company Material Adverse
Effect; (vii) to the knowledge of the Company, no charges with respect to or
relating to the Company or any Significant Subsidiary are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful practices which, if adversely determined, would
reasonably be expected to have a Company Material Adverse Effect; and (viii) the
Company has not received notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any
Significant Subsidiary and, to the knowledge of the Company, no such
investigation is in progress.
SECTION 4.21. Contracts. Each material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its Significant Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound (the "Material
Contracts") is a valid and binding obligation of the Company or such Significant
Subsidiaries, as applicable, and in full force and effect, except where failure
to be valid and binding and in full force and effect would not reasonably be
25
expected to have a Company Material Adverse Effect, and there are no defaults by
the Company or any of its Significant Subsidiaries or, to the Company's
knowledge, any other party thereto, thereunder, except those defaults that would
not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.22. Inventory. Except as disclosed in Section 4.22 of the
Disclosure Schedule hereto, all inventory reflected on the most recent unaudited
balance sheet of the Company and all inventory acquired since the date of such
balance sheet, in either instance, other than inventory sold in the ordinary
course of business consistent with past practice is, as of the date hereof, the
property of the Company and its subsidiaries, free and clear of any Lien, other
than statutory Liens being contested in good faith, has not been pledged as
collateral, and is not held on consignment from others. Except as disclosed on
Schedule 4.22 hereto, all inventories held by the Company and its subsidiaries
at any location are (a) valued on the most recent unaudited balance sheet of the
Company at lower of cost or market, (b) except to the extent of any reserve
therefor on the most recent audited balance sheet of the Company, based on the
Company's experience, not obsolete, slow-moving, or damaged.
SECTION 4.23. Balance Sheet Reserves. The reserves for accounts receivable
reflected in the most recent audited balance sheet of the Company have been
established in accordance with GAAP and such reserves, taken as a whole, based
on the Company's experience, are adequate to cover any losses relating to
collectibility of accounts receivable.
SECTION 4.24. Foreign Corrupt Practices Act. Neither the Company nor any of
its Significant Subsidiaries, nor, to the Company's knowledge, any director,
officer or employee of the Company or any of its Significant Subsidiaries has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
26
ARTICLE V
Representations and Warranties of Parent and Sub
Parent and Sub jointly and severally represent and warrant to the Company
as follows:
SECTION 5.01. Standing and Corporate Power. Each of Parent and Sub is a
corporation validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted.
SECTION 5.02. Authority; Noncontravention. Parent and Sub have all the
requisite corporate power and authority to enter into this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement and
the consummation of the Transactions have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes a valid and binding
obligation of each such party, enforceable against each such party in accordance
with its terms. The execution and delivery of the Operative Agreements do not,
and the consummation of the Transactions and compliance with the provisions of
the Operative Agreements will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent or any of its subsidiaries under,
(i) the certificate of incorporation or by-laws of Parent or Sub or the
comparable charter or organizational documents of any other subsidiary of
Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent or Sub or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent, Sub or any other subsidiary of Parent or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens or
judgments, orders, decrees, statutes, laws, ordinances, rules or regulations
that individually or in the aggregate would not (x) have a material adverse
effect on Parent and its subsidiaries taken as a whole, (y) impair the ability
of
27
Parent and Sub to perform their respective obligations under this Agreement or
(z) prevent the consummation of any of the Transactions. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent, Sub or any other
subsidiary of Parent in connection with the execution and delivery of this
Agreement or the consummation by Parent or Sub, as the case may be, of any of
the Transactions, except for (i) the filing of a premerger notification and
report form under the HSR Act, (ii) the filing with the SEC of the Offer
Documents and such reports under Sections 13 and 16(a) of the Exchange Act as
may be required in connection with the Operative Agreements and the
Transactions, (iii) the filing of the Certificate of Merger with the Maryland
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (iv) all
necessary consents and approvals from each of the Customs Service Bureau and the
Bureau of Alcohol, Tobacco and Firearms applicable to the Merger and (v) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the "takeover" or "blue sky" laws of
various states.
SECTION 5.03. Information Supplied. None of the information supplied or to
be supplied by Parent or Sub for inclusion or incorporation by reference in the
Offer Documents, the Schedule 14D-9, the Information Statement or the Proxy
Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the
Information Statement, at the respective times the Offer Documents, the Schedule
14D-9 and the Information Statement are filed with the SEC or first published,
sent or given to the Company's stockholders, or, in the case of the Proxy
Statement, at the date the Proxy Statement is first mailed to the Company's
stockholders or at the time of the meeting of the Company's stockholders held to
vote on approval and adoption of this Agreement, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation or warranty is made by Parent or Sub with respect to
statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference therein.
28
SECTION 5.04. Brokers. No broker, investment banker, financial advisor or
other person, other than NatWest Markets Corporate Finance Advisory Limited, the
fees and expenses of which shall be paid by Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Parent or
Sub.
SECTION 5.05. Financing. Parent and Sub have readily available all of the
funds necessary to consummate the Offer and the Merger on the terms contemplated
by the Operative Agreements, and, at the expiration of the Offer and the
Effective Time of the Merger, Parent and Sub shall have available all of the
funds necessary for the acquisition of all shares of Common Stock pursuant to
the Offer and the Merger, as the case may be, and to perform their respective
obligations under this Agreement.
ARTICLE VI
Covenants Relating to Conduct of Business
SECTION 6.01. Conduct of Business.
(a) Ordinary Course. During the period from the date of this Agreement to
the earlier of the Effective Time of the Merger and the appointment or election
of Sub's designees to the Company Board pursuant to Section 7.06 (such earlier
time, the "Control Time"), the Company shall, and shall cause its subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time of the Merger. Without limiting the
generality of the foregoing, except as contemplated by this Agreement or
otherwise approved in writing by Parent, during the period from the date of this
Agreement to the Control Time, the Company shall not, and shall not permit any
of its subsidiaries to:
29
(i) (A) declare, set aside or pay any dividends on (except for the
regularly quarterly dividends of $.06 per share), or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, other than the
issuance of Common Stock upon the exercise of Stock Options outstanding on
the date of this Agreement in accordance with their present terms;
(iii) amend its charter, by-laws or other comparable charter or
organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien (except for such Liens required by law) or otherwise dispose of
any of its properties or assets, except in the ordinary course of business
consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to
30
maintain any financial statement condition of another person or enter into
any arrangement having the economic effect of any of the foregoing, except
for short-term borrowings incurred in the ordinary course of business
consistent with past practice and pursuant to existing agreements, or (B)
make any loans, advances or capital contributions to, or investments in,
any other person, other than to the Company or any direct or indirect
wholly owned subsidiary of the Company;
(vii) make or agree to make any new capital expenditure or
expenditures not contemplated by the Company's current budget, as such
budget is set forth in Section 6.01 of the Disclosure Schedule;
(viii) (A) grant to any officer of the Company or any of its
subsidiaries any increase in compensation, except as was required under
employment agreements in effect as of January 26, 1997, (B) grant to any
officer of the Company or any of its subsidiaries any increase in severance
or termination pay, except as was required under employment, severance or
termination agreements in effect as of January 26, 1997, (C) except as set
forth in Section 6.01 of the Disclosure Schedule, enter into any
employment, severance or termination agreement with any officer of the
Company or any of its subsidiaries or (D) amend any Benefit Plan in any
respect;
(ix) make any change in accounting methods, principles or practices
materially affecting the Company's assets, liabilities or business, except
insofar as may have been required by a change in generally accepted
accounting principles;
(x) pay, discharge, settle or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms;
(xi) except in the ordinary course of business, modify, amend or
terminate any Material Contract or waive or release or assign any material
rights or claims under any Material Contract;
31
(xii) make any material tax election or settle or compromise any
material income tax liability; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company shall not, and shall not permit any of its
subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) except as otherwise
permitted by Section 6.02, any of the conditions to the Offer set forth in
Exhibit A, or any of the conditions to the Merger set forth in Article VIII, not
being satisfied.
(c) Advice of Changes. The Company shall promptly advise Parent orally and
in writing of any change or event having, or which, insofar as can reasonably be
foreseen, would have, a Company Material Adverse Effect.
SECTION 6.02. No Solicitation. (a) The Company shall not, nor shall it
permit any officer or director of the Company or any officer or director of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, (i) solicit or
initiate the submission of, any Takeover Proposal (as defined below), (ii)
except as provided in Section 6.02(b), enter into any agreement with respect to
any Takeover Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to
any Takeover Proposal, or take any other action to solicit or initiate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal; provided, however, that prior to the
acceptance for payment of shares of Common Stock pursuant to the Offer, the
Company may, after taking into account the advice of outside counsel, in
response to an unsolicited written bona fide Takeover Proposal which contains no
financing condition from a person that the Company Board reasonably believes has
the financial ability to make a Superior Proposal (as defined in Section
6.02(b)), subject to compliance with Section 6.02(c), furnish non-public
information with respect to the
32
Company to such person pursuant to a customary confidentiality agreement and
participate in discussions or negotiations with such person. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any executive officer or director of the Company or
any of its subsidiaries or any investment banker/attorney or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to be a
breach of this Section 6.02(a) by the Company. For purposes of this Agreement,
"Takeover Proposal" means any written proposal for a merger or other business
combination involving the Company or any of its subsidiaries or any proposal or
offer to acquire in any manner, directly or indirectly, more than 20% of the
equity securities of the Company or more than 20% of the Company's consolidated
total assets, other than the Transactions.
(b) Neither the Company Board nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Sub, the approval or recommendation by the Company Board or any such committee
of the Offer, this Agreement or the Merger or (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal. Notwithstanding the
foregoing, the Company Board, may approve or recommend (and, in connection
therewith withdraw or modify its approval or recommendation of the Offer, this
Agreement or the Merger) a Superior Proposal. For purposes of this Agreement,
"Superior Proposal" means a bona fide Takeover Proposal which contains no
financing condition made by a third party on terms which the Company Board
determines in its good faith judgment, after taking into account the written
advice of the Company's investment banker, to be more favorable to the Company's
stockholders than the Offer and the Merger.
(c) The Company shall promptly advise Parent orally and in writing of any
Takeover Proposal or any inquiry with respect to or which it believes would be
reasonably likely to lead to any Takeover Proposal unless the Company Board is
advised by outside legal counsel that the furnishing of such advice would be
inconsistent with the legal obligations of the Company Board. The Company shall
keep Parent informed of the status of any such Takeover Proposal or inquiry.
(d) Nothing in this Section 6.02 shall prevent the Company and the Company
Board from complying with Rule 14e-2 under the Exchange Act, or issuing a
communication meeting the requirements of Rule 14d-9(e) under the Exchange Act,
with respect to any tender offer or otherwise prohibit the Company from making
any public disclosures required by law or the re
33
quirements of the New York Stock Exchange; provided, however, that the Company
may not, except as permitted by Section 6.02(b), withdraw or modify its position
with respect to the Offer or the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement. (a) If
stockholder approval of the Merger is required by law, except to the extent that
the Company Board shall have withdrawn or modified its approval or
recommendation of the Offer, or the Merger as permitted by Section 6.02(b), the
Company shall, at Parent's request, as soon as practicable following Sub's
purchase of shares of Common Stock in the Offer satisfying the Minimum
Condition, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders Meeting") for the purpose of the approval of the
Merger and adoption of this Agreement. The Company shall, through the Company
Board, recommend to its stockholders the approval of the Merger, except to the
extent that the Company Board shall have withdrawn or modified its approval or
recommendation of the Offer or the Merger as permitted by Section 6.02(b).
Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding shares of Common Stock the parties shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Stockholders Meeting in accordance with Section 3-106 of the MGCL.
(b) If stockholder adoption of this Agreement is required by law, except to
the extent that the Company Board shall have withdrawn or modified its approval
or recommendation of the Offer or the Merger as permitted by Section 6.02(b),
the Company shall, at Parent's request, as soon as practicable following Sub's
purchase of shares of Common Stock in the Offer satisfying the Minimum
Condition, prepare and file a preliminary Proxy Statement with the SEC and shall
use its reasonable efforts to respond to any comments of the SEC or its staff
and, except to the extent that the Company Board shall have withdrawn or
modified its approval or recommendation of the Offer or the Merger as permitted
by Section 6.02(b), to cause the Proxy Statement to be mailed to the Company's
stockholders as
34
promptly as practicable after such filing. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the adoption of this Agreement
by the Company's stockholders there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, this Company shall
promptly prepare and mail to its stockholders such an amendment or supplement.
The Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
(c) Parent shall cooperate with the Company in preparing the Proxy
Statement and shall promptly furnish to the Company all information as may be
requested in connection therewith and Parent shall cause all shares of Common
Stock purchased pursuant to the Offer and all other shares of Common Stock owned
by Sub or any other subsidiary of Parent to be voted in favor of the adoption of
this Agreement.
SECTION 7.02. Access to Information; Confidentiality. The Company shall,
and shall cause each of its Significant Subsidiaries to, afford to Parent, and
to Parent's officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time of the Merger to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its Significant
Subsidiaries to, furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. All such information shall be held in accordance with
the confidentiality agreement (the "Confidentiality Agreement") dated January 6,
1997.
SECTION 7.03. Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, unless, to the extent
permitted by Section 6.02(b), the Company Board approves or recommends a
Superior Proposal, each of the parties shall use its reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be
35
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer, the Merger and the other
Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging any Operative Agreement or the consummation of any of the
Transactions, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and (iv)
the execution and delivery of any additional instruments necessary to consummate
the Transactions and to fully carry out the purposes of the Operative
Agreements. In connection with and without limiting the foregoing, the Company
and the Company Board shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger or any Operative Agreement or any of the other
Transactions and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Offer, the Merger, any Operative Agreement
or any other Transaction, take all action necessary to ensure that the Offer,
the Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by the Operative Agreements and otherwise
to minimize the effect of such statute or regulation on the Offer, the Merger
and the other Transactions. Notwithstanding the foregoing, the Company Board
shall not be prohibited from taking any action permitted by Section 6.02(b).
(b) The Company shall give prompt notice to Parent, and Parent or Sub shall
give prompt notice to the Company, of (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
36
SECTION 7.04. Stock Options. (a) Either prior to or as soon as practicable
following the consummation of the Offer, the Company Board (or, if appropriate,
any committee administering the Stock Plans) shall adopt such resolutions or
take such other actions as are required to adjust the terms of all outstanding
Stock Options heretofore granted under any stock option program or arrangement
of the Company (collectively, the "Stock Plans") or any other stock option plan
to provide that, at the Effective Time of the Merger, each Stock Option
outstanding immediately prior to the acceptance for payment of shares of Common
Stock pursuant to the Offer (whether or not vested) shall be canceled in
exchange for a cash payment by the Company of, or can only be exercised for net
cash equal to, an amount equal to (i) the excess, if any, of (A) the price per
share of Common Stock to be paid pursuant to the Offer over (B) the exercise
price per share of Common Stock subject to such Stock Option, multiplied by (ii)
the number of shares of Common Stock for which such Stock Option shall not
theretofore have been exercised. The Company represents and warrants that no
consents of the holders of the Stock Options are necessary to effectuate the
foregoing cash-out. After the date of this Agreement, neither the Company Board
nor any committee thereof shall cause any Stock Option to become exercisable as
a result of the execution of the Operative Agreements or the consummation of the
Transactions.
(b) All amounts payable pursuant to this Section 7.04 shall be subject to
any required withholding of taxes and shall be paid without interest.
(c) The Stock Plans shall terminate as of the Effective Time of the Merger,
and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be deleted as of the Effective Time of
the Merger, and the Company shall ensure that following the Effective Time of
the Merger no holder of a Stock Option or any participant in any Stock Plan or
other Benefit Plan shall have any right thereunder to acquire any capital stock
of the Company or the Surviving Corporation.
SECTION 7.05. Indemnification. (a) From and after the Effective Time,
Parent and the Surviving Corporation shall indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director or employee of the
Company or any of its subsidiaries (the "Indemnified Parties") against (i) all
losses, claims, damages, costs, ex
37
penses (including attorney's fees and expenses), liabilities or judgments or
amounts that are paid in settlement (which settlement shall require the prior
written consent of Parent, which consent shall not be unreasonably withheld or
delayed) of or in connection with any claim, action, suit, proceeding or
investigation (a "Claim") in which an Indemnified Party is, or is threatened to
be made, a party or a witness 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, director or
employee of the Company or any of its subsidiaries, whether such Claim pertains
to any matter or fact arising, existing or occurring at or prior to the
Effective Time, regardless of whether such Claim is asserted or claimed prior
to, at or after the Effective Time (the "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, the Merger, the Offer, the
Operative Agreements or the other transactions contemplated hereby or by the
Operative Agreements, in the case of either clause (i) or (ii) to the full
extent the Company would have been permitted under Maryland law and its Restated
Certificate of Incorporation and By-Laws to indemnify such person (and Parent
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law and
under such Restated Certificate of Incorporation or By-Laws, upon receipt of any
undertaking required by such Restated Certificate of Incorporation, By-Laws or
applicable law). Any Indemnified Party wishing to claim indemnification under
this Section 7.05(a), upon learning of any Claim, shall notify Parent (but the
failure so to notify Parent shall not relieve it from any liability which Parent
may have under this Section 7.05(a) except to the extent such failure prejudices
Parent) and shall deliver to Parent any undertaking required by such Restated
Certificate of Incorporation, By-Laws or applicable law. Parent shall use its
best efforts to assure, to the extent permitted under applicable law, that all
limitations of liability existing in favor of the Indemnified Parties as
provided in the Company's Restated Certificate of Incorporation and By-Laws, as
in effect as of the date hereof, with respect to claims or liabilities arising
from facts or events existing or occurring prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement
and the Operative Agreements), shall survive the Merger. The obligations of
Parent described in this Section 7.05(a) shall continue in full force and
effect, without any amendment thereto, for a period of not less than six years
from the Effective Time; provided, however, that all rights to indemnification
in respect of any Claim asserted or made within such period shall continue until
the final dis
38
position of such Claim; and provided, further, that nothing in this Section
7.05(a) shall be deemed to modify applicable Maryland law regarding
indemnification of former officers and directors. The Indemnified Parties as a
group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(b) Parent and the Surviving Corporation shall cause to be maintained in
effect for not less than six years from the Effective Time the current policies
of directors' and officers' liability insurance maintained by the Company and
its subsidiaries (provided that Parent and the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the Indemnified Parties in all
material respects so long as no lapse in coverage occurs as a result of such
substitution) with respect to all matters, including the transactions
contemplated hereby, occurring prior to, and including, the Effective Time,
provided that, in the event that any Claim is asserted or made within such
six-year period, such insurance shall be continued in respect of any such Claim
until final disposition of any and all such Claims, provided, further, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 150% of the premiums paid as of the date
hereof by Parent for such insurance.
(c) The obligations of Parent and the Surviving Corporation under this
Section 7.05 are intended to benefit, and be enforceable against Parent and the
Surviving Corporation directly by, the Indemnified Parties, and shall be binding
on all respective successors of Parent and the Surviving Corporation.
SECTION 7.06. Directors. Promptly upon the acceptance for payment of, and
payment by Sub for, any shares of Common Stock pursuant to the Offer (which
constitute at least the Minimum Condition), Sub shall be entitled to designate
such number of directors on the Company Board as shall give Sub, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Company
Board equal to at least that number of directors, rounded up to the next whole
number, which is the product of (a) the total number of directors on the Company
Board (giving effect to the directors elected pursuant to this sentence)
multiplied by (b) the percentage that (i) such number of shares of Common Stock
so accepted for payment and paid for by Sub plus the number of shares of Common
Stock otherwise owned by Sub or any other subsidiary of Parent bears to
39
(ii) the number of such shares outstanding, and the Company shall, at such
time, cause Sub's designees to be so elected. Subject to applicable law, the
Company shall take all action requested by Parent necessary to effect any such
election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company shall make such mailing with
the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company shall promptly, at the option of Sub, either increase the
size of the Company Board or obtain the resignation of such number of its
current directors as is necessary to enable Sub's designees to be elected or
appointed to the Company Board as provided above. The provisions of this Section
7.07 are in addition to and shall not limit any rights which Sub, Parent or any
of their affiliates may have as a holder or beneficial owner of shares of Common
Stock as a matter of law with respect to the election of directors or otherwise.
SECTION 7.07. Fees and Expenses. (a) Except as provided in paragraphs (b)
and (c) below and in Section 7.09, all fees and expenses incurred in connection
with the Offer, the Merger, this Agreement and the Transactions shall be paid by
the party incurring such fees or expenses, whether or not the Offer or the
Merger is consummated.
(b) The Company shall pay to Parent, upon demand, a fee of:
(x) $20 million (the "Termination Fee"), payable in same day
funds, if:
(i) this Agreement shall be terminated pursuant to Section
9.01(b)(i) as a result of the existence of any condition set
forth in paragraph (d) of Exhibit A;
(ii) (A) after the date of this Agreement, any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange
Act), other than Parent, Sub, any of their respective affiliates
or other persons with whom any of the foregoing is part of a
group, shall have publicly made a Takeover Proposal, (B) the
Offer shall have remained open until at least the scheduled
expiration date immediately following
40
the date such Takeover Proposal is made (and in any event for at
least ten business days following the date such Takeover Proposal
is made), (C) the Minimum Tender Condition shall not have been
satisfied at the expiration of the Offer, (D) this Agreement
shall thereafter be terminated pursuant to Section 9.01(b)(i) and
(E) the Company Board, within 10 business days after the public
announcement of such Takeover Proposal, either fails to recommend
against acceptance of such Takeover Proposal by the Company's
shareholders or announces that it takes no position with respect
to the acceptance of such Takeover Proposal by the Company's
shareholders; or
(iii) this Agreement shall be terminated pursuant to Section
9.01(c) or 9.01(d) (but, only if, in the case of paragraph (f) of
Exhibit A, where such condition existed on the date of this
Agreement); or
(y) in the event this Agreement is terminated pursuant to Section
9.01(d) as a result of any condition set forth in paragraph (f) of Exhibit
A, and provided that no Termination Fee is or would become payable
hereunder, the Company shall pay to Parent all Parent Expenses up to and
including $1,000,000. For purposes of this Section 7.07(b)(y), "Parent
Expenses" shall mean all out-of-pocket fees and expenses (including,
without limitation, all travel expenses and all fees and expenses of
counsel, investment banking firms, accountants, experts and consultants to
Parent) incurred or paid by or on behalf of Parent in connection with or
leading to this Agreement, the transactions contemplated hereby, and
performing or securing performance of the obligations of Parent hereunder,
including, without limitation, such fees and expenses related to
preparation and negotiation of documentation.
(c) In the event this Agreement is terminated, the Offer is terminated or
the Merger does not occur, solely due to a breach by Parent or Sub of any of its
covenants, agreements or obligations hereunder, without limitation of any other
rights or remedies available to the Company at law or in equity, Parent and Sub
shall pay to the Company, upon demand, all Expenses of the Company up to and
including $4,000,000. For purposes of this Section 7.07(c), "Expenses" shall
mean all out-of-pocket fees and expenses (including, without limitation, all
travel expenses and all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants to the Company) incurred or paid by or on
behalf of the Company in
41
connection with or leading to this Agreement, the transactions contemplated
hereby, and performing or securing performance of the obligations of the Company
hereunder, including, without limitation, such fees and expenses related to
preparation and negotiation of documentation.
SECTION 7.08. Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, shall consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the Transactions, including
the Offer and the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
SECTION 7.09. Transfer Taxes. Parent shall pay or cause Sub to pay any
state or local taxes, use, transfer tax or similar tax (including any real
property transfer or gains tax) payable in connection with the consummation of
the Offer and/or the Merger (collectively, the "Transfer Taxes"). The Company
agrees to cooperate with Parent or Sub, as the case may be, in the filing of any
returns with respect to the Transfer Taxes, including supplying in a timely
manner a complete list of all real property interests held by the Company and
its subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the assets giving rise to such Transfer Taxes shall be agreed to by
the Company and Parent.
ARTICLE VIII
Conditions Precedent
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. If required by applicable law, this
Agreement and the Merger shall have been approved by the affirmative vote
or consent of the holders of a majority of the outstanding shares of Common
Stock in accordance with applicable law and the Company's Charter.
42
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
each of the parties shall have used its best efforts to prevent the entry
of any such injunction or other order and to appeal as promptly as possible
any injunction or other order that may be entered.
(d) Other Governmental Consents. The Company and Parent shall have
received all necessary consents and approvals from each of the Customs
Service Bureau and the Bureau of Alcohol, Tobacco and Firearms applicable
to the Merger.
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Merger, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if Sub shall not have purchased that number of shares which
constitutes the Minimum Tender Condition of Common Stock pursuant to
the Offer prior to December 31, 1997; provided, however, that the
passage of such period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree, ruling
or action restraining, enjoining or otherwise prohibiting the purchase
of shares of Common Stock pursuant to the Offer or the consummation of
the Merger; or
43
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the purchase of shares of Common
Stock pursuant to the Offer or the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(iii) if the Merger shall not have consummated by April 30, 1998
or such later date mutually agreed to by the parties; provided,
however, that the passage of such period shall be tolled for any part
thereof during which any party shall be subject to a nonfinal order,
decree, ruling or action restraining, enjoining or otherwise
prohibiting the purchase of shares of Common Stock pursuant to the
Offer or the consummation of the Merger; provided, further, however,
that the right to terminate this Agreement pursuant to this Section
9.01(b)(iii) shall not be available to any party whose failure to
perform any obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(c) by the Company if (x) to the extent permitted by Section 6.02(b),
the Company Board approves or recommends a Superior Proposal and (y) prior
to or contemporaneously with such termination, the Company pays to Parent
an amount in cash equal to the Termination Fee;
(d) by Parent or Sub if Sub terminates the Offer as a result of the
occurrence of any event set forth in paragraphs (d), (f) and (g) of Exhibit
A to this Agreement;
(e) by the Company if Sub terminates the Offer as a result of the
occurrence of any event set forth in paragraph (a), (b), (c), (e), (f) or
(g) of Exhibit A to this Agreement;
(f) by the Company in the event the Company has convened a
Stockholders Meeting in accordance with Section 7.01 and the Merger and
this Agreement have not been approved by the affirmative vote or consent of
the holders of the requisite number of outstanding shares of Common Stock
in accordance with applicable law and the Company's Charter;
44
(g) by the Company if Sub (A) shall have failed to commence the Offer
within the time required under the Exchange Act or (B) shall have failed to
pay for any Common Stock accepted for payment pursuant to the Offer and, in
the case of clause (B), Sub shall have failed to make such payment within
three business days of receipt of written notice thereof from the Company;
provided, however, that any such failure is not caused by a material breach
by the Company; or
(h) by the Company if Parent or Sub fail to perform in any material
respect any provision of this Agreement and Parent or Sub have failed to
perform such obligation or cure such breach within 10 business days of its
receipt of written notice from the Company and such failure to perform has
not been waived in accordance with the terms of this Agreement; provided,
however, that such failure to perform is not caused by a material breach by
the Company.
SECTION 9.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 9.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 4.15, Section 5.04, the last sentence of Section 7.02,
Section 7.07, this Section 9.02 and Article IX and except to the extent that
such termination results from the wilful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in the
Operative Agreements.
SECTION 9.03. Amendment. This Agreement may be amended by the parties at
any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall not be made any amendment
that by law requires further approval by such stockholders without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 9.04. Extension; Waiver. At any time prior to the Effective Time of
the Merger, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or
45
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 9.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.01, an amendment of this
Agreement to Section 9.03 or an extension or waiver pursuant to Section 9.04
shall, in order to be effective, require (a) in the case of Parent or Sub action
by a majority of its respective Board of Directors and (b) in the case of the
Company, action by a majority of the members of the Board of Directors of the
Company who were members thereof on the date of this Agreement and remain as
such hereafter; provided, however, that in the event that Sub's designees are
appointed or elected to the Board of Directors of the Company as provided in
Section 7.06, after the acceptance for payment of shares of Common Stock
pursuant to the Offer and prior to the Effective Time of the Merger, the
affirmative vote of a majority of the Directors who are not Sub's, designees or
appointees as provided in Section 7.06, in lieu of the vote required pursuant to
clause (b) above, shall be required to (i) amend or terminate this Agreement by
the Company, (ii) exercise or waive any of the Company's rights or remedies
under this Agreement or (iii) extend the time for performance or Parent's and
Sub's respective obligations under this Agreement.
ARTICLE X
General Provisions
SECTION 10.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger. This
Section 10.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time of the Merger.
46
SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
BAA plc
Xxxxxxxx Xxxxx
000 Xxxxxx Xxxx
Xxxxxx XX0X 0XX
Attention: Xxxxxx Xxxxx
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) if to the Company, to
Duty Free International, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx, Esq.
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
SECTION 10.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
47
"material" means, when used in connection with the Company or Parent,
material to the business, financial condition or results of operations of such
party and its subsidiaries taken as a whole, and the term "materially" has a
correlative meaning.
"material adverse change" or "material adverse effect" means, when used in
connection with the Parent, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that is materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of such
party and its subsidiaries taken as a whole.
"Operative Agreements" means this Agreement, the Stockholder Agreement, the
Option Agreement, the Offer Documents and any other documents necessary to
consummate the Merger.
"person" means an individual, corporation, partnership, company, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
A "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 10.04. Interpretation. When a references is made in this Agreement
to a Section or Exhibit, such reference shall be to a Section of, or an Exhibit
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include, "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
SECTION 10.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effec
48
tive when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 10.06. Entire Agreement; No Third-Party Beneficiaries. The
Operative Agreements and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of the Operative
Agreements and (b) except for the provisions of Article III with respect to the
Paying Agent and Section 7.05, are not intended to confer upon any person other
than the parties any rights or remedies hereunder.
SECTION 10.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
SECTION 10.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 10.09. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Maryland, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Maryland in the event any dispute arises out of
any Operative Agreement or any of the Transactions, (b) agrees that it shall not
attempt to deny or defeat such personal jurisdiction
49
by motion or other request for leave from any such court and (c) agrees that it
shall not bring any action relating to any Operative Agreement or any of the
Transactions in any court other than a Federal or state court sitting in the
State of Maryland.
50
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
BAA PLC
By:
-----------------------------------
Name:
Title:
W & G ACQUISITION CORPORATION
By:
-----------------------------------
Name:
Title:
DUTY FREE INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered shares of Common Stock after
the termination or withdrawal of the Offer), to pay for any shares of Common
Stock tendered pursuant to the Offer unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer that number of
shares of Common Stock which would represent at least a majority of the Fully
Diluted Shares (the "Minimum Tender Condition")and (ii) any waiting period under
the HSR Act applicable to the purchase of shares of Common Stock pursuant to the
Offer shall have expired or been terminated. The term "Fully Diluted Shares"
means all outstanding securities entitled generally to vote in the election of
directors of the Company on a fully diluted basis, after giving effect to the
exercise or conversion of all options, rights and securities exercisable or
convertible into such voting securities. Furthermore, notwithstanding any other
term of the Offer or this Agreement, Sub shall not be required to accept for
payment or, subject as aforesaid, to pay for any shares of Common Stock not
theretofore accepted for payment or paid for, and may terminate the Offer if, at
any time on or after the date of this Agreement and before the acceptance of
such shares for payment or the payment therefor, any of the following conditions
exists:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (including, without limitation, the
Department of the Treasury, the Customs Service Bureau and the Bureau of
Alcohol, Tobacco and Firearms) or any other person (in the case of any
suit, action or proceeding by a person other than a Governmental Entity,
such suit, action or proceeding having a reasonable likelihood of success)
(i) challenging the acquisition by Parent or Sub of any shares of Common
Stock, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other Transactions, or
seeking to obtain from the Company, Parent or Sub any damages that are
material in relation to the Company and its subsidiaries
-2-
taken as whole, (ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries of
any material portion of the business or assets of the Company, Parent or
any of their respective subsidiaries, or to compel the Company, Parent or
any of their respective subsidiaries to dispose of or hold separate any
material portion of the business or assets of the Company, Parent or any of
their respective subsidiaries, as a result of the Offer, the Merger or any
of the other Transactions, (iii) seeking to impose limitations on the
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock, including the right to vote the
Common Stock purchased by it on all matters properly presented to the
stockholders of the Company, or (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect the
business or operations of the Company or its subsidiaries, or (v) which
otherwise is reasonably likely to prevent consummation of the Transactions;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued (each of the
foregoing, a "Legal Event") with respect to, or deemed applicable to, or
any consent or approval withheld with respect to, (i) Parent, the Company
or any of their respective subsidiaries or (ii) the Offer, the Merger or
any of the other Transactions by any Governmental Entity or before any
court or governmental authority, agency or tribunal, domestic or foreign,
that has a substantial likelihood of resulting, directly or indirectly, in
any of the consequences referred to in clauses (i) through (v) of paragraph
(a) above;
(c) since the date of this Agreement there shall have occurred any
material adverse change, or any development that, insofar as reasonably can
be foreseen, is reasonably likely to result in a material adverse change,
in the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries
taken as a whole other than changes resulting from currency exchange rate
fluctuations, customs, tax and duty law changes and changes relating to the
economy in general and to the Company's industry in general and not
specifically relating to the Company or any of its Subsidiaries;
-3-
(d) (i) the Company Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Parent or Sub its approval or
recommendation of the Offer, the Merger or this Agreement, or approved or
recommended any Superior Proposal or (ii) the Company Board or any
committee thereof shall have resolved to do any of the foregoing;
(e) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange or in
the London Stock Exchange, for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or involving
the United Kingdom and, in the case of armed hostilities involving the
United Kingdom, having, or which could reasonably be expected to have, a
substantial continuing general effect on business and financial conditions
in the United Kingdom, (iv) any limitation (whether or not mandatory) by
any United States or the United Kingdom governmental authority on the
extension of credit generally by banks or other financial institutions or
(v) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality shall not be true and
correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made as of such time
and the failure to be so true and correct or so true and correct in any
material respect is a Company Material Adverse Effect, and except with
respect to representations and warranties made as of an earlier time;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agree
-4-
ment and such failure would result in a Company Material Adverse Effect; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms.
Subject to Section 1.01(a), the foregoing conditions (i) may be asserted by
Parent and Sub regardless of the circumstances giving rise to such condition and
(ii) are for the sole benefit of Parent and Sub and may be waived by Parent or
Sub, in whole or in part at any time and from time to time in the sole
discretion of Parent or Sub. The failure by Parent or Sub at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
