EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Between
KCLC ACQUISITION CORP.
and
KINDERCARE LEARNING CENTERS, INC.
Dated as of October 3, 1996
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TABLE OF CONTENTS
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ARTICLE 1.
THE MERGER . . . . . . . . . . . . . 2
SECTION 1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Certificate of Incorporation; By-Laws . . . . . . . . . . . . 2
SECTION 1.6 Directors and Officers. . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS. . . . . . . . . . 3
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . 3
SECTION 2.2 Dissenting Shares and Section 262 Shares. . . . . . . . . . . 4
SECTION 2.3 Company Common Stock Elections. . . . . . . . . . . . . . . . 5
SECTION 2.4 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5 Treatment of Options and Other Employee Equity Rights . . . . 7
SECTION 2.6 Treatment of Warrants . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.7 Surrender of Shares and Warrants; Transfer Books. . . . . . . 8
SECTION 2.8 The Debt Offer. . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . 13
SECTION 3.1 Organization and Qualification; Subsidiaries. . . . . . . . . 14
SECTION 3.2 Certificate of Incorporation and By-Laws. . . . . . . . . . . 14
SECTION 3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.4 Authority Relative to This Agreement. . . . . . . . . . . . . 16
SECTION 3.5 No Conflict; Required Filings and Consents. . . . . . . . . . 17
SECTION 3.6 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.7 SEC Filings; Financial Statements . . . . . . . . . . . . . . 18
SECTION 3.8 Absence of Certain Changes or Events. . . . . . . . . . . . . 19
SECTION 3.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 21
SECTION 3.12 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.13 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.14 Offer Documents; Proxy Statement . . . . . . . . . . . . . . 26
SECTION 3.15 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.16 Opinion of Financial Advisor . . . . . . . . . . . . . . . . 27
SECTION 3.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.18 Board Recommendation . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.19 Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . 27
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF NEWCO. . . . . . . . . . . . . . 28
SECTION 4.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . 28
SECTION 4.2 Authority Relative to This Agreement. . . . . . . . . . . . . 29
SECTION 4.3 No Conflict; Required Filings and Consents. . . . . . . . . . 29
SECTION 4.4 Offer Documents; Proxy Statement. . . . . . . . . . . . . . . 30
SECTION 4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . 30
SECTION 5.1 Conduct of Business of the Company Pending the Merger . . . . 30
ARTICLE 6.
ADDITIONAL AGREEMENTS. . . . . . . . . . . 33
SECTION 6.1 Stockholders Meeting. . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.2 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.3 Access to Information; Confidentiality. . . . . . . . . . . . 34
SECTION 6.4 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.5 Employee Benefits Matters . . . . . . . . . . . . . . . . . . 35
SECTION 6.6 Directors' and Officers' Indemnification and Insurance. . . . 35
SECTION 6.7 Notification of Certain Matters . . . . . . . . . . . . . . . 36
SECTION 6.8 Further Action; Best Efforts. . . . . . . . . . . . . . . . . 37
SECTION 6.9 Public Announcements. . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.10 Disposition of Litigation. . . . . . . . . . . . . . . . . . 39
SECTION 6.11 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.12 Resignation of Directors . . . . . . . . . . . . . . . . . . 39
SECTION 6.13 Stop Transfer Order. . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 7.
CONDITIONS OF MERGER. . . . . . . . . . . 40
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger . 40
SECTION 7.2 Conditions to Obligation of Newco . . . . . . . . . . . . . . 40
SECTION 7.3 Conditions to Obligation of the Company . . . . . . . . . . . 42
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER. . . . . . . . 42
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.5 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 9.
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GENERAL PROVISIONS . . . . . . . . . . . 44
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements. . 44
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.5 Entire Agreement; Assignment. . . . . . . . . . . . . . . . . 47
SECTION 9.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 48
Annex A - Affiliate Letter
Exhibit A - Certificate of Incorporation
of the Company after the Merger
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 3, 1996 (the
"AGREEMENT"), between KCLC Acquisition Corp., a Delaware corporation ("NEWCO"),
and KinderCare Learning Centers, Inc., a Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of the Company and Newco
have determined that the merger of Newco with and into the Company (the
"MERGER"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair to and in the best interests of their respective
stockholders, and such Boards of Directors have approved such Merger, pursuant
to which each share of common stock, par value $.01 per share (the "COMPANY
COMMON STOCK"), issued and outstanding immediately prior to the Effective Time
(as defined in Section 1.3) will be converted into either (A) the right to
retain at the election of the holder thereof and subject to the terms hereof,
common stock, par value $.01 per share, of the Company or (B) the right to
receive cash, other than (a) shares of Company Common Stock owned, directly or
indirectly, by the Company or any subsidiary (as defined in Section 9.3) of the
Company or by Newco or any subsidiary of Newco and (b) Dissenting Shares (as
defined in Section 2.2);
WHEREAS, the Merger and this Agreement require the vote of a majority
of the shares of the Company Common Stock for the approval thereof (the "COMPANY
STOCKHOLDER APPROVAL");
WHEREAS, Newco is a newly formed corporation organized at the
direction of Kohlberg Kravis Xxxxxxx & Co. L.P.;
WHEREAS, as a condition to Newco's willingness to enter into this
Agreement and consummate the transactions contemplated hereby, Newco has
required that the Stockholder and the Funds (each as defined in the Voting
Agreement (as defined herein)) agree, among other things, to vote shares of
Company Common Stock beneficially owned by them in accordance with the Voting
Agreement (including without limitation shares of Company Common Stock issued
upon conversion of warrants of the Company beneficially owned by the
Stockholder) and comply with the other provisions of such Voting Agreement; and
in order to induce Newco to enter into this Agreement, the Stockholder and the
Funds have executed and delivered the Voting Agreement, dated as of the date
hereof, between Newco, on the one hand, and the Stockholder and the Funds, on
the other hand (the "VOTING AGREEMENT");
WHEREAS, Newco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1.
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
of this Agreement and in accordance with the General Corporation Law of the
State of Delaware ("DGCL"), at the Effective Time (as defined in Section 1.3),
Newco shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Newco shall cease and the Company shall survive
the Merger.
SECTION 1.2 CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1 and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the closing of the Merger (the "CLOSING")
will take place at 10:00 a.m. on the second business day after satisfaction or
waiver of the conditions set forth in Article 7 (the "CLOSING DATE"), at the
offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.3 EFFECTIVE TIME. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article 7, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State
of the State of Delaware, in such form as required by and executed in accordance
with the relevant provisions of the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger) being the
"EFFECTIVE TIME").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Newco shall vest in the Company following the Merger, and all debts,
liabilities and duties of the Company and Newco shall become the debts,
liabilities and duties of the Company following the Merger.
SECTION 1.5 CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At the
Effective Time and without any further action on the part of the Company and
Newco, the certificate of incorporation
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of the Company, as in effect immediately prior to the Effective Time, shall be
amended so as to read in its entirety in the form set forth as Exhibit A hereto,
and, as so amended, until thereafter further amended as provided therein and
under the DGCL, it shall be the certificate of incorporation of the Company
following the Merger.
(b) At the Effective Time and without any further action on the part
of the Company and Newco, the by-laws of Newco shall be the by-laws of the
Company following the Merger and thereafter may be amended or repealed in
accordance with their terms or the certificate of incorporation of the Company
following the Merger and as provided under the DGCL.
SECTION 1.6 DIRECTORS AND OFFICERS. Subject to Section 6.12, the
directors of Newco immediately prior to the Effective Time shall be the initial
directors of the Company following the Merger, each to hold office in accordance
with the certificate of incorporation and by-laws of the Company following the
Merger, and the officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Company following the Merger, in each case
until their respective successors are duly elected or appointed (as the case may
be) and qualified.
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company, Newco or
any holder of any shares of Company Common Stock or any shares of capital stock
of Newco:
(a) COMMON STOCK OF NEWCO. Each share of common stock of Newco issued
and outstanding immediately prior to the Effective Time shall be converted
into a number of shares of the common stock, par value $.01 per share, of
the Company following the Merger equal to the quotient of (i) 7,345,679
divided by (ii) the number of shares of common stock of Newco outstanding
immediately prior to the Effective Time.
(b) CANCELLATION OF TREASURY STOCK AND NEWCO-OWNED COMPANY COMMON
STOCK. Each share of Company Common Stock that is owned by the Company or
by any subsidiary of the Company, and each share of Company Common Stock
that is owned by Newco or any subsidiary of Newco shall automatically be
cancelled and retired and shall cease to exist, and no cash, Company Common
Stock or other consideration shall be delivered or deliverable in exchange
therefor.
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(c) CONVERSION (OR RETENTION) OF COMPANY COMMON STOCK. Except as
otherwise provided herein and subject to Section 2.4, each issued and
outstanding share of Company Common Stock (other than any such shares to be
cancelled pursuant to Section 2.1(b) and any Dissenting Shares (as defined
in Section 2.2)) shall be converted into the following (the "MERGER
CONSIDERATION"):
(i) for each such share of Company Common Stock with respect to
which an election to retain Company Common Stock has been effectively
made and not revoked or lost, pursuant to Sections 2.3(c), (d) and (e)
("ELECTING SHARES"), the right to retain one fully paid and
nonassessable share of Company Common Stock (a "NON-CASH ELECTION
SHARE"); and
(ii) for each such share of Company Common Stock (other than
Electing Shares), the right to receive in cash from the Company
following the Merger an amount equal to $20.25 (the "CASH ELECTION
PRICE").
(d) CANCELLATION AND RETIREMENT OF COMPANY COMMON STOCK. As of the
Effective Time, all shares of Company Common Stock (other than shares
referred to in Section 2.1(b) and 2.1(c)(i)) issued and outstanding
immediately prior to the Effective Time shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall, to the extent such certificate represents such shares, cease
to have any rights with respect thereto, except the right to receive cash,
including cash in lieu of fractional shares of Company Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate
in accordance with Section 2.7.
SECTION 2.2 DISSENTING SHARES AND SECTION 262 SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted in favor of
or consented to the Merger and shall have delivered a written demand for
appraisal of such shares in the time and manner provided in Section 262 of the
DGCL and shall not have failed to perfect or shall not have effectively
withdrawn or lost their rights to appraisal and payment under the DGCL (the
"DISSENTING SHARES") shall not be converted into the right to receive the Merger
Consideration, but shall be entitled to receive the consideration as shall be
determined pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, that if any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost his, her or its right to appraisal and payment under the DGCL, such
holder's shares of Company Common Stock shall thereupon be deemed to have been
converted, at the Effective Time, into the right to receive the
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Merger Consideration set forth in Section 2.1 of this Agreement, without any
interest thereon.
(b) The Company shall give Newco (i) prompt notice of any demands for
appraisal pursuant to Section 262 received by the Company, withdrawals of such
demands and any other instruments served pursuant to the DGCL and received by
the Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Newco, make any payment with respect to
any such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.3 COMPANY COMMON STOCK ELECTIONS. (a) Each person who, on
or prior to the Election Date referred to in (c) below, is a record holder of
shares of Company Common Stock will be entitled, with respect to all or any
portion of his shares, to make an unconditional election (a "NON-CASH ELECTION")
on or prior to such Election Date to retain Non-Cash Election Shares, on the
basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement (as defined in
Section 3.14), Newco shall appoint a bank or trust company to act as exchange
agent (the "EXCHANGE AGENT") for the payment of the Merger Consideration.
(c) Newco shall prepare and mail a form of election, which form shall
be subject to the reasonable approval of the Company (the "FORM OF ELECTION"),
with the Proxy Statement to the record holders of Company Common Stock as of the
record date for the Stockholders Meeting (as defined in Section 6.1), which Form
of Election shall be used by each record holder of shares of Company Common
Stock who wishes to elect to retain Non-Cash Election Shares for any or all
shares of Company Common Stock held, subject to the provisions of Section 2.4
hereof, by such holder. The Company will use its best efforts to make the Form
of Election and the Proxy Statement available to all persons who become holders
of Company Common Stock during the period between such record date and the
Election Date referred to below. Any such holder's election to retain Non-Cash
Election Shares shall have been properly made only if the Exchange Agent shall
have received at its designated office, by 5:00 p.m., New York City time on the
business day (the "ELECTION DATE") next preceding the date of the Stockholders
Meeting, a Form of Election properly completed and signed and accompanied by
certificates for the shares of Company Common Stock to which such Form of
Election relates, duly endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company (or by an appropriate guarantee of delivery
of such certificates as set forth in such Form of Election from a firm which is
a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States, provided such
certificates are in fact delivered to the Exchange Agent
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within five NASDAQ trading days after the date of execution of such guarantee of
delivery).
(d) Any Form of Election may be revoked by the stockholder submitting
it to the Exchange Agent only by written notice received by the Exchange Agent
prior to 5:00 p.m, New York City time, on the Election Date. In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Newco and the Company that the Merger has been abandoned.
If a Form of Election is revoked, the certificate or certificates (or guarantees
of delivery, as appropriate) for the shares of Company Common Stock to which
such Form of Election relates shall be promptly returned to the stockholder
submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent shall be binding whether
or not elections to retain Non-Cash Election Shares have been properly made or
revoked pursuant to this Section 2.3 with respect to shares of Company Common
Stock and when elections and revocations were received by it. If the Exchange
Agent determines that any election to retain Non-Cash Election Shares was not
properly made with respect to shares of Company Common Stock, such shares shall
be treated by the Exchange Agent as shares which were not Electing Shares at the
Effective Time, and such shares shall be exchanged in the Merger for cash
pursuant to Section 2.1(c)(ii). The Exchange Agent shall also make all
computations as to the allocation and the proration contemplated by Section 2.4,
and any such computation shall be conclusive and binding on the holders of
shares of Company Common Stock. The Exchange Agent may, with the mutual
agreement of Newco and the Company, make such rules as are consistent with this
Section 2.3 for the implementation of the elections provided for herein as shall
be necessary or desirable fully to effect such elections.
SECTION 2.4 PRORATION.
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of shares of Company Common Stock to be converted into the
right to retain Company Common Stock at the Effective Time (the "NON-CASH
ELECTION NUMBER") shall be equal to 1,296,296 (excluding for this purpose any
shares of Company Common Stock to be cancelled pursuant to Section 2.1(b)).
(b) If the number of Electing Shares exceeds the Non-Cash Election
Number, then each Electing Share shall be converted into the right to retain
Non-Cash Election Shares or receive cash in accordance with the terms of Section
2.1(c) in the following manner:
(i) A proration factor (the "NON-CASH PRORATION FACTOR") shall be
determined by dividing the Non-Cash Election Number by the total number of
Electing Shares.
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(ii) The number of Electing Shares covered by each Non-Cash Election
to be converted into the right to retain Non-Cash Election Shares shall be
determined by multiplying the Non-Cash Proration Factor by the total number
of Electing Shares covered by such Non-Cash Election.
(iii) All Electing Shares, other than those shares converted into the
right to receive Non-Cash Election Shares in accordance with Section
2.4(b)(ii), shall be converted into cash (on a consistent basis among
stockholders who made the election referred to in Section 2.1(c)(i), pro
rata to the number of shares as to which they made such election) as if
such shares were not Electing Shares in accordance with the terms of
Section 2.1(c)(ii).
(c) If the number of Electing Shares is less than the Non-Cash
Election Number, then:
(i) all Electing Shares shall be converted into the right to retain
Company Common Stock in accordance with the terms of Section 2.1(c)(i);
(ii) additional shares of Company Common Stock other than Electing
Shares and Dissenting Shares shall be converted into the right to retain
Non-Cash Election Shares in accordance with the terms of 2.1(c) in the
following manner:
(1) a proration factor (the "CASH PRORATION FACTOR") shall be
determined by dividing (x) the difference between the Non-Cash
Election Number and the number of Electing Shares, by (y) the total
number of shares of Company Common Stock other than Electing Shares
and Dissenting Shares; and
(2) the number of shares of Company Common Stock in addition to
Electing Shares to be converted into the right to retain Non-Cash
Election Shares shall be determined by multiplying the Cash Proration
Factor by the total number of shares other than Electing Shares and
Dissenting Shares; and
(iii) subject to Section 2.2, shares of Company Common Stock subject
to clause (ii) of this paragraph (c) shall be converted into the right to
retain Non-Cash Election Shares in accordance with Section 2.1(c)(i) (on a
consistent basis among shareholders who held shares of Company Common Stock
as to which they did not make the election referred to in Section
2.1(c)(i), pro rata to the number of shares as to which they did not make
such election).
SECTION 2.5 TREATMENT OF OPTIONS AND OTHER EMPLOYEE EQUITY RIGHTS.
(a) Immediately prior to the Effective Time, each outstanding stock option held
by any current or former
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employee or director (an "OPTION") granted under the 1993 Stock Option and
Incentive Plan, the 1993 Director Stock Option Plan or otherwise (the "STOCK
PLANS"), whether or not then exercisable, shall be cancelled by the Company, and
except as otherwise agreed by the Company, Newco and the holder, the holder
thereof shall be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company following the Merger in consideration
for such cancellation an amount in cash equal to the product of (a) the number
of shares of Company Common Stock previously subject to such Option and (b) the
excess, if any, of the cash Merger Consideration per share over the exercise
price per share previously subject to such Option, reduced by the amount of any
withholding or other taxes required by law to be withheld.
(b) Effective as of the Effective Time, the Company shall use its
reasonable best efforts to take all such action as is necessary prior to the
Effective Time to terminate all Stock Plans so that on and after the Effective
Time no current or former employee or director shall have any Option to purchase
shares of Company Common Stock or any other equity interest in the Company under
any Stock Plan. The Company shall use its reasonable best efforts to obtain any
consents necessary to release the Company from any liability in respect of any
Option.
SECTION 2.6 TREATMENT OF WARRANTS. At the Effective Time, pursuant
to the Warrant Agreement (as defined in Section 3.3) and without any action on
the part of Newco, the Company or the holders of any of the Warrants (as defined
in Section 3.3), each Warrant issued and outstanding immediately prior to the
Effective Time shall be cancelled, extinguished and converted into the right to
receive the amount of cash determined in accordance with Section 12(d) of the
Warrant Agreement (the "WARRANT CONSIDERATION") payable to the holder thereof,
without interest, upon surrender of the certificate formerly representing such
Warrant in the manner provided in Section 2.7, less any required withholding
taxes.
SECTION 2.7 SURRENDER OF SHARES AND WARRANTS; TRANSFER BOOKS. (a)
EXCHANGE AGENT. As soon as reasonably practicable as of or after the Effective
Time, the Company shall deposit with the Exchange Agent, (i) for the benefit of
the holders of shares of Company Common Stock, the cash portion of Merger
Consideration and (ii) for the benefit of the holders of the Warrants, the
Warrant Consideration, each for exchange in accordance with this Article 2.
Such funds shall be invested by the Exchange Agent as directed by the Company,
PROVIDED that such investments shall be (i) securities issued or directly and
fully guaranteed or insured by the United Stated government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit, eurodollar time deposits and
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits with any commercial bank, depository institution or trust company
9
incorporated or doing business under the laws of the United States of America,
any state thereof or the District of Columbia, provided that such commercial
bank, depository institution or trust company has, at the time of investment,
(A) capital and surplus exceeding $250 million and (B) outstanding short-term
debt securities which are rated at least A-1 by Standard & Poor's Rating Group
Division of The XxXxxx-Xxxx Companies, Inc. or at least P-1 by Xxxxx'x Investors
Service, Inc. or carry an equivalent rating by a nationally recognized rating
agency if both of the two named rating agencies cease to publish ratings of
investments, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clauses (i) and (ii) above
entered into with any financial institution meeting the qualifications specified
in clause (ii) above, (iv) commercial paper having a rating in the highest
rating categories from Standard & Poor's Rating Group Division of The
XxXxxx-Xxxx Companies, Inc. or Xxxxx'x Investors Service, Inc. or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease to publish ratings of investments and in each case
maturing within six months after the date of acquisition and (v) money market
mutual or similar funds having assets in excess of $1 billion. Any net profit
resulting from, or interest or income produced by, such investments will be
payable to the Company.
(b) EXCHANGE PROCEDURES FOR SHARES OF COMPANY COMMON STOCK. As soon
as practicable after the Effective Time, each holder of an outstanding
certificate or certificates which prior thereto represented shares of Company
Common Stock shall, upon surrender to the Exchange Agent of such certificate or
certificates and acceptance thereof by the Exchange Agent, be entitled to a
certificate or certificates representing the number of full shares of Company
Common Stock, if any, to be retained by the holder thereof pursuant to this
Agreement and the amount of cash, if any, into which the number of shares of
Company Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to this Agreement. The Exchange
Agent shall accept such certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective Time,
there shall be no further transfer on the records of the Company or its transfer
agent of certificates representing shares of Company Common Stock which have
been converted, in whole or in part, pursuant to this Agreement into the right
to receive cash, and if such certificates are presented to the Company for
transfer, they shall be cancelled against delivery of cash and, if appropriate,
certificates for retained Company Common Stock. If any certificate for such
retained Company Common Stock is to be issued in, or if cash is to be remitted
to, a name other than that in which the certificate for Company Common Stock
surrendered for exchange is registered, it shall be a condition of such exchange
that the certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in
10
proper form for transfer and that the person requesting such exchange shall pay
to the Company or its transfer agent any transfer or other taxes required by
reason of the issuance of certificates for such retained Company Common Stock in
a name other than that of the registered holder of the certificate surrendered,
or establish to the satisfaction of the Company or its transfer agent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.7(b), each certificate for shares of Company Common Stock shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration as contemplated by Section
2.1. No interest will be paid or will accrue on any cash payable as Merger
Consideration or in lieu of any fractional shares of retained Company Common
Stock.
(c) EXCHANGE PROCEDURES FOR WARRANTS. As soon as practicable after
the Effective Time, the Company shall cause to be mailed to each record holder,
as of the Effective Time, of an outstanding certificate or certificates, which
immediately prior to the Effective Time represented Warrants (the
"CERTIFICATES"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
of the Warrant Consideration therefor. The Exchange Agent shall accept the
Certificates upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time, there shall be no
further transfer on the records of the Company or its transfer agent of
Certificates representing Warrants, and if such Certificates are presented to
the Company for transfer, they shall be cancelled against delivery of Warrant
Consideration therefor. Until surrendered as contemplated by this Section
2.7(c), each Certificate for Warrants shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Warrant Consideration as contemplated by Section 2.6. No interest will be paid
or will accrue on any cash payable as Warrant Consideration.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to retained Company Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
certificate for shares of Company Common Stock with respect to the shares of
retained Company Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.7(f)
until the surrender of such certificate in accordance with this Article 2.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the holder of the certificate representing
whole shares of retained Company Common Stock issued in connection therewith,
without interest, (i) at the time of
11
such surrender or as promptly after the sale of the Excess Shares (as defined in
Section 2.7(f)) as practicable, the amount of any cash payable in lieu of a
fractional share of retained Company Common Stock to which such holder is
entitled pursuant to Section 2.7(f) and the proportionate amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of retained Company Common Stock, and (ii) at
the appropriate payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of retained Company Common Stock.
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK EXCHANGED FOR
CASH. All cash paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of this
Article 2 (including any cash paid pursuant to Section 2.7(f)) shall be deemed
to have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock exchanged for cash theretofore represented by
such certificates.
(f) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of retained Company Common Stock shall be issued in connection
with the Merger, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of the Company after the
Merger; and
(ii) Notwithstanding any other provision of this Agreement, each
record holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
retained Company Common Stock (after taking into account all shares of Company
Common Stock delivered by such holder) shall receive, in lieu thereof, a cash
payment (without interest) representing such holder's proportionate interest in
the net proceeds from the sale by the Exchange Agent (following the deduction of
applicable transaction costs), on behalf of all such holders, of the shares (the
"EXCESS SHARES") of retained Company Common Stock representing such fractions.
Such sale shall be made as soon as practicable after the Effective Time.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Merger
Consideration or Warrant Consideration deposited with the Exchange Agent
pursuant to this Section 2.7 (the "EXCHANGE FUND") which remains undistributed
to the holders of the certificates representing shares of Company Common Stock
or Warrants for six months after the Effective Time shall be delivered to the
Company, upon demand, and any holders of shares of Company Common Stock or
Warrants prior to the Merger who have not theretofore complied with this Article
2 shall thereafter look only to the Company and only as general creditors
thereof for payment of
12
their claim for cash, if any, retained Company Common Stock, if any, any cash in
lieu of fractional shares of retained Company Common Stock, any dividends or
distributions with respect to retained Company Common Stock or Warrant
Consideration, as applicable, to which such holders may be entitled.
(h) NO LIABILITY. None of Newco, the Company nor the Exchange Agent
shall be liable to any person in respect of any shares of retained Company
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock or Warrants shall not have been surrendered prior
to one year after the Effective Time (or immediately prior to such earlier date
on which any cash, if any, any cash in lieu of fractional shares of retained
Company Common Stock, any dividends or distributions with respect to retained
Company Common Stock in respect of such certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in Section
3.5(b)), any such cash, dividends or distributions in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Company, free and clear of all claims or interest of any person
previously entitled thereto.
SECTION 2.8 THE DEBT OFFER. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.1, the Company shall, as
soon as reasonably practicable following execution of this Agreement (but in no
event later than fifteen calendar days after the public announcement of the
execution of this Agreement), commence an offer to purchase all of the
outstanding aggregate principal amount of the Company's 10-3/8% Senior Notes due
2001 (hereinafter referred to as the "NOTES") on the terms set forth in Section
2.8 of the disclosure schedule between Newco and the Company dated the date
hereof (the "DISCLOSURE SCHEDULE") and such other customary terms and conditions
as are reasonably acceptable to Newco (the "DEBT OFFER"). The Company shall
waive any of the conditions to the Debt Offer and make any other changes in the
terms and conditions of the Debt Offer as reasonably requested by Newco, and the
Company shall not, without Newco's prior consent, waive any material condition
to the Debt Offer, make any changes to the terms and conditions of the Debt
Offer set forth on Section 2.8 of the Disclosure Schedule or make any other
material changes in the terms and conditions of the Debt Offer. Notwithstanding
the immediately preceding sentence, Newco shall not request that the Company
make any change to the terms and conditions of the Debt Offer which decreases
the price per Note payable in the Debt Offer, changes the form of consideration
payable in the Debt Offer (other than by adding consideration) or imposes
conditions to the Debt Offer in addition to those set forth in Section 2.8 of
the Disclosure Schedule which are materially adverse to holders of the Notes (it
being agreed that a request by Newco that the Company waive any condition in
whole or in part at any
13
time and from time to time in its sole discretion shall not be deemed to be
materially adverse to any holder of Notes), unless such change was previously
approved by the Company in writing. The Company covenants and agrees that,
subject to the terms and conditions of this Agreement, including but not limited
to the conditions to the Debt Offer, it will accept for payment and pay for
Notes as soon as the condition set forth in Section 7.2(h) of this Agreement is
satisfied and it is permitted to do so under applicable law, PROVIDED that the
Company shall coordinate the timing of any such purchase with Newco in order to
obtain the greatest participation in the Debt Offer.
(b) Promptly following the date of this Agreement, Newco and the
Company shall prepare an offer to purchase the Notes (or portions thereof) and
forms of the related letter of transmittal (the "LETTER OF TRANSMITTAL")
(collectively, the "OFFER TO PURCHASE") and summary advertisement, as well as
all other information and exhibits (collectively, the "OFFER DOCUMENTS"). Newco
and the Company will cooperate with each other in the preparation of the Offer
Documents. All mailings to the holders of Notes in connection with the Debt
Offer shall be subject to the prior review, comment and reasonable approval of
Newco. The Company will use its best efforts to cause the Offer Documents to be
mailed to the holders of the Notes as promptly as practicable following
execution of this Agreement (but in no event later than fifteen calendar days
after the public announcement of the execution of this Agreement). The Company
agrees promptly to correct any information in the Offer Documents that shall be
or have become false or misleading in any material respect.
(c) In connection with the Debt Offer, if requested by Newco, the
Company shall promptly furnish Newco with security position listings, any
non-objecting beneficial owner lists and any available listings or computer
files containing the names and addresses of the beneficial owners and/or record
holders of Notes, each as of a recent date, and shall promptly furnish Newco
with such additional information (including but not limited to updated lists of
Noteholders, mailing labels, security position listings and non-objecting
beneficial owner lists) and such other assistance as Newco or its agents may
reasonably require in communicating the Debt Offer to the record and beneficial
holders of Notes.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Newco that, except as
set forth on the Disclosure Schedule, but, with respect to any specific
representation and warranty, only to the extent that it would be reasonably
apparent that a reference on
14
the Disclosure Schedule relates to such representation and warranty:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approval could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect (as
defined below). Each of the Company and each of its Significant Subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. When
used in connection with the Company or any of its subsidiaries, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that, either individually
or in the aggregate with all other changes or effects, is materially adverse to
the business, financial condition or results of operations of the Company and
its subsidiaries taken as a whole.
SECTION 3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company
has heretofore furnished to Newco a complete and correct copy of the certificate
of incorporation and the by-laws of the Company as currently in effect. Such
certificate of incorporation and by-laws are in full force and effect and no
other organizational documents are applicable to or binding upon the Company.
The Company is not in violation of any of the provisions of its certificate of
incorporation or by-laws.
SECTION 3.3 CAPITALIZATION. The authorized capital stock of the
Company consists of 40,000,000 shares of Company Common Stock and 10,000,000
shares of Preferred Stock, $.01 par value per share (the "PREFERRED STOCK"). As
of October 1, 1996, (i) 19,146,211 shares of Company Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable
and were issued free of preemptive (or similar) rights, (ii) 0 shares of Company
Common Stock were held in the treasury of the Company, (iii) an aggregate of
2,620,282 shares of Company Common Stock were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Options and (iv) an aggregate of 3,695,317 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding warrants (the "WARRANTS") issued pursuant to
the
15
Warrant Agreement, dated March 31, 1993, between the Company and The First
National Bank of Boston (the "WARRANT AGREEMENT"). As of the date hereof, no
shares of Preferred Stock are issued and outstanding. Since October 1, 1996,
the Company has not issued or reserved for issuance (a) any shares of capital
stock or other voting securities of the Company or any of its subsidiaries,
except as a result of the exercise of Options or Warrants outstanding at October
1, 1996 or (b) any Options or Warrants, except as described in this Section 3.3.
Other than Options or Warrants outstanding as of the date hereof, the Company
has issued or reserved for issuance (a) no options or other rights to acquire
from the Company or any of its subsidiaries, and no obligation of the Company or
any of its subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or any of its subsidiaries and (b) no equity
equivalents, interests in the ownership or earnings of the Company or any of its
subsidiaries or other similar rights (collectively, with the Options and the
Warrants, "COMPANY SECURITIES"). All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive (or similar)
rights. There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such subsidiary or any other entity. Except
for the Equity Registration Rights Agreement dated March 31, 1993, among the
Company, Xxxxxxxxx & Co., L.P., Xxxxxxxxx International Limited, TCW Special
Credit Funds, Xxxxxxx Financial Services Corporation, Lodestar Management
Incorporated and Lodestar Associates, L.P (together with Lodestar Management
Incorporated, "LODESTAR") and the Warrant Registration Rights Agreement dated
March 31, 1993, between the Company and Lodestar, there are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
The Company has delivered to Newco prior to the date hereof a true and complete
list of the subsidiaries and associated entities of the Company which evidences,
among other things, the amount of capital stock or other equity interests owned
by the Company, directly or indirectly, in such subsidiaries or associated
entities. Each of the outstanding shares of capital stock of each of the
Company's Significant Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and all such shares are owned by the Company or another
wholly owned subsidiary of the Company and are owned free and clear of all
security interests, liens, claims, pledges, agreements, limitations in voting
rights, charges or other encumbrances of any nature whatsoever, except as set
forth on Section 3.3 of the Disclosure Schedule. No entity in which the Company
owns,
16
directly or indirectly, less than a 50% equity interest is, individually or when
taken together with all such other entities, material to the business of the
Company and its subsidiaries taken as a whole. As of the date hereof, the only
outstanding indebtedness for borrowed money of the Company and its subsidiaries
is (i) $70 million in aggregate principal amount of Notes issued pursuant to the
Indenture between the Company and AmSouth Bank, N.A., as Trustee, dated as of
June 2, 1994 (the "INDENTURE"), (ii) $48,500,000 in aggregate principal amount
issued under, the Credit Agreement, dated June 2, 1994 (the "CREDIT AGREEMENT"),
by and among the Company, the lenders listed therein, The Toronto-Dominion Bank,
as facing bank, and Toronto Dominion (Texas), Inc., as agent, (iii) $7,437,000
aggregate principal amount issued under a loan agreement, dated June 2, 1994
(the "LOAN AGREEMENT") between the Company and SouthTrust Bank of Alabama, N.A.,
(iv) $33,025,000 aggregate principal amount outstanding under industrial revenue
bonds which are secured by a like amount of letters of credit issued under to
the Credit Agreement, (v) $5,350,000 in aggregate principal amount of industrial
revenue bonds secured by real property and (vi) $64,000 aggregate principal
amount issued under a bank overdraft line, dated August 29, 1995, between the
Company and NationsBank of Georgia N.A. The loans and other extensions of
credit under the Credit Agreement and the Loan Agreement are each prepayable in
full in accordance with their respective terms.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
approval of this Agreement by the holders of a majority of the outstanding
shares if and to the extent required by the DGCL, and the filing of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Newco, constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms. The Board of Directors of the Company has approved
this Agreement and the transactions contemplated hereby (including but not
limited to the Debt Offer and the Merger) so as to render inapplicable hereto
and thereto the limitation on business combinations contained in Section 203 of
the DGCL (or any similar provision). The Board of Directors of the Company has
approved the Voting Agreement and the transactions contemplated thereby so as to
render inapplicable thereto the limitation on business combinations contained in
Section 203 of the DGCL (or any similar provision). As a result of the
foregoing actions, the only vote
17
required to authorize the Merger is the affirmative vote of a majority of the
outstanding shares of Company Common Stock.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance of this Agreement by the Company do not and
will not: (i) conflict with or violate the certificate of incorporation or
by-laws of the Company or the equivalent organizational documents of any of its
Significant Subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties are bound or affected; or (iii) result in any
breach or violation of or constitute a default (or an event which with notice or
lapse of time or both could become a default) or result in the loss of a
material benefit under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except (A) in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and (B) in the case of clause (iii), other than as set forth on
Section 3.5(a) of the Disclosure Schedule and except that the consummation of
the Merger may result in conflicts, violations, breaches or defaults under the
Indenture, the Credit Agreement and the Loan Agreement.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require any consent, approval, authorization or permit of, action by, filing
with or notification to, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority, official or
agency, domestic or foreign (a "GOVERNMENTAL ENTITY"), except for (i) the
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations promulgated thereunder, the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations promulgated thereunder, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), state securities, takeover and Blue Sky
laws, (ii) the filing and recordation of appropriate merger or other documents
as required by the DGCL and (iii) such consents, approvals, authorizations,
permits, actions, filings or notifications the failure of which to make or
obtain could not
18
reasonably be expected to (x) prevent or materially delay consummation of the
Debt Offer or the Merger or (y) have a Material Adverse Effect.
SECTION 3.6 COMPLIANCE. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are bound
or affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such conflicts, defaults or violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.7 SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company and,
to the extent applicable, each of its then or current subsidiaries, has filed
all forms, reports, statements and documents required to be filed with the SEC
since March 31, 1993 (collectively, the "SEC REPORTS"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. The Company has heretofore delivered or promptly
will deliver to Newco, in the form filed with the SEC (including any amendments
thereto), (i) its (and, to the extent applicable, its subsidiaries') Annual
Reports on Form 10-K for each of the three fiscal years ended June 3, 1994, June
2, 1995 and May 31, 1996 (as amended by the Form 10-K/A filed with the SEC on
September 30, 1996), (ii) all definitive proxy statements relating to the
Company's (and such subsidiaries') meetings of stockholders (whether annual or
special) held since March 31, 1993 and (iii) all other SEC Reports. No SEC
Report contained, when filed, any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except to the
extent revised or superseded by a subsequent filing with the SEC (a copy of
which has been provided to Newco prior to the date hereof), none of the SEC
Reports filed prior to the date hereof contains any untrue statement of a
material fact or omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the audited and unaudited consolidated financial
statements of the Company (including any related notes thereto) included in its
Annual Reports on Form 10-K for each of the three fiscal years ended June 3,
1994, June 2, 1995 and May
19
31, 1996, which have previously been furnished to Newco, complies as to form in
all material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly presents the consolidated financial position of
the Company and its subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the periods
indicated.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at May 31, 1996, including the notes
thereto, neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet or in the notes
thereto prepared in accordance with generally accepted accounting principles
consistently applied, except for liabilities or obligations incurred in the
ordinary course of business since May 31, 1996.
SECTION 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 31,
1996, except as contemplated by this Agreement, disclosed in the SEC Reports
filed and publicly available prior to the date of this Agreement or disclosed in
Section 3.8 of the Disclosure Schedule, the Company and its subsidiaries have
conducted their businesses only in the ordinary course and, since such date,
there has not been (i) any condition, event or occurrence which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (ii) any action which, if it had been taken after the date hereof, would
have required the consent of Newco under Section 5.1 hereof or (iii) any
condition, event or occurrence which could reasonably be expected to prevent,
hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
SECTION 3.9 ABSENCE OF LITIGATION. Except as disclosed with
reasonable specificity in the SEC Reports filed and publicly available prior to
the date of this Agreement, there are no suits, claims, actions, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries, or any properties or rights of
the Company or any of its subsidiaries, before any Governmental Entity, that (i)
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or (ii) seek to delay or prevent the consummation of the
transactions contemplated hereby. As of the date hereof, neither the Company
nor any of its subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or award
having, or which, insofar as can be reasonably foreseen, in the future could
20
reasonably be expected to have a Material Adverse Effect or could prevent or
materially delay the consummation of the transactions contemplated hereby. As of
the date hereof, no officer or director of the Company is a defendant in any
litigation commenced by stockholders of the Company with respect to the
performance of his or her duties as an officer and/or director of the Company
under any federal or state law (including litigation under federal and state
securities laws). Except as set forth in Section 3.9 of the Disclosure
Schedule, to the knowledge of the Company, there exist no indemnification
agreements with any of the directors and officers of the Company.
SECTION 3.10 PROPERTIES. (a) The Company or one of its subsidiaries
has (i) good and marketable fee title to the real property owned in fee by the
Company or any of its subsidiaries (collectively, the "OWNED PROPERTIES") and
(ii) good and valid leasehold title or other occupancy right to the real
property leased, subleased or licensed by the Company or any of its subsidiaries
(collectively, the "LEASED PROPERTIES") (Owned Properties and Leased Properties
being sometimes referred to herein collectively as the "COMPANY PROPERTIES"), in
each case free and clear of all options to purchase or lease (in the case of the
Owned Properties), leases, conditions of limitation, mortgages, liens, security
interests, easements, encumbrances, covenants, rights-of-way and other similar
restrictions, except for such options, leases, conditions of limitation,
mortgages, liens, security interests, easements, encumbrances, covenants,
rights-of-way and other similar restrictions set forth in Section 3.10 of the
Disclosure Schedule or which, individually or in the aggregate with all other
options, leases, conditions of limitation, mortgages, liens, security interests,
easements, encumbrances, covenants, rights-of-way and other similar
restrictions, could not reasonably be expected to have a Material Adverse Effect
or prevent or materially delay the transactions contemplated hereby.
(b) Each agreement under which real property is leased, subleased or
licensed to the Company as of the date hereof (collectively, the "COMPANY
LEASES") is in full force and effect in accordance with its respective terms and
the Company or one of its subsidiaries is the holder of the lessee's or tenant's
interest thereunder and there exists no default under any of the Company Leases
by the Company or any of its subsidiaries and no circumstance exists which, with
the giving of notice, the passage of time or both could result in such a
default, except for such defaults or other circumstances set forth in Section
3.10 of the Disclosure Schedule or which, individually or in the aggregate with
all other defaults or other circumstances, could not reasonably be expected to
have a Material Adverse Effect or prevent or materially delay the transactions
contemplated hereby; except as set forth in Section 3.10 of the Disclosure
Schedule, the transfer of the shares of Company Common Stock or the consummation
of any other part of the transactions contemplated by this Agreement does not
violate the terms of any of the
21
Company Leases. Except as set forth in Section 3.10 of the Disclosure Schedule
and except for any violations, individually or in the aggregate with all other
violations, could not reasonably be expected to have a Material Adverse Effect
or prevent or materially delay the transactions contemplated hereby, neither the
Company nor any of its subsidiaries (or any of the affiliates of any of the
foregoing) has an ownership, financial or other interest in the landlord under
any of the Company Leases, which exceeds a 50% ownership, financial or other
interest in such landlord.
(c) Except as set forth in Section 3.10 of the Disclosure Schedule,
each of the reciprocal easement or operating agreements to which the Company or
any of its subsidiaries is a party as of the date hereof and which encumbers any
of the Company Properties (collectively, the "REAS") is in full force and effect
and there exists no default on the part of the Company or any subsidiary of the
Company under any REA and no circumstance exists which, with the giving of
notice, the passage of time or both could result in such a default, except for
such defaults or other circumstances set forth in Section 3.10 of the Disclosure
Schedule or which, individually or in the aggregate with all other defaults or
circumstances, could not reasonably be expected to have a Material Adverse
Effect or prevent or materially delay the transactions contemplated hereby;
except as set forth in Section 3.10 of the Disclosure Schedule and except for
any violation or failure to obtain consent, individually or in the aggregate
with all other violations or failures, could not reasonably be expected to have
a Material Adverse Effect or prevent or materially delay the transactions
contemplated hereby, the transfer of the shares of Company Common Stock or the
consummation of any other part of transactions contemplated by this Agreement
does not violate the terms of any REAs nor is the consent of any party to any of
the REAs required to be obtained in connection with the transactions
contemplated under this Agreement.
(d) The current operation and use of the Company Properties does not
violate any statutes, laws, regulations, rules, ordinances, permits,
requirements, orders or decrees now in effect except for such violations which
could not, individually or in the aggregate with all other violations,
reasonably be expected to have a Material Adverse Effect or prevent or
materially delay the transactions contemplated hereby.
SECTION 3.11 EMPLOYEE BENEFIT PLANS. (a) Section 3.11(a) of the
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (including without limitation
multiemployer plans within the meaning of ERISA Section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans,
22
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), under which any employee or former employee of the Company or any of
its subsidiaries has, or could reasonably be expected to have, any present or
future right to benefits or under which the Company or any subsidiary of the
Company has, or could reasonably be expected to have, any present or future
liability. All such plans, agreements, programs, policies and arrangements
shall be collectively referred to as the "COMPANY PLANS". Section 3.11 of the
Disclosure Schedule also contains a true and complete description of all
severance plans of the Company or any of its subsidiaries. No Company Plan is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or is an
"employee pension plan" within the meaning of Section 3(2) of ERISA subject to
Title IV of ERISA.
(b) With respect to each Company Plan, the Company has delivered or
made available to Newco a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or description of any oral
communication) by the Company or any of its subsidiaries which modify in any
significant respect the benefits provided under the terms of any Company Plan in
a manner not reflected in any of the documents described in this subsection (b);
and (iv) for the three most recent years (A) the Form 5500 and attached
schedules; (B) audited financial statements; and (C) actuarial valuation
reports.
(c) With respect to all the Company Plans, except as set forth in the
SEC Reports and except as could not individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect: (i) all Company Plans are in
substantial compliance with all applicable law, including the Internal Revenue
Code of 1986, as amended (the "CODE") and ERISA, including in compliance with
all filing and reporting requirements; (ii) the aggregate accumulated benefit
obligations of each pension plan that is subject to Title IV of ERISA (as of the
date of the most recent actuarial valuation prepared for such Plan) do not
exceed the fair market value of the assets of such pension plan (as of the date
of such valuation), and no material adverse change has occurred with respect to
the financial condition of such plan since such last valuation; (iii) each
pension plan that is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service,
and the Company is not aware of any circumstances likely to result in revocation
of any such favorable determination letter; (iv) there is no pending or, to the
knowledge of the officers of the Company, threatened litigation or
administrative agency proceeding relating to any
23
Company Plan (other than benefit claims in the ordinary course); (v) the Company
has no obligations under any unfunded deferred compensation plans other than
with respect to the Nonqualified Deferred Compensation Plan effective August 1,
1996, and the Company's liability with respect to such plan does not exceed the
assets held by the applicable rabbi trust or otherwise set aside in satisfaction
of benefits payable to participants thereunder by more than $200,000; and (vi)
neither the Company, its subsidiaries nor any entity that is treated as a single
employer with the Company or its subsidiaries under Section 414(b), (c), (m) or
(o) of the Code (an "ERISA AFFILIATE") has incurred or reasonably expects to
incur any lien or liability to the Pension Benefit Guaranty Corporation, any
Pension Plan or otherwise under Title IV of ERISA (other than the payment of
contributions or premiums, none of which are overdue) or under Section 412 of
the Code.
(d) Except as specifically contemplated by this Agreement or as
disclosed in Section 3.11(d) of the Disclosure Schedule, the consummation of the
Merger and other transactions contemplated by this Agreement will not (x)
entitle any Company employee or director to severance pay, or (y) accelerate the
time of payment or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of the Company Plans.
SECTION 3.12 TAX MATTERS. For purposes of this Section 3.12, any
reference to the Company or its subsidiaries shall include any corporation that
merged or was liquidated with and into the Company or any of its subsidiaries.
Except as disclosed in Section 3.12 of the Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect to the
Company and its subsidiaries have been timely filed. The Company and its
subsidiaries have (i) timely paid all Taxes that are due, or that have been
asserted in writing by any taxing authority to be due, from or with respect
to it for the periods ending prior to the date hereof or (ii) provided
adequate reserves in its financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax Returns.
(b) No material claim for unpaid Taxes has become a lien against the
property of the Company or any of its subsidiaries or is being asserted
against the Company or any of its subsidiaries.
(c) The statute of limitations with respect to the Tax Returns of the
Company and its subsidiaries and of each affiliated group (within the
meaning of the Code) of which the Company and any of its subsidiaries are
or have been a member for all periods through the respective years
specified in Section 3.12 of the Disclosure Schedule has expired. There
are no outstanding agreements, waivers or
24
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due
from or with respect to the Company or any subsidiary of the Company for
any taxable period, and no power of attorney granted by or with respect to
the Company or any subsidiary of the Company relating to Taxes is currently
in force.
(d) No audit or other proceeding by any Governmental Entity has
formally commenced and no specific notification has been given to the
Company or any subsidiary of the Company that such an audit or other
proceeding is pending or threatened with respect to any Taxes due from or
with respect to the Company or any subsidiary of the Company or any Tax
Return filed by or with respect to the Company or any subsidiary of the
Company. No assessment of Tax has been proposed in writing against the
Company or any subsidiary of the Company or any of their assets or
properties.
(e) As of the Effective Time, neither the Company nor any of the
subsidiaries shall be a party to, be bound by or have any obligation under,
any Tax sharing agreement or similar contract or arrangement.
(f) There is no contract or agreement, plan or arrangement by the
Company or any subsidiary of the Company covering any person that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible by the Company or its subsidiaries by reason
of section 280G of the Code, as now in effect.
(g) As used herein, "TAXES" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any Governmental Entity. As used herein,
"TAX RETURN" shall mean any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
SECTION 3.13 ENVIRONMENTAL LAWS. To the extent that any inaccuracy,
individually or in the aggregate with any other inaccuracy, could not reasonably
be expected to have a Material Adverse Effect, (a) each of the Company and each
of its subsidiaries complies and has complied with all Environmental Laws
applicable to the properties, assets or businesses of the Company and its
subsidiaries, and possesses and complies with and
25
has possessed and complied with all Environmental Permits required under such
laws except where any noncompliance or failure to possess any Environmental
Permit has not had or could not reasonably be expected to result in individually
or in the aggregate material liability under Environmental Laws; (b) no
modification, revocation, reissuance, alteration, transfer, or amendment of any
of the Environmental Permits, or any review by, or approval of, any third party
of any of the Environmental Permits is required in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of Company and its
subsidiaries following such consummation; (c) none of the Company and its
subsidiaries has received any Environmental Claim, and none of the Company and
its subsidiaries is aware after reasonable inquiry of any threatened
Environmental Claim; (d) none of the Company and its subsidiaries has assumed,
contractually or by operation of law, any liabilities or obligations under any
Environmental Laws; (e) there are no past or present events, conditions,
circumstances, practices, plans or legal requirements that could reasonably be
expected to result in material liability to the Company or any of its
subsidiaries under Environmental Laws, prevent, or reasonably be expected to
materially increase the burden on the Company or any subsidiary of, complying
with Environmental Laws or of obtaining, renewing, or complying with all
Environmental Permits required under such laws; (f) there are and have been no
Hazardous Materials or other conditions at or from any property owned, operated
or otherwise used by the Company or any subsidiary now or in the past that could
reasonably be expected to give rise to material liability of the Company or any
subsidiary under any Environmental Law. For purposes of this Agreement, the
following terms shall have the following meanings:
"ENVIRONMENTAL CLAIM" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability arising out of, relating to,
based on or resulting from (i) the presence, discharge, emission, release
or threatened release of any Hazardous Materials at any location, whether
or not owned, leased or operated by the Company or any of its subsidiaries
or (ii) circumstances forming the basis of any violation or alleged
violation of any Environmental Law or Environmental Permit or (iii)
otherwise relating to obligations or liabilities under any Environmental
Laws.
"ENVIRONMENTAL PERMITS" means all permits, licenses, registrations and
other governmental authorizations required for the Company and the
operations of the Company's and its subsidiaries' facilities and otherwise
to conduct its business under Environmental Laws.
"ENVIRONMENTAL LAWS" means all applicable federal, state and local
statutes, rules, regulations, ordinances,
26
orders, decrees and common law, as they exist at the date hereof, relating
in any manner to contamination, pollution or protection of human health or
the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste
Disposal Act, the Resource Conservation and Recovery Act, the Clean Air
Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended,
and similar state laws.
"HAZARDOUS MATERIALS" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials, substances and
forces, including but not limited to electromagnetic fields, regulated
pursuant to, or that could form the basis of liability under, any
Environmental Law.
SECTION 3.14 OFFER DOCUMENTS; PROXY STATEMENT. None of the
information supplied by the Company for inclusion in (i) the Offer Documents,
shall, at the time the Offer Documents or any amendments or supplements thereto
are first published, sent or given to noteholders, as the case may be, 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 the light of the circumstances under which they were made, not
misleading, (ii) the registration statement on Form S-4 to be filed with the SEC
by the Company in connection with the issuance of the Common Stock of the
Company following the Merger (such Form S-4, as amended or supplemented, is
herein referred to as the "FORM S-4") will, at the time the Form S-4 is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (iii) the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders Meeting (as defined in Section 6.1) (such proxy statement, as
amended or supplemented, is herein referred to as the "PROXY STATEMENT") will,
at the date it is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Form S-4 will, as of its effective
date, and the prospectus contained therein will, as of its date, comply as to
form in all material respects with the requirements of the Securities Act and
the rules and regulations promulgated thereunder. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder, except that no
27
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Newco specifically for inclusion in the Proxy Statement. For purposes of this
Agreement, the parties agree that statements made and information in the Offer
Documents, the Form S-4 and the Proxy Statement relating to the Federal income
tax consequences of the transactions herein contemplated to holders of Company
Common Stock shall be deemed to be supplied by the Company and not by Newco.
SECTION 3.15 BROKERS. No broker, finder or investment banker (other
than CS First Boston) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Newco a complete and correct copy of all agreements
between the Company and the Financial Adviser pursuant to which such firm would
be entitled to any payment relating to the transactions contemplated hereby.
SECTION 3.16 OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of CS First Boston (the "FINANCIAL ADVISER") dated the date of this
Agreement, to the effect that the consideration to be received in the Merger by
the Company's stockholders is fair to the holders of the Company Common Stock
from a financial point of view. The aggregate fees payable under such
agreements will not exceed $2.75 million.
SECTION 3.17 LABOR MATTERS. As of the date hereof, the Company is
not a party to any agreement pursuant to which a labor organization is certified
under applicable labor law as a bargaining agent for any of the Company's or any
of its subsidiaries employees, nor is any such agreement presently being
negotiated.
SECTION 3.18 BOARD RECOMMENDATION. The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the Voting Agreement and the transactions contemplated
thereby, taken together, are fair to and in the best interests of the
stockholders of the Company, and (ii) resolved to recommend that the holders of
the shares of Company Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger.
SECTION 3.19 TRADENAMES. The Company or its subsidiaries owns (in
each case, except as set forth in Section 3.19 of the Disclosure Schedule, free
and clear of any liens, encumbrances or security interests) all rights to all
domestic or foreign trademarks, trade names, brandmarks, brand names,
copyrights, applications pending for trademarks or trade name registrations, and
brandmarks or brand name registrations or
28
copyright registrations and other proprietary rights for child care, preschool
and after-school educational services and goods and services related to the
rendition of such services ("INTELLECTUAL PROPERTY") used by the Company and
each of its subsidiaries, including, without limitation, the exclusive right to
use the names and marks KINDERCARE, KINDERCARE (DESIGN) and marks presenting
KINDERCARE as a formative portion thereof (i.e. KINDERCARE WOODEN TOYS,
KINDERCARE WEAR, KINDERCARE PROMISE) and KLUBMATES and any confusingly similar
variations thereof used by the Company or its subsidiaries for child care,
preschool and after-school educational services and goods and services related
to the rendition of such services, in each case in each state in which the
centers to which such Intellectual Property relates are located, except to the
extent that any failure to own such rights could not, individually or in the
aggregate with all other failures, reasonably be expected to have a Material
Adverse Effect. The Company is the owner of the xxxx KID'S CHOICE for
educational services exclusively throughout the United States, with the
exception of the geographic area of use of the xxxx KID'S CHOICE in the States
of Pennsylvania and New York by the entities identified in the Company's
presently pending concurrent use service xxxx application for KID'S CHOICE and
KID'S CHOICE (DESIGN), which such application is set forth in Section 3.19 of
the Disclosure Schedule, except to the extent that the failure to be such owner
could not reasonably be expected to have a Material Adverse Effect. Except as
set forth in Section 3.19 of the Disclosure Schedule, to the best knowledge of
the Company, the use of the Intellectual Property by the Company and its
subsidiaries does not infringe on the rights of any person, except for such
infringement which individually or in the aggregate with other infringements,
could not reasonably be expect to have a Material Adverse Effect.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco hereby represents and warrants to the Company that:
SECTION 4.1 CORPORATE ORGANIZATION. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority and any necessary Governmental Entity to own, operate or lease its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals could not, individually or in
the aggregate, reasonably be expected to prevent the consummation of the Debt
Offer or the Merger.
29
SECTION 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Newco has all
necessary corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Newco and
the consummation by Newco of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Newco other than
filing and recordation of appropriate merger documents as required by the DGCL.
This Agreement has been duly executed and delivered by Newco and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Newco enforceable against it in accordance with its
terms.
SECTION 4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance of this Agreement by Newco does not and will
not: (i) conflict with or violate the certificate of incorporation or by-laws
of Newco; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been
obtained and all filings described in such clauses have been made, conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
Newco or by which it or its properties are bound or affected; or (iii) result in
any breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could become a default) or result in the loss of
a material benefit under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of Newco pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Newco is a party or by
which Newco or any of its properties are bound or affected, except, in the case
of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Debt Offer or the
Merger.
(b) The execution, delivery and performance of this Agreement by Newco
does not and will not require any consent, approval, authorization or permit of,
action by, filing with or notification to, any Governmental Entity, except (i)
for applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the HSR Act, state securities, takeover and
Blue Sky laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the DGCL, and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain would not, individually or in the aggregate, reasonably be
expected to prevent the consummation of the Debt Offer or the Merger.
30
SECTION 4.4 OFFER DOCUMENTS; PROXY STATEMENT. None of the
information supplied in writing by Newco specifically for inclusion in (i) the
Offer Documents, shall, at the time the Offer Documents or any amendments or
supplements thereto are first published, sent or given to noteholders, as the
case may be, 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 the light of the circumstances under which they were
made, not misleading, (ii) the Form S-4 will, at the time the Form S-4 is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (iii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Newco makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents.
SECTION 4.5 BROKERS. No broker, finder or investment banker (other
than Salomon Brothers Inc) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Newco. Unless the Merger is
consummated, the Company shall not be responsible for the payment of any such
fees to Salomon Brothers Inc.
SECTION 4.6 FINANCING. Attached as Annex A-1 to A-3 of the
Disclosure Schedule are true and complete copies of the letters addressed to the
Company, dated the date hereof, issued in connection with the financing of the
transactions contemplated by this Agreement. The terms and conditions of the
letters attached as Annex A-1 to A-3 of the Disclosure Schedule are satisfactory
to Newco.
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER.
The Company covenants and agrees that, during the period from the date hereof to
the Effective Time, unless Newco gives its prior written consent (which shall
not be unreasonably withheld), the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of
31
business and in compliance with applicable laws; and the Company and its
subsidiaries shall each use its reasonable best efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. Except as expressly contemplated by this Agreement, by way
of amplification and not limitation, neither the Company nor any of its
subsidiaries shall, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose or commit to do, any of the following
without the prior written consent of Newco (which shall not be unreasonably
withheld):
(a) Amend or otherwise change the certificate of incorporation or
by-laws or equivalent organizational documents of the Company or any
Significant Subsidiary;
(b) Other than as set forth on Section 5.1(b) of the Disclosure
Schedule, issue, deliver, sell, lease, sell and leaseback, pledge, dispose
of or encumber, or authorize or commit to the issuance, delivery, sale,
lease, sale/leaseback, pledge, disposition or encumbrance of, (A) any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except for the issuance and delivery of (i) shares of Company
Common Stock issuable in accordance with the terms of Options outstanding
as of October 1, 1996 and (ii) shares of Company Common Stock issuable in
accordance with the terms of Warrants outstanding as of October 1, 1996) or
(B) any assets of the Company or any of its subsidiaries, other than assets
sold, leased, pledged, disposed of or encumbered in the ordinary course of
business;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of the
Company or any of its Significant Subsidiaries;
(e) (i) other than with respect to borrowings, repayments and
repurchases necessary to effect the Debt Offer and borrowings, repayments
and repurchases in the ordinary course of
32
business under the Credit Agreement (which in the case of borrowings in the
ordinary course of business under the Credit Agreement shall not in
aggregate amount exceed $80 million at any one time outstanding, plus any
amounts necessary to effect the Debt Offer), repurchase, repay or incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person; (ii) enter into any
contract or agreement other than in the ordinary course of business; (iii)
authorize any single expenditure for any capital or acquisition (including
without limitation any acquisition of any corporation, partnership or other
business enterprise or division thereof) which are not specifically
provided for in the Company's capital budget (a true and correct copy of
which has been delivered to Newco and is set forth as Section 5.1(e) of the
Disclosure Schedule), implemented taking into account normal seasonal
patterns (PROVIDED that the Company may exceed such budget to with respect
to any center by up to 10%) for the Company and its subsidiaries taken as a
whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
5.1(e);
(f) Except as set forth on Section 5.1(f) of the Disclosure Schedule
and to the extent required under existing employee and director benefit
plans, agreements or arrangements as in effect on the date of this
Agreement, (i) increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or wages
of employees of the Company or its subsidiaries, who are not directors or
officers of the Company, in the ordinary course of business and consistent
with the Company's budget, (ii) grant any severance or termination pay not
currently required to be paid under existing severance plans to, or enter
into any employment, consulting or severance agreement or arrangement with,
any present or former director, officer or other employee of the Company or
any of its subsidiaries, except for the granting of severance or
termination pay, in the ordinary course of business, to employees who are
terminated by the Company after the date hereof or (iii) establish, adopt,
enter into or amend or terminate any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
33
(h) Make any material tax election or settle or compromise any
material federal, state, local or foreign tax liability;
(i) Settle or compromise any pending or threatened suit, action or
claim for in excess of $100,000 per suit, action or claim or which relates
to the transactions contemplated hereby;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Significant Subsidiaries (other
than the Merger); or
(k) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(j).
ARTICLE 6.
ADDITIONAL AGREEMENTS
SECTION 6.1 STOCKHOLDERS MEETING. The Company, acting through its
Board of Directors, will, as promptly as practicable following the date of this
Agreement and in consultation with Newco, (i) duly call, give notice of, convene
and hold a meeting of its stockholders for the purpose of considering and
approving this Agreement and the transactions contemplated hereby (the
"STOCKHOLDERS MEETING") and (ii) (A) include in the Proxy Statement the
unanimous recommendation of the Board of Directors that the stockholders of the
Company vote in favor of the approval of this Agreement and the transactions
contemplated hereby and the written opinion of the Financial Adviser that the
consideration to be received by the stockholders of the Company pursuant to the
Merger is fair to such stockholders and (B) use its best efforts to obtain the
necessary approval of this Agreement and the transactions contemplated hereby by
its stockholders.
SECTION 6.2 PROXY STATEMENT. Promptly following the date of this
Agreement, the Company shall prepare the Proxy Statement, and the Company shall
prepare and file with the SEC the Form S-4, in which the Proxy Statement will be
included. The Company shall use its best efforts as promptly as practicable to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use its best efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
The Company shall also take any action required to be taken under any applicable
state securities laws in connection with the registration and qualification in
connection with the Merger of
34
common stock of the Company following the Merger. The information provided by
the Company for use in the Form S-4, and to be supplied by Newco in writing
specifically for use in the Form S-4, shall, at the time the Form S-4 becomes
effective and on the date of the Stockholders Meeting referred to above, be true
and correct in all material respects and shall not omit to state any material
fact required to be stated therein or necessary in order to make such
information not misleading, and the Company and Newco each agree to correct any
information provided by it for use in the Form S-4 which shall have become false
or misleading. Newco and the Company will cooperate with each other in the
preparation of the Proxy Statement; without limiting the generality of the
foregoing, the Company will immediately notify Newco of the receipt of any
comments from the SEC and any request by the SEC for any amendment to the Proxy
Statement or for additional information. All filings with the SEC, including
the Proxy Statement and any amendment thereto, and all mailings to the Company's
stockholders in connection with the Merger, including the Proxy Statement, shall
be subject to the prior review, comment and approval of Newco (which approval by
Newco shall not be unreasonably withheld). Newco will furnish to the Company
the information relating to it required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company agrees to use its best efforts, after consultation with the other
parties hereto, to respond promptly to any comments made by the SEC with respect
to the Proxy Statement and any preliminary version thereof filed by it and cause
such Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable time.
SECTION 6.3 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors, counsel, financial
advisors and other agents to, afford Newco and its representatives and the
potential financing sources for the transactions contemplated by this Agreement
complete access at all reasonable times to its officers, employees, agents,
properties, offices, centers and other facilities and to all books, contracts
and records, and shall furnish Newco and such financing sources with all
financial, operating and other data and information as Newco, through its
representatives or such financing sources may from time to time request. Except
as required by law, each of the Company and Newco will hold any nonpublic
information in confidence to the extent required by, and in accordance with, the
provisions of the letter dated July 3, 1996 among Kohlberg Kravis Xxxxxxx & Co.
("KKR & CO."), Oaktree Capital Management, LLC and the Company (the
"CONFIDENTIALITY AGREEMENT").
(b) No investigation pursuant to this Section 6.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
35
SECTION 6.4 THIRD PARTIES. The Company shall not take any action
with respect to any transaction or proposed transaction with a third party which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Debt Offer or the Merger. The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party. The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
SECTION 6.5 EMPLOYEE BENEFITS MATTERS. Except as contemplated herein,
the Company, for the period ending on December 31, 1997, shall provide employee
benefits under plans, programs and arrangements which, in the aggregate, will
provide benefits to the employees of the Company which are no less favorable, in
the aggregate, than those provided pursuant to the plans, programs and
arrangements of the Company (other than those related to Company Securities) in
effect and disclosed to Newco on the date hereof; PROVIDED, HOWEVER, that
nothing herein shall prevent the amendment or termination of any such plan,
program or arrangement, require that the Company provide or permit investment in
the securities of the Company or interfere with the Company's right or
obligation to make such changes as are necessary to conform with applicable law.
SECTION 6.6 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-laws of the Company following the
Merger shall contain provisions identical with respect to elimination of
personal liability and indemnification to those set forth in Articles 8 and 9 of
the Certificate of Incorporation of the Company set forth in Exhibit A hereto
and Article VII, Section 5 of the By-laws of the Company, respectively, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers, agents or employees of the Company.
(b) The Company shall maintain in effect for six years from the
Effective Time policies of directors' and officers' liability insurance
containing terms and conditions which are not less advantageous than those
policies maintained by the Company at the date hereof, with respect to matters
occurring prior to the Effective Time, to the extent available, and having the
maximum available coverage under the current policies of directors' and
officers' liability insurance; provided that (i) the Company following the
Merger shall not be required to spend in excess of a $450,000 annual premium
therefor; provided further that if the Company following the Merger would be
required to spend in excess of a $450,000 premium per annum to obtain insurance
having the maximum available coverage under the current policies, the Company
will be required to spend $450,000 to maintain or procure insurance coverage
pursuant hereto, subject
36
to availability of such (or similar) coverage and (ii) such policies may in the
sole discretion of the Company be one or more "tail" policies for all or any
portion of the full six year period.
(c) In furtherance of and not in limitation of the preceding
paragraph, Newco agrees that the officers and directors of the Company that are
defendants in all litigation commenced by stockholders of the Company with
respect to (x) the performance of their duties as such officers and/or directors
under federal or state law (including litigation under federal and state
securities laws) and (y) Newco's offer or proposal to acquire the Company
including, without limitation, any and all such litigation commenced on or after
the date of this Agreement (the "Subject Litigation") shall be entitled to be
represented, at the reasonable expense of the Company, in the Subject Litigation
by one counsel (and Delaware counsel if appropriate and one local counsel in
each jurisdiction in which a case is pending and one counsel for directors of
the Company which are affiliated with Oaktree Capital Management, LLC (the
"Oaktree Directors"), if Newco and the Company shall have reasonably concluded
(based on the advice of counsel) that there may be defenses available to such
Oaktree Directors which are different from or additional to those available to
the other directors of the Company) each of which such counsel shall be selected
by a plurality of such director defendants; provided that neither Newco nor the
Company shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and that a condition
to the indemnification payments provided in Section 6.6(a) shall be that such
officer/director defendant not have settled any Subject Litigation without the
consent of Newco; and provided further that the neither Newco nor the Company
shall have any obligation hereunder to any officer/director defendant when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such officer/director defendant in the manner contemplated hereby is
prohibited by applicable law.
(d) Upon the Effective Time, the Company shall remain liable for all
of its obligations under the existing indemnification agreements with each of
the directors and officers of the Company.
SECTION 6.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Newco, and Newco shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Newco, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.7 shall not
37
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 6.8 FURTHER ACTION; BEST EFFORTS. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action, and to do or
cause to be done, and to assist and cooperate with the parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement and the Voting Agreement, including but not limited to (i) cooperation
in the preparation and filing of the Offer Documents, the Form S-4, the Proxy
Statement, any required filings under the HSR Act and any amendments to any
thereof, (ii) determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any Governmental
Entities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Debt Offer and the Merger, and the Voting Agreement, including the
transactions contemplated by Sections 4 and 5 thereof, and (iii) promptly making
any such filings, furnishing information required in connection therewith and
timely seeking to obtain any such consents, approvals, permits or
authorizations.
(b) Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist the shares of
Company Common Stock from NASDAQ/NMS, provided that such delisting shall not be
effective until after the Effective Time. The parties also acknowledge that it
is Newco's intent that the shares of Company Common Stock following the Merger
will not be quoted on NASDAQ/NMS or listed on any national securities exchange.
(c) The Company agrees to provide, and will cause its subsidiaries
and its and their respective officers, employees and advisers to provide, all
necessary cooperation in connection with (i) the arrangement of any financing to
be consummated contemporaneous with or at or after the Closing in respect of the
transactions contemplated by this Agreement, including without limitation,
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting or
placement agreements, pledge and security documents, other definitive financing
documents, or other requested certificates or documents, including a certificate
of the chief financial officer of the Company with respect to solvency matters,
comfort letters of accountants and legal opinions as may be requested by
38
Newco and (ii) the amendment to the Indenture contemplated by Section 2.8 of the
Disclosure Schedule. The parties acknowledge that the payment of any fees by
the Company in connection with any commitment letters shall be subject to the
occurrence of the Closing. In addition, in conjunction with the obtaining of
any such financing, the Company agrees, at the request of Newco, to call for
prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing indebtedness of the Company; provided that no such
prepayment or redemption shall themselves actually be made until
contemporaneously with or after the Effective Time.
(d) The Company shall cooperate with any reasonable requests of Newco
or the SEC related to the recording of the Merger as a recapitalization for
financial reporting purposes, including, without limitation, to assist Newco and
its affiliates with any presentation to the SEC with regard to such recording
and to include appropriate disclosure with regard to such recording in all
filings with the SEC and all mailings to stockholders made in connection with
the Newco. In furtherance of the foregoing, the Company shall provide to Newco
for the prior review of Newco's advisors any description of the transactions
contemplated by this Agreement which is meant to be disseminated.
(e)(i) Newco hereby agrees to use its reasonable best efforts,
subject to normal conditions, to arrange the financing described in Annexes A-1
and A-2 of the Disclosure Schedule in respect of the transactions contemplated
by this Agreement (as described in Section 7.2(f) hereof), including using its
reasonable best efforts (A) to assist the Company in the negotiation of
definitive agreements with respect thereto and (B) to satisfy all conditions
applicable to Newco in such definitive agreements. Newco will keep the Company
informed of the status of its efforts to arrange such financing, including
making reports with respect to significant developments. In the event Newco is
unable to arrange any portion of such financing in the manner or from the
sources originally contemplated, Newco will use its reasonable best efforts,
subject to normal conditions, to arrange any such portion from alternative
sources.
(ii) Subject to the Company having received the proceeds of the
financing described in Section 7.2(f) on terms satisfactory to Newco, Newco at
Closing will be capitalized with an equity contribution of $148.75 million.
Newco will be under no obligation pursuant to the preceding sentence unless and
until the Company receives the proceeds of the financing described in Section
7.2(f) on terms satisfactory to Newco. In addition, Newco will be under no
obligation under any circumstances to be capitalized with equity of more than
$148.75 million.
(f) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of
39
each party to this Agreement shall use their reasonable best efforts to take all
such necessary action.
SECTION 6.9 PUBLIC ANNOUNCEMENTS. Neither Newco nor the Company will
issue any press release or public statement with respect to the transactions
contemplated by this Agreement and the Voting Agreement, including the Debt
Offer and the Merger, without the other party's prior consent, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with NASDAQ. In addition to the foregoing, Newco and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or other public
statements with respect to such transactions. The parties agree that the
initial press release or releases to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed upon prior to the
issuance thereof.
SECTION 6.10 DISPOSITION OF LITIGATION. The Company will not
voluntarily cooperate with any third party which has sought or may hereafter
seek to restrain or prohibit or otherwise oppose the Debt Offer or the Merger
and will cooperate with Newco to resist any such effort to restrain or prohibit
or otherwise oppose the Debt Offer or the Merger.
SECTION 6.11 AFFILIATES. Prior to the Closing Date, the Company
shall deliver to Newco a letter identifying all persons who are, at the time
this Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Newco on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 6.12 RESIGNATION OF DIRECTORS. Prior to the Effective Time,
the Company shall deliver to Newco evidence satisfactory to Newco of the
resignation of all directors of the Company (other than Xx. Xxxxxx Xxxxx and,
subject to the satisfaction of the conditions set forth in Section 6 of the
Voting Agreement, Xx. Xxxxxxx X. Xxxxxx), effective at the Effective Time.
SECTION 6.13 STOP TRANSFER ORDER. The Company shall notify the
Company's transfer agent that there is a stop transfer order with respect to all
of the Subject Shares (as defined in the Voting Agreement) and that the Voting
Agreement places limits on the voting of the Subject Shares.
40
ARTICLE 7.
CONDITIONS OF MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) COMPANY STOCKHOLDER APPROVAL. The Company Stockholder Approval
shall have been obtained.
(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
the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and any material "blue sky" and other
state securities laws applicable to the registration and qualification of
the Common Stock of the Company following the Merger shall have been
complied with.
SECTION 7.2 CONDITIONS TO OBLIGATION OF NEWCO. The obligations of
Newco to effect the Merger are further subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement that are qualified as
to materiality shall 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 of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date. Newco shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to the
effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date (except for such failures to
perform as have
41
not had or could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect with respect to the Company or
materially adversely affect the ability of the Company to consummate the
transactions herein contemplated or perform its obligations hereunder).
(c) CONSENTS, ETC. Newco shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained,
except where the failure to obtain such licenses, permits, consents,
approvals, authorizations, qualifications and orders could not,
individually or in the aggregate with all other failures, reasonably be
expected to have a Material Adverse Effect.
(d) NO MATERIAL LITIGATION. There shall not be pending by any
Governmental Entity any suit, action or proceeding (or by any other person
any suit, action or proceeding which has a reasonable likelihood, in the
opinion of counsel to Newco, of success) (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or the Voting Agreement or
seeking to obtain from Newco or any of its affiliates any damages that are
material to any such party, (ii) seeking to prohibit or limit the ownership
or operation by the Company or any of its subsidiaries of any material
portion of the business or assets of the Company or any of its subsidiaries
or (iii) seeking to impose limitations on the ability of Newco (or any
designee of Newco pursuant to the Voting Agreement) or any stockholder of
Newco or the Company to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock, including, without
limitation, the right to vote the Company Common Stock on all matters
properly presented to the stockholders of the Company.
(e) AFFILIATE LETTERS. Newco shall have received the agreements
referred to in Section 6.11.
(f) FINANCING. The Company shall have received the proceeds of
financing on the terms and conditions set forth in Annexes A-1 through A-3
of the Disclosure Schedule or upon terms and conditions which are, in the
reasonable judgement of Newco, substantially equivalent thereto, and to the
extent that any terms and conditions are not set forth in Annexes A-1
through A-3 of the Disclosure Schedule, on terms and conditions reasonably
satisfactory to Newco.
42
(g) RECAPITALIZATION ACCOUNTING. Newco shall be reasonably satisfied
that the Merger shall be recorded as a recapitalization for financial
reporting purposes.
(h) NOTES. Newco shall have received evidence that the terms of the
Notes shall have been amended to the reasonable satisfaction of Newco
including, without limitation, the elimination of the negative covenants
contained therein and the elimination of any restrictions applicable to the
transactions contemplated by this Agreement. The Company shall have
purchased at least that principal amount of Notes as equals the minimum
condition of the Debt Offer.
SECTION 7.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligations
of the Company to effect the Merger are further subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Newco set forth in this Agreement that are qualified as to
materiality shall 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 of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date. The Company
shall have received a certificate signed on behalf of Newco by an
authorized officer of Newco to the effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF NEWCO. Newco shall have performed
the obligations required to be performed by it under this Agreement at or
prior to the Closing Date (except for such failures to perform as have not
had or could not reasonably be expected, either individually or in the
aggregate, to materially adversely affect the ability of Newco to
consummate the transactions herein contemplated or perform its obligations
hereunder).
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent of Newco and the Company;
(b) By Newco or the Company if any court of competent jurisdiction,
arbitrator or other Governmental Entity
43
located or having jurisdiction within the United States or any country or
economic region in which either the Company or Newco, directly or
indirectly, has material assets or operations, shall have issued a final
order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the consummation of the Merger, the Debt
Offer or any of the transactions contemplated by the Merger Agreement or
the Voting Agreement, or otherwise altering the terms of any of the
foregoing in any significant respect, and such order, decree, ruling or
other action is or shall have become final and nonappealable;
(c) By Newco or the Company if the Merger shall not have been
consummated on or before March 31, 1997, PROVIDED THAT so long as an
Extending Action (as defined below) is no longer in effect at 11:59 p.m.
(New York City time) on March 31, 1997, such date shall be automatically
extended by one day past March 31, 1997 for each day that an Extending
Action was in effect on or prior to March 31, 1997; PROVIDED FURTHER that
the right to terminate this Agreement under this Section 8.1(c) shall not
be available to the party whose action or failure to act has been the cause
of or resulted in the failure of the Merger to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
or
(d) By Newco if any required approval of the stockholders of the
Company shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof.
As used in this Section 8.1, an "Extending Action" shall mean any
order, decree or ruling or other action restraining, enjoining or otherwise
prohibiting the consummation of the Merger, the Debt Offer or any of the
transactions contemplated by the Merger Agreement or the Voting Agreement,
or otherwise altering the terms of any of the foregoing in any significant
respect, by a court of competent jurisdiction, arbitrator or other
Governmental Entity located or having jurisdiction within the United States
or any country or economic region in which either the Company or Newco,
directly or indirectly, has material assets or operations, which order,
decree, ruling or other action has not become final and nonappealable.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 8.3 and Section 9.1; PROVIDED, HOWEVER, that nothing herein
shall relieve any party from liability for any breach hereof.
44
SECTION 8.3 FEES AND EXPENSES. (a) In addition to any other amounts
which may be payable or become payable pursuant to any other paragraph of this
Section 8.3, the Company shall (provided that Newco is not then in material
breach of its obligations under this Agreement), promptly, but in no event later
than two business days following written notice thereof, together with related
bills or receipts, reimburse KKR & Co., in an aggregate amount of up to $2.5
million, for all out-of-pocket expenses and fees (including, without limitation,
fees payable to all banks, investment banking firms and other financial
institutions, and their respective agents and counsel, and all fees of counsel,
accountants, financial printers, experts and consultants to Newco and its
affiliates), whether incurred prior to, on or after the date hereof, in
connection with the Merger and the consummation of all transactions contemplated
by this Agreement, the Voting Agreement and the financing thereof.
(b) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.4 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.5 WAIVER. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
ARTICLE 9.
GENERAL PROVISIONS
SECTION 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article 1, Section 6.6 and Articles 8 and 9 shall survive the Effective
Time and those set forth in Section 6.3,
45
Section 6.8(a), Section 8.3 and Articles 8 and 9 shall survive termination of
this Agreement.
SECTION 9.2 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Newco:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co,
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
if to the Company:
Xx. Xxxxxx Xxxxx,
Chairman and Chief Executive Officer
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
and
Xxxxxxx Xxxxx,
Vice President/General Counsel
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
46
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
and
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
and
Oaktree Capital Management LLC
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Attention:
SECTION 9.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "BENEFICIAL OWNER" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Company Common
Stock;
(c) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee
or executor, of the power to
47
direct or cause the direction of the management policies of a person,
whether through the ownership of stock, as trustee or executor, by contract
or credit arrangement or otherwise;
(d) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended May 31, 1996 were prepared;
(e) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, or any other person
means any corporation, partnership, joint venture or other legal entity of
which the Company, or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder
of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity; and
(g) "SIGNIFICANT SUBSIDIARY" has the meaning set forth in Regulation
S-X promulgated by the SEC.
SECTION 9.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the
48
parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Newco may assign all or any of its rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of Newco, PROVIDED
that no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 9.6 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, with respect to
the provisions of Section 6.6 and 8.3, shall inure to the benefit of the persons
or entities benefitting from the provisions thereof who are intended to be
third-party beneficiaries thereof. Except as provided in the preceding
sentence, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Newco and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
KINDERCARE LEARNING CENTERS, INC.
By: /s/ XX. XXXXXX XXXXX
-----------------------------------------
Title: Chief Executive Officer
KCLC ACQUISITION CORP.
By: /s/ XXXXXXX X. XXXXXXX
-----------------------------------------
Title: President
49
ANNEX A
FORM OF AFFILIATE LETTER
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.01
per share ("COMPANY STOCK"), of KinderCare Learning Centers, Inc., a Delaware
corporation (the "COMPANY"), is entitled to retain in connection with the merger
(the "MERGER") of the Company with KCLC Acquisition Corp., a Delaware
corporation, securities (the "SECURITIES") of the Company. The undersigned
acknowledges that the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("RULE 145") promulgated under the Securities Act
of 1933 (the "ACT"), although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Securities retained by the
undersigned pursuant to the Merger may be restricted unless such transaction is
registered under the Act or an exemption from such registration is available.
The undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company
that the undersigned will not sell, assign or transfer any of the Securities
retained by the undersigned pursuant to the Merger except (i) pursuant to an
effective registration statement under the Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to the Company or as
described in a "no-action" or interpretive letter from the Staff of the
Securities and Exchange Commission (the "SEC"), is not required to be registered
under the Act.
In the event of a sale or other disposition by the undersigned of
Securities pursuant to Rule 145, the undersigned will supply the Company with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that the Company may instruct its
transfer agent to withhold the transfer of any Securities disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent shall effectuate the transfer of the Securities sold as indicated in the
letter.
50
The undersigned acknowledges and agrees that appropriate legends will
be placed on certificates representing Securities retained by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Company from independent counsel
reasonably satisfactory to the Company to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Securities
and (ii) the receipt by Newco of this letter is an inducement and a condition to
Newco's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO ANNEX A
[Name] [Date]
On __________________ the undersigned sold the securities
("SECURITIES") of KinderCare Learning Centers, Inc. (the "COMPANY") described
below in the space provided for that purpose (the "SECURITIES"). The Securities
were retained by the undersigned in connection with the merger of KCLC
Acquisition Corp. with and into the Company.
Based upon the most recent report or statement filed by the Company
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the "ACT").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
A-1
Exhibit A
CERTIFICATE OF INCORPORATION
OF
KINDERCARE LEARNING CENTERS, INC.
-------------------------
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the Corporation is KinderCare Learning Centers,
Inc.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law.
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is _____________ shares of Common Stock, par value $.01 each
and ______________ shares of preferred stock, par value $.01 each (hereinafter
referred to as "Preferred Stock"). The Preferred Stock may be issued from time
to time in one or more series with such distinctive designations as may be
stated in the resolution or resolutions providing for the issue of a duly
authorized committee thereof. The resolution or resolutions providing for the
issue of shares of a particular series shall fix, subject to applicable laws and
the provisions of this ARTICLE FOURTH, for each such series the number of shares
constituting such series and the designations and powers, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including, without limiting the generality
of the foregoing, such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors or a duly authorized committee thereof
under the Delaware General Corporation Law. The number of authorized shares of
any class or classes of stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock of the Corporation irrespective of the
provisions of Section 242(b)(2) of the Delaware General Corporation Law or any
corresponding provision hereinafter enacted.
FIFTH: The Board of Directors of the Corporation, acting by
majority vote, may alter, amend or repeal the By-Laws of the Corporation.
2
SIXTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
SEVENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director, except for liability as a
director (A) for any breach of the director's duty of loyalty to the Corporation
or its stockholders; (B) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (C) under Section
174 of the Delaware General Corporation Law; or (D) for any transaction from
which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after this Certificate of Incorporation
becomes effective to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation law, as so amended.
EIGHTH: INDEMNIFICATION.
8.1 CERTAIN DEFINITIONS. As used in this Article, the term:
(a) "Corporation" includes any domestic or foreign predecessor
entity of this Corporation in a merger or other transaction
in which the predecessor's existence ceased upon
consummation of the transaction.
(b) "Change in Control" shall have occurred if, during any
period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors
of the Corporation cease for any reason to constitute at
least a majority thereof, unless the election of each new
director was approved in advance by a vote of at least a
majority of the directors then still in office who were
directors at the beginning of the period.
(c) "Director" means an individual who is or was a director of
the Corporation or an individual who, while a director of
the Corporation, is or was serving at the Corporation's
request as a director, officer, partner, trustee, employee,
or agent of
3
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise.
A director is considered to be serving an employee benefit
plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the
context requires otherwise, the estate or personal
representative of a director.
(d) "Expenses" includes attorneys' fees.
(e) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), or reasonable
expenses incurred with respect to a proceeding.
(f) "Officer" means an individual who is or was an officer of
the Corporation or an individual who, while an officer of
the Corporation, is or was serving at the Corporation's
request as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or
other enterprise. An officer is considered to be serving an
employee benefit plan at the Corporation's request if his
duties to the Corporation also impose duties on, or
otherwise involve services by, him to the plan or to
participants in or beneficiaries of the plan. "Officer"
includes, unless the context requires otherwise, the estate
or personal representative of an officer.
(g) "Party" includes an individual who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(h) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or
informal.
(i) "Reviewing Party" shall mean the person or persons making
the entitlement determination pursuant to Section 8.4 of
this Article, and shall not include a court making any
4
determination under this Article or otherwise.
Section 8.2 BASIC INDEMNIFICATION ARRANGEMENT.
(a) Except as provided in subsections 8.2(d), 8.2(e) and 8.2(f)
below, the Corporation shall indemnify an individual who is
made a party to a proceeding because he is or was a director
or officer against liability incurred by him in the
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the Corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful.
(b) A person's conduct with respect to an employee benefit plan
for a purpose he believed in good faith to be in the
interests of the participants in and beneficiaries of the
plan is conduct that satisfies the requirement of subsection
8.2(a).
(c) The termination of a proceeding by judgment, order,
settlement, or conviction, or upon a plea of NOLO
CONTENDERE or its equivalent shall not, of itself, be
determinative that the proposed indemnitee did not meet the
standard of conduct set forth in subsection 8.2(a).
(d) The Corporation shall not indemnify a person under this
Article in connection with a proceeding by or in the right
of the Corporation in which such person was adjudged liable
to the Corporation, unless, and then only to the extent
that, the Reviewing Party, or a court of competent
jurisdiction acting pursuant to Section 8.5 of this Article,
determines that, in view of the circumstances of the case,
the indemnitee is fairly and reasonably entitled to
indemnification.
(e) Indemnification permitted under this Article in connection
with a proceeding by or in the right of the Corporation
shall include reasonable expenses, penalties, fines
(including an excise tax assessed with respect to an
employee benefit plan) and amounts paid in settlement
(provided that such settlement and the amounts paid in
connection therewith are not unreasonable, as determined by
the Reviewing Party responsible
5
for making the determination that indemnification is
permissible as described in Section 8.4(b) below) in
connection with the proceeding, but, unless ordered by a
court, shall not include judgments.
(f) Notwithstanding any other provision of this Article,
no person shall be entitled to indemnification or
advancement of expenses hereunder with respect to any
proceeding or claim brought or made by him against the
Corporation, other than a proceeding or claim seeking or
defending such person's right to indemnification or
advancement of expense pursuant to Section 8.5 hereof or
otherwise.
(g) If any person is entitled under any provision of this
Article to indemnification by the Corporation for some
portion of liability incurred by him, but not the total
amount thereof, the Corporation shall indemnify such person
for the portion of such liability to which he is entitled.
(h) The Corporation shall indemnify a director or officer to the
extent that he has been successful, on the merits or
otherwise, in the defense of any proceeding to which he was
a party, or in defense of any claim, issue or matter
therein, because he is or was a director or officer, against
reasonable expenses incurred by him in connection with the
proceeding.
Section 8.3 ADVANCES FOR EXPENSES.
(a) The Corporation shall pay for or reimburse the reasonable
expenses incurred by a director or officer as a party to a
proceeding in advance of final disposition of the proceeding
if:
(i) Such person furnishes the Corporation a written
affirmation of his good faith belief that he has
met the standard of conduct set forth in
subsection 8.2(a) above, and
(ii) Such person furnishes the Corporation a written
undertaking (meeting the qualifications set forth
below in subsection 8.3(b)), executed personally
or on his behalf, to repay any advances if it
6
is ultimately determined that he is not entitled
to indemnification under this Article or
otherwise.
(b) The undertaking required by subsection 8.3(a)(ii) above must
be an unlimited general obligation of the proposed
indemnitee but need not be secured and shall be accepted
without reference to financial ability to make repayment.
If a director or officer seeks to enforce his rights to
indemnification in a court pursuant to Section 8.5, such
undertaking to repay shall not be applicable or enforceable
unless and until there is a final court determination that
he is not entitled to indemnification, as to which all
rights of appeal have been exhausted or have expired.
Section 8.4 AUTHORIZATION OF AND DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) The Corporation acknowledges that indemnification of a
director or officer under Section 8.2 has been
pro-authorized by the Corporation in the manner described in
subsection 8.4(b) below. Nevertheless, the Corporation
shall not indemnify a director or officer under Section 8.2
unless a separate determination has been made in the
specific case that indemnification of such person is
permissible in the circumstances because he has met the
standard of conduct set forth in subsection 8.2(a);
provided, however, that no such entitlement decision need be
made prior to the advancement of expenses and that,
regardless of the result or absence of any such
determination, the Corporation shall make any
indemnification mandated by Section 8.2(h) above.
(b) The determination referred to in subsection 8.4(a) above
shall be made, at the election of the Board of Directors
(unless a Change in Control shall have occurred, in which
case the proposed indemnitee director or officer shall be
entitled to designate that the determination shall be made
by special legal counsel selected by him):
(i) by the Board of Directors of the Corporation by
majority vote of a quorum consisting of directors
not at the time parties to the proceeding;
7
(ii) if a quorum cannot be obtained under subdivision
(i), by a majority vote of a committee duly
designated by the Board of Directors (in which
designation directors who are parties may
participate), consisting solely of two or more
directors not at the time parties to the
proceeding;
(iii) by special legal counsel:
(1) selected by the Board of Directors or its
committee in the manner prescribed in
subdivision (i) or (ii); or
(2) if a quorum of the Board of Directors cannot
be obtained under subdivision (i) and a
committee cannot be designated under
subdivision (ii), selected by a majority vote
of the full Board of Directors (in which
selection directors who are parties may
participate); or
(iv) by the stockholders; provided that shares owned by
or voted under the control of directors or
officers who are at the time parties to the
proceeding may not be voted on the determination.
(c) As acknowledged above, the Corporation has pre-authorized
the indemnification of directors and officers hereunder,
subject to a case-by-case determination that the proposed
indemnitee met the applicable standard of conduct under
subsection 8.2(a). Consequently, no further decision need or
shall be made on a case-by-case basis as to the
authorization of the Corporation's indemnification of, or
advancement of expenses to, directors and officers
hereunder. Nevertheless, except as set forth in subsection
8.4(d) below, evaluation as to reasonableness of expenses of
a director or officer in the specific case shall be made in
the same manner as the determination that indemnification is
permissible, as described in subsection 8.4(d) above, except
that if the determination is made by special legal counsel,
evaluation as to reasonableness of
8
expenses shall be made by those entitled under subsection
8.4 (b) (iii) to select counsel.
(d) Notwithstanding the requirement under subsection 8.4(c) that
the Reviewing Party evaluate the reasonableness of expenses
claimed by the proposed indemnitee, any expenses claimed by
the proposed indemnitee shall be deemed reasonable if the
Reviewing Party fails to make the evaluation required by
subsection 8.4(c) within thirty (30) days following the
proposed indemnitee's written request for indemnification
for, or advancement of, expenses.
(e) The Reviewing Party, however chosen, shall make the
requested determination as promptly as reasonably practical
after a request for indemnification is presented.
Section 8.5 COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES.
A director or officer who is a party to a proceeding may apply for
indemnification or advances for expenses to the court conducting the proceeding
or to another court of competent jurisdiction. For purposes of this Article,
the Corporation hereby consents to personal jurisdiction and venue in any court
in which is pending a proceeding to which a director or officer is a party.
Regardless of any determination by the Reviewing Party that the proposed
indemnitee is not entitled to indemnification or advancement of expenses
or as to the reasonableness of expenses, and regardless of any failure by
the Reviewing Party to make a determination as to such entitlement or the
reasonableness of expenses, such court's review shall be a DE NOVO review.
On application, the court, after giving any notice it considers necessary, may
order indemnification or advancement of expenses if it determines that:
(i) The applicant is entitled to mandatory indemnification under
Section 8.2(h) above (in which case the Corporation shall pay the
indemnitee's reasonable expenses incurred to obtain court-ordered
indemnification);
(ii) The applicant is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not he met the standard of conduct set forth in
subsection 8.2(a) above or was adjudged liable as described in
subsection 8.2(d) above (in which case any court-ordered
indemnification need not be limited to reasonable expenses
incurred by the indemnitee but may include expenses, penalties,
fines, judgments, amounts paid in settlement and any other
amounts ordered by the court to be indemnified, and,
9
whether or not so ordered, the Corporation shall pay the
applicant's reasonable expenses incurred to obtain court-ordered
indemnification); or
(iii) In the case of advances for expenses, the applicant is entitled
pursuant to this Restated Certificate of Incorporation, Amended
and Restated Bylaws or applicable resolution or agreement to
payment for or reimbursement of his reasonable expenses incurred
as a party to a proceeding in advance of final disposition of the
proceeding (in which case the Corporation shall pay the
applicant's reasonable expenses incurred to obtain court-ordered
advancement of expenses); or
(iv) The applicant is otherwise entitled to enforcement of his rights
hereunder (in which case the Corporation shall pay the
indemnitee's reasonable expenses incurred to obtain such
enforcement).
Section 8.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, subject to authorization in the specific case, indemnify and advance
expenses under this Article to an employee or agent of the Corporation who is
not a director or officer, to the same extent as to a director or officer or to
any lesser extent (or greater extent if permitted by law) determined by the
Board of Directors.
Section 8.7 LIABILITY INSURANCE. The Corporation may purchase and
maintain insurance on behalf of a director or officer or an individual who is or
was an employee or agent of the Corporation or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise against liability asserted against or
incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the Corporation would have power to
indemnify him against the same liability under Section 8.2, Section 8.3 or
Section 8.4 above.
Section 8.8 WITNESS FEES. Nothing in this Article shall limit the
Corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in this proceeding.
Section 8.9 REPORT TO STOCKHOLDERS. If the Corporation indemnifies or
advances expenses to a director or officer in connection with a proceeding by or
in the right of the Corporation, to the extent required by law the Corporation
shall report the indemnification or advance, in writing, to the stockholders
with or before the notice of the next stockholders' meeting.
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Section 8.10 SECURITY FOR INDEMNIFICATION OBLIGATIONS. The Corporation
may at any time and in any manner, at the discretion of the Board of Directors,
secure the Corporation's obligations to indemnify or advance expenses to a
person pursuant to this Article.
Section 8.11 NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Article to make any payment to a person hereunder to the
extent such person has otherwise actually received payment (under any insurance
policy, agreement or otherwise) of the amounts otherwise payable hereunder.
Section 8.12 SUBROGATION. In the event of payment under this Article,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
Section 8.13 CONTRACT RIGHTS. The right to indemnification and
advancement of expenses conferred hereunder to directors and officers shall be a
contract right and shall not be affected adversely to any director or officer by
any amendment of this Restated Certificate of Incorporation with respect to any
action or inaction occurring prior to such amendment; provided, however, that
this provision shall not confer upon any indemnitee or potential indemnitee (in
his capacity as such) the right to consent or object to any subsequent amendment
of this Restated Certificate of Incorporation.
Section 8.14 SPECIFIC PERFORMANCE. In any proceeding brought by or
on behalf of an officer or director to specifically enforce the provisions of
this Article, the Corporation hereby waives the claim or defense therein that
the plaintiff or claimant has an adequate remedy at law, and the Corporation
shall not urge in any such proceeding the claim or defense that such remedy at
law exists. The provisions of this Section 8.14, however, shall not prevent the
officer or director from seeking a remedy at law in connection with any breach
of the provisions of this Article.
Section 8.15 NON-EXCLUSIVITY, ETC. The rights of a director or
officer hereunder shall be in addition to any other rights with respect to
indemnification, advancement of expenses or otherwise that he may have under
contract or the General Corporation Law of the State of Delaware or otherwise.
Section 8.16 AMENDMENTS. It is the intent of the Corporation to
indemnify and advance expenses to its directors and officers to the full extent
permitted by the Delaware General Corporation Law, as amended from time to time.
To the extent that the Delaware General Corporation Law is hereafter amended to
permit a Delaware business corporation to provide to its
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directors greater rights to indemnification or advancement of expenses than
those specifically set forth hereinabove, this Article shall be construed to
require such greater indemnification or more liberal advancement of expenses to
the Corporation's directors and officers, in each case consistent with the
Delaware General Corporation Law as so amended from time to time. No amendment,
modification or rescission of this Article, or any provision hereof, the effect
of which would diminish the rights to indemnification or advancement of
expenses as set forth herein shall be effective as to any person with respect
to any action taken or omitted by such person prior to such amendment,
modification or rescission.
Section 8.17 SEVERABILITY. To the extent that the provisions of
this Article are held to be inconsistent with the provisions of Section 145 of
the Delaware General Corporation Law (including subsection (f) thereof), such
provisions of such statute shall govern. In the event that any of the provisions
of this Article (including any provision within a single section, subsection,
division or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions of this
Article shall remain enforceable to the fullest extent permitted by law.
