EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Dated as of April 10, 2002
By and Among
WH Holdings (Cayman Islands) Ltd.,
WH Acquisition Corp.
And
Herbalife International, Inc.
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER............................................................................................. 1
SECTION 1.1 The Merger............................................................................... 1
SECTION 1.2 Closing.................................................................................. 2
SECTION 1.3 Effective Time........................................................................... 2
SECTION 1.4 Effects of the Merger.................................................................... 2
SECTION 1.6. Directors................................................................................ 2
SECTION 1.7. Officers................................................................................. 2
SECTION 1.8 Additional Actions....................................................................... 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES... 3
SECTION 2.1 Effect on Capital Stock.................................................................. 3
SECTION 2.2 Exchange of Certificates................................................................. 4
SECTION 2.3 Stock Options............................................................................ 5
SECTION 2.4 No Liability............................................................................. 5
SECTION 2.5 Dissenters' Rights....................................................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................ 6
SECTION 3.1 Organization and Qualification; Subsidiaries............................................. 6
SECTION 3.2 Capitalization of the Company and its Subsidiaries....................................... 7
SECTION 3.3 Authority Relative to this Agreement..................................................... 8
SECTION 3.4 SEC Reports; Financial Statements........................................................ 8
SECTION 3.5 Information Supplied..................................................................... 9
SECTION 3.6 Consents and Approvals; No Violations.................................................... 9
SECTION 3.7 No Default............................................................................... 10
SECTION 3.8 Absence of Changes....................................................................... 10
SECTION 3.9 Litigation............................................................................... 10
SECTION 3.10 Compliance with Applicable Law........................................................... 11
SECTION 3.11 Employee Benefit Plans; Labor Matters.................................................... 13
SECTION 3.12 Environmental Laws and Regulations....................................................... 15
SECTION 3.13 Taxes.................................................................................... 15
SECTION 3.14 Intellectual Property.................................................................... 17
SECTION 3.15 Vote Required............................................................................ 19
SECTION 3.16 Brokers.................................................................................. 19
SECTION 3.17 No Additional Representations............................................................ 19
SECTION 3.18 Takeover Statutes........................................................................ 19
SECTION 3.19 Affiliate Transactions................................................................... 19
SECTION 3.20 Insurance................................................................................ 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.............................................. 20
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SECTION 4.1 Organization......................................................................... 20
SECTION 4.2 Authority Relative to this Agreement................................................. 21
SECTION 4.3 Information Supplied................................................................. 21
SECTION 4.4 Consents and Approvals; No Violations................................................ 21
SECTION 4.5 Adequate Funds....................................................................... 22
SECTION 4.6 No Prior Activities.................................................................. 22
SECTION 4.7 Ownership of Securities.............................................................. 22
SECTION 4.8 Brokers.............................................................................. 22
SECTION 4.9 No Additional Representations; Investigation by Parent and Acquisition............... 22
ARTICLE V COVENANTS.......................................................................................... 23
SECTION 5.1 Conduct of Business.................................................................. 23
SECTION 5.2 Other Potential Acquirors............................................................ 26
SECTION 5.3 Preparation of the Proxy Statement; Stockholders' Meeting............................ 28
SECTION 5.4 Access to Information; Confidentiality............................................... 30
SECTION 5.5 Reasonable Efforts; Notification..................................................... 30
SECTION 5.6 Stock Options........................................................................ 31
SECTION 5.7 Takeover Statutes; Inconsistent Actions.............................................. 31
SECTION 5.8 Indemnification, Exculpation and Insurance........................................... 31
SECTION 5.9 Fees and Expenses.................................................................... 32
SECTION 5.10 Public Announcements................................................................. 32
SECTION 5.11 Status of Company Employees; Employee Benefits....................................... 33
SECTION 5.12 Governmental Approvals............................................................... 33
SECTION 5.13 Japanese Subsidiary Minority Shares.................................................. 33
SECTION 5.14 Rights Plan.......................................................................... 34
SECTION 5.15 Indemnification by Company........................................................... 34
ARTICLE VI CONDITIONS PRECEDENT.............................................................................. 35
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger.......................... 35
SECTION 6.2 Additional Conditions to Obligations of Parent and Acquisition....................... 36
SECTION 6.3 Additional Conditions to Obligations of the Company.................................. 36
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................................ 37
SECTION 7.1 Termination.......................................................................... 37
SECTION 7.2 Effect of Termination................................................................ 39
SECTION 7.3 Amendment............................................................................ 39
SECTION 7.4 Extension; Waiver.................................................................... 39
SECTION 7.5 Termination Fee; Expense Reimbursement............................................... 39
ARTICLE VIII GENERAL PROVISIONS.............................................................................. 41
SECTION 8.1 Nonsurvival of Representations and Warranties........................................ 41
SECTION 8.2 Notices.............................................................................. 41
SECTION 8.3 Definitions.......................................................................... 42
SECTION 8.4 Interpretation....................................................................... 43
SECTION 8.5 Counterparts; Facsimile.............................................................. 43
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries....................................... 43
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SECTION 8.7 Governing Law.......................................... 43
SECTION 8.8 Assignment............................................. 43
SECTION 8.9 Enforcement............................................ 43
SECTION 8.10 Waiver of Jury Trial................................... 44
SECTION 8.11 Personal Liability..................................... 44
SECTION 8.12 Financing.............................................. 44
SECTION 8.13 Materiality............................................ 44
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TABLE OF DEFINED TERMS
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Cross Reference
Term in Agreement Page
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Acquisition Agreement Section 5.2(e) 27
Acquisition Preamble 1
Agreement Preamble 1
Assertion Section 5.15 34
Certificates Section 2.2(a) 4
Class A Common Stock Preamble 1
Class B Common Stock Preamble 1
Closing Date Section 1.2 2
Code Section 3.11(a) 13
Company Common Stock Preamble 1
Company Disclosure Schedule Article III 6
Company Employees Section 5.11(a) 33
Company Financial Adviser Section 3.16 19
Company Letter of Transmittal Section 2.2(a) 4
Company Material Adverse Effect Section 3.1(b) 6
Company Permits Section 3.10(a) 11
Company Preamble 1
Company SEC Reports Section 3.4 8
Company Securities Section 3.2(a) 7
Company Stock Option(s) Section 2.3 5
Company Stockholders' Meeting Section 3.5 9
Effective Time Section 1.3 2
Employee Plans Section 3.11(a) 13
Environmental Laws Section 3.12 15
ERISA Affiliate Section 3.11(f) 14
ERISA Section 3.11(a) 13
Exchange Act Section 3.2(c) 8
Exchange Agent Section 2.2(b) 4
Excluded Shares Section 2.1(a)(i) 3
Expenses Section 7.5(b) 40
FDA Permits Section 3.10(a) 11
FDA Section 3.10(a) 11
FDCA Section 3.10(a) 11
Financing Letters Section 4.5 22
Financings Section 4.5 22
Governmental Approvals Section 5.12 33
Governmental Entity Section 3.6 9
HSR Act Section 3.6 9
Income Tax Section 3.13(a)(i) 15
Indemnifiable Matter Section 5.15 34
Indemnified Liabilities Section 5.8(b) 32
Indemnified Persons Section 5.8(b) 31
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Indemnitee Section 5.15 34
IP Rights Section 3.14(a) 17
J-Sub Minority Shares Section 5.13 34
Lien Section 3.2(b) 8
Material Contract Section 3.6 10
Material Respect Section 8.3(c) 42
Merger Consideration Section 2.1(a)(i) 3
Merger Preamble 1
Xxxxxx Xxxxxxx Section 3.16 19
NRS Preamble 1
Order Section 6.1(e) 36
Outside Date Section 7.1(e) 38
Parent Benefit Plans Section 5.11(a) 33
Parent Disclosure Schedule Article IV 20
Parent Material Adverse Effect Section 4.1(b) 20
Parent Preamble 1
Potential Acquiror Section 5.2(b) 26
Proxy Statement Section 3.5 9
Schedule 13E-3 Section 5.3(d) 29
SEC Section 3.4 8
Securities Act Section 3.4 8
Senior Lender Section 4.5 22
Series A Preferred Stock Section 3.2(a) 7
Significant Subsidiary Section 8.3(f) 42
Special Committee Preamble 1
Stock Option Plan Section 2.3 5
Stockholder Approval Preamble 1
Superior Proposal Section 5.2(d) 27
Surviving Corporation Section 1.1 1
Takeover Proposal Section 5.2(a) 26
Tax Return Section 3.13(a)(iii) 15
Tax Section 3.13(a)(ii) 15
Termination Fee Section 7.5(a) 39
UBSW Section 4.5 22
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 10, 2002 (this "Agreement"),
by and among WH Holdings (Cayman Islands) Ltd., a Cayman Islands corporation
("Parent"), WH Acquisition Corp., a Nevada corporation and a wholly-owned
subsidiary of Parent ("Acquisition"), and Herbalife International, Inc., a
Nevada corporation (the "Company").
BACKGROUND
A. The respective Boards of Directors of Parent, Acquisition and the
Company have approved, adopted and each, along with the currently constituted
Special Committee of the Board of Directors of the Company (the "Special
Committee"), deem it advisable to consummate the merger of Acquisition with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the Nevada Revised Statutes
("NRS"), whereby each issued and outstanding share of Class A common stock of
the Company, $0.01 par value per share (the "Class A Common Stock"), and each
issued and outstanding share of Class B common stock of the Company, $0.01 par
value per share (the "Class B Common Stock" and together with the Class A Common
Stock, the "Company Common Stock"), other than shares to be cancelled in
accordance with Section 2.1(c), will be converted into the right to receive the
Merger Consideration (as defined below).
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Class A Common Stock (the "Stockholder Approval").
C. Parent, Acquisition 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.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
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forth in this Agreement, and in accordance with Chapter 92A of the NRS,
Acquisition shall be merged with and into the Company at the Effective Time (as
defined in Section 1.3). The addresses of Acquisition and the Company are set
forth in Section 8.2 hereof and their governing law is Nevada. Following the
Merger, the separate corporate existence of Acquisition shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company and of Acquisition in accordance with the NRS.
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SECTION 1.2 Closing. The closing of the Merger will take place at 10:00
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a.m. on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI (the "Closing Date"), at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP,
000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, unless another time, date
or place is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
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as soon as practicable on or after the Closing Date, the parties shall prepare,
execute and acknowledge and thereafter file articles of merger in such form as
is required by Section 92A.200 of the NRS and shall make all other filings or
recordings required under the NRS. The Merger shall become effective upon filing
with the Secretary of State of the State of Nevada, or at such other date and
time as Acquisition and the Company shall agree should be specified in such
articles of merger and as may be permitted by the NRS (the date and time of such
effectiveness, being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
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forth in Section 92A.250 of the NRS and all other effects specified in Chapter
92A of the NRS.
SECTION 1.5 Articles of Incorporation and Bylaws. At the Effective Time,
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subject to Section 5.8(a), the Articles of Incorporation and Bylaws of Surviving
Corporation shall be amended to be identical to the Articles of Incorporation
and Bylaws, respectively, of Acquisition as in effect immediately prior to the
Effective Time (except that the name of the Surviving Corporation shall remain
the name of the Company), until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.6 Directors. Unless otherwise notified by Parent at least five
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(5) days prior to Closing each of the directors of the Company and its
subsidiaries shall resign or be removed from the Board of Directors of the
Company and its subsidiaries, respectively. The directors of Acquisition
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation at the Effective Time, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to the
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Effective Time shall be the officers of the Surviving Corporation at the
Effective Time and shall hold office until the earlier of their death,
resignation or removal or until their successors are duly appointed and
qualified.
SECTION 1.8 Additional Actions. If, at any time after the Effective Time,
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the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Acquisition or the Company or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Acquisition or
the Company, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of Acquisition or the Company, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in
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the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
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the Merger and without any action on the part of Parent, Acquisition, the
Company or the holders of any shares of Company Common Stock or any shares of
capital stock of Acquisition:
(a) Conversion of Common Stock.
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(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock owned by the Company or any subsidiary of the Company, or Parent,
Acquisition or any other subsidiary of Parent (the "Excluded Shares")) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, without interest, $ 19.50 in cash (the
"Merger Consideration"), less any required tax withholding.
(ii) All shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each certificate previously representing any such shares shall
thereafter represent only the right to receive the Merger Consideration upon
surrender of such certificates in accordance with Section 2.2. The holders of
such certificates previously evidencing such shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Common Stock as of the Effective
Time except to receive the Merger Consideration, and as otherwise provided
herein or by law.
(b) Capital Stock of Acquisition. Each share of the capital stock of
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Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(c) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
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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 Parent,
Acquisition or any other subsidiary of Parent immediately prior to the Effective
Time shall automatically be cancelled and retired without any conversion thereof
and no Merger Consideration shall be delivered with respect thereto.
(d) Declared and Unpaid Dividends. To the extent the record date for the
-----------------------------
Company's quarterly cash dividend of $0.15 per share of Company Common Stock, as
declared in accordance with past practice followed prior to the date hereof,
occurs before the Effective Time, and the quarterly dividend is unpaid as of the
Effective Time, such declared and unpaid dividend shall be paid to the holders
of Company Common Stock at the Effective Time; provided, however, that the
Company shall be entitled to declare and pay only one such dividend after the
date hereof.
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SECTION 2.2 Exchange of Certificates.
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(a) Promptly after the Effective Time, the Exchange Agent (as defined
below) shall mail to each holder of record of Company Common Stock immediately
prior to the Effective Time (other than Excluded Shares) (i) a letter of
transmittal (the "Company Letter of Transmittal") (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
certificates representing shares of the Company Common Stock (the
"Certificates") shall pass, only upon delivery of such Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent shall reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby.
(b) Prior to or contemporaneously with the Effective Time, and subject to
Section 4.5, Parent shall cause to be deposited with the party specified by
Parent as the exchange agent (the "Exchange Agent") amounts sufficient in the
aggregate to provide all funds necessary for the Exchange Agent to make payments
pursuant to Section 2.1(a)(i) hereof to holders of Company Common Stock issued
and outstanding immediately prior to the Effective Time who are to receive the
Merger Consideration. Any interest, dividends, or other income earned on the
investment of cash deposited by Parent with the Exchange Agent in accordance
with this Section 2.2(b) shall be for the account of and payable to Parent.
Prior to the Effective Time, the Company shall transfer to the Exchange Agent
cash in the amount of $165 million to be held by the Exchange Agent for the
account of the Company but to be transferred to the Exchange Agent as part of
the Merger Consideration at the Effective Time
(c) Upon surrender to the Exchange Agent of Certificates, together with
the Company Letter of Transmittal, duly executed and completed in accordance
with the instructions thereto, and only upon such surrender, the holder of such
Certificate shall be entitled to receive, in exchange therefor, and Parent shall
promptly cause to be delivered by the Exchange Agent to such holder, a check in
the amount to which such holder is entitled, after giving effect to any required
tax withholdings. The Certificates surrendered pursuant to this Section 2.2(c)
shall forthwith be cancelled. If any Certificate shall have been lost, stolen,
mislaid or destroyed, then upon receipt of an affidavit of that fact from the
holder claiming such Certificate to be lost, mislaid, stolen or destroyed and a
lost certificate indemnity, the Exchange Agent shall issue to such holder the
Merger Consideration into which the shares represented by such lost, stolen,
mislaid or destroyed Certificate shall have been converted.
(d) No interest will be paid or will accrue on the amount payable upon the
surrender of any Certificate. If payment is to be made to a person other than
the registered holder of the Certificate surrendered, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer, as determined by the Exchange Agent or
Parent, and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Parent or the Exchange Agent that such tax has been paid or
is not payable. One hundred eighty (180) days following the Effective Time,
Parent shall be entitled to cause the Exchange Agent to deliver to it any funds
(including any interest received with respect thereto) made available to the
Exchange Agent which have not been disbursed to holders of the Certificates
formerly
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representing shares of Company Common Stock outstanding on the Effective Time,
and thereafter such holders shall be entitled to look to the Parent only as
general creditors thereof with respect to cash payable upon due surrender of
their Certificates. Any amounts remaining unclaimed by the holders of Company
Common Stock five (5) business days immediately prior to such time the amounts
would otherwise escheat to or become property of any Governmental Entity shall
become, to the extent permitted by applicable law, the property of Parent free
and clear of any claims or interest of any person previously entitled thereto.
(e) In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, the Merger
Consideration may be paid or issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate,
accompanied by all documents required to evidence and effect such transfer,
shall be properly endorsed with signature guarantees or otherwise be in proper
form for transfer, and the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of such Certificate or establish to
the satisfaction of Parent that such tax has been paid or is not applicable.
(f) The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates. At
the Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registrations of transfers of shares of Company Common
Stock thereafter on the records of the Company.
SECTION 2.3 Stock Options. At the Effective Time, each outstanding option
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to purchase shares of Company Common Stock (a "Company Stock Option" or,
collectively, the "Company Stock Options") issued pursuant to the Company's 1991
Stock Option Plan (the "Stock Option Plan"), or otherwise, whether vested or
unvested, shall be canceled and each holder of a Company Stock Option shall be
entitled to receive, subject to applicable tax withholdings, if any, promptly
after the Effective Time, in exchange therefor cash in an amount equal to the
product of (i) the excess of the Merger Consideration over the exercise price of
such Company Stock Option, multiplied by (ii) the number of shares subject to
such Company Stock Option. The Company shall take all action necessary to give
effect to this Section 2.3.
SECTION 2.4 No Liability. None of Parent, Acquisition, the Company or the
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Exchange Agent shall be liable to any holder of shares of Company Common Stock
for any cash otherwise payable to such holder of shares of Company Common Stock
or paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 2.5 Dissenters' Rights. Pursuant to the provisions of NRS Section
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92A.390, the holders of Company Common Stock shall not have any dissenters'
rights and shall be entitled to receive only the Merger Consideration.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except in each case as publicly disclosed by the Company in the Company SEC
Reports (as defined below) filed prior to the date hereof or as set forth on the
Disclosure Schedule previously delivered by the Company to Parent (the "Company
Disclosure Schedule") (it being agreed that any disclosure set forth on any
particular schedule of the Company Disclosure Schedules shall be deemed
disclosed in another schedule of the Company Disclosure Schedule if disclosure
with respect to the particular schedule is sufficient to make it reasonably
clear to Parent the relevance of the disclosure to such other schedule), the
Company hereby represents and warrants to each of Parent and Acquisition as
follows:
SECTION 3.1 Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Each of the Company and its subsidiaries (which reference throughout
this Agreement shall include directly and indirectly owned subsidiaries) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. The Company has heretofore
delivered to Acquisition or Parent accurate and complete copies of the Articles
of Incorporation and Bylaws (or similar governing documents), as currently in
effect, of the Company and each of its subsidiaries. The Company is not in
violation of its Articles of Incorporation or Bylaws. None of the Company's
Significant Subsidiaries is in violation of its organizational documents. None
of the Company's other subsidiaries is in violation of its organizational
documents except for violations which would not reasonably be expected to have a
Company Material Adverse Effect.
(b) Each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not reasonably be expected to have a Company Material Adverse Effect.
The term "Company Material Adverse Effect" shall mean any change or effect
that, individually or in the aggregate, is or is reasonably likely to be
materially adverse to the business, assets, operations, results of operations,
prospects as identified in the Company's 2002 budget previously delivered to
Parent or financial condition of the Company and its subsidiaries, taken as a
whole other than any changes or effects arising out of (i) general economic
conditions, (ii) the financial markets and (iii) the entering into or the public
disclosure of this Agreement or the transaction contemplated hereby.
(c) Section 3.1 of the Company Disclosure Schedule identifies each
subsidiary of the Company as of the date hereof and its respective jurisdiction
of incorporation or organization, as the case may be.
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SECTION 3.2 Capitalization of the Company and its Subsidiaries.
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(a) The authorized capital stock of the Company consists of (i)
100,000,000 shares of preferred stock, $0.01 par value per share, 1,000,000
shares of which are designated Series A Junior Participating Preferred ("Series
A Preferred Stock"), none of which are issued and outstanding, and 99,000,000
shares of which are blank check preferred stock without designation, none of
which are issued and outstanding; and (ii) 100,000,000 shares of common stock,
$0.01 par value per share, 33,333,333 shares of which are designated as Class A
Common Stock, 11,418,499 of which are issued and outstanding as of April 8,
2002, and 66,666,667 shares of which are designated as Class B Common Stock,
21,075,263 of which are issued and outstanding as of April 8, 2002. All of the
outstanding shares of Company Common Stock have been validly issued and are
fully paid, nonassessable and free of preemptive rights. As of April 8, 2002,
56,680 shares of Class A Common Stock and 184,643 shares of Class B Common Stock
were reserved for issuance pursuant to outstanding Company Stock Options. Except
as set forth above or as set forth in Section 3.2 of the Company Disclosure
Schedule, as of the date hereof, there were outstanding (i) no shares of capital
stock or other voting securities of the Company, (ii) no securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company and, no obligations of the Company to issue any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company and (iv) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries (collectively "Company
Securities"). Section 3.2 of the Company Disclosure Schedule identifies, as of
April 8, 2002, the holder of each outstanding Company Stock Option issued
pursuant to the Stock Option Plan, the number of shares of Company Common Stock
issuable upon the exercise of each Company Stock Option and the exercise price
and expiration date thereof and except as set forth in Section 3.2 of the
Company Disclosure Schedule no options currently outstanding have been granted
other than pursuant to the Stock Option Plan. As of the date hereof, except as
set forth in Section 3.2 of the Company Disclosure Schedule, there are no
outstanding obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities. Except as set forth in Section 3.2
of the Company Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company. Since April 8, 2002, there have been no issuances
of the Company's capital stock other than issuances pursuant to outstanding
Company Stock Options.
(b) Except as set forth in Section 3.2 of the Company Disclosure Schedule,
all of the outstanding capital stock of the Company's Significant Subsidiaries
(other than director's qualifying shares in the case of foreign subsidiaries) is
owned by the Company, or one of its subsidiaries, directly or indirectly, free
and clear of any Lien or any other limitation or restriction (including any
restriction on the right to vote or sell the same except as may be provided as a
matter of law) and except for any Liens which are incurred in the ordinary
course of business. Except as set forth in Section 3.2 of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's other
subsidiaries (other than director's qualifying shares in the case of foreign
subsidiaries) is owned by the Company, or one of its subsidiaries, free and
clear of any material Lien or any other material limitation or restriction
(including any restriction on the right to vote or sell the same except as may
be provided as a matter of law) and except for
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any Liens which are incurred in the ordinary course of business. All of the
outstanding shares of capital stock of the Company's Significant Subsidiaries
are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were issued free of preemptive rights in compliance with
applicable corporate and securities laws. Except as set forth in Section 3.2 of
the Company Disclosure Schedule, there are no securities of the Company's
subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from the Company or its subsidiaries and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for, the issuance, purchase or sale, directly or indirectly, by the Company or
any of its subsidiaries of any capital stock or other ownership interests in or
any other securities of any subsidiary of the Company. Except as set forth in
Section 3.2 of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company's subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
(c) The Class A Common Stock and Class B Common Stock constitute the
only classes of equity securities of the Company or its subsidiaries registered
or required to be registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
SECTION 3.3 Authority Relative to this Agreement. The Company has all
------------------------------------
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been recommended by the Special
Committee and duly and validly authorized and recommended by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company or its subsidiaries are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby except the approval and adoption
of this Agreement by the holders of a majority of the outstanding shares of
Class A Common Stock. This Agreement has been duly and validly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by Parent and Acquisition, constitutes a valid, legal and binding agreement of
the Company enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 3.4 SEC Reports; Financial Statements. The Company has filed
---------------------------------
all required forms, reports and documents with the Securities and Exchange
Commission (the "SEC") for the periods on or after January 1, 1999 (such
filings, along with any other filings made by the Company pursuant to the
Securities Act (as defined below) are hereinafter referred to as "Company SEC
Reports"), each of which has complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports
contained when filed any untrue statement of a material
8
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein in
light of the circumstances under which they were made not misleading. The
consolidated financial statements of the Company included in the Company SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended, except, in the case of unaudited
interim financial statements, for normal year-end audit adjustments and the fact
that certain information and notes have been condensed or omitted in accordance
with the applicable rules of the SEC.
SECTION 3.5 Information Supplied. None of the information contained in
--------------------
or incorporated by reference in the proxy statement (the "Proxy Statement")
relating to the meeting of the Company's stockholders to be held in connection
with the Merger (the "Company Stockholders' Meeting") will, at the date the
Proxy Statement is mailed to stockholders of the Company or at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary,
in order to make the statements therein in light of the circumstances under
which they are made, not misleading, except that no representation or warranty
is made by the Company with respect to statements made or incorporated by
reference therein based on written information supplied by Parent or Acquisition
for inclusion or incorporation by reference therein. The Proxy Statement insofar
as it relates to the meeting of the Company's stockholders to vote on the Merger
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
SECTION 3.6 Consents and Approvals; No Violations.
-------------------------------------
(a) Except as set forth in Section 3.6 of the Company Disclosure
Schedule, and except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Exchange Act, state securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), foreign antitrust laws and
the filing of the articles of merger as required by the NRS, no filing with or
notice to and no permit, authorization, consent or approval of any court,
arbitrator or tribunal, or administrative governmental or regulatory body,
agency or authority, foreign or domestic (a "Governmental Entity") is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not reasonably be expected to
have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.6 of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or Bylaws (or similar governing documents)
of the Company or any of its subsidiaries, (ii) result in a violation or breach
of or constitute (with or without due notice or lapse of time or both) a default
(or give
9
rise to any right of termination, amendment, cancellation, acceleration or Lien)
under any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
(each a "Material Contract") or (iii) to the Company's knowledge, violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of their respective properties or
assets, except, in the case of (ii) or (iii), for violations, breaches or
defaults which would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.7 No Default. Except as set forth in Section 3.7 of the
----------
Company Disclosure Schedule, none of the Company or any of its subsidiaries is
in breach, default or violation of any term, condition or provision of (a) any
Material Contract or (b) any order, writ, injunction, decree, law, statute, rule
or regulation applicable to the Company or any of its subsidiaries or any of
their respective properties or assets, except, in the case of (a) and (b), for
violations, breaches or defaults that would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.8 Absence of Changes. Except as set forth in Section 3.8 of
------------------
the Company Disclosure Schedule, since December 31, 2001, there has not been:
(i) any events, changes or effects with respect to the Company or its
subsidiaries that would reasonably be expected to have a Company Material
Adverse Effect or that are outside the ordinary course of business; (ii) any
declaration, payment or setting aside for payment of any dividend (other than
the Company's quarterly cash dividend consistent with past practice and except
to the Company or any subsidiary wholly owned by the Company) or other
distribution or any redemption, purchase or other acquisition of any shares of
capital stock or securities of the Company or any subsidiary (it being
acknowledged that repurchase of J-Sub Minority Shares is within the ordinary
course of business); (iii) any return of any capital or other distribution of
assets to stockholders of the Company or any subsidiary (except to the Company
or any subsidiary wholly owned by the Company); (iv) any acquisition (by merger,
consolidation, acquisition of stock or assets or otherwise) of any person or
business; (v) any material change by the Company to its accounting policies,
practices, or methods; (vi) any amendment to the Articles of Incorporation or
Bylaws or other organizational documents of the Company or its subsidiaries;
(vii) any sale or transfer of any material portion of its assets or of any
material asset, except in the ordinary course of business; (viii) pledge of any
of its assets or otherwise permitted any of its assets to become subject to any
Lien, except for pledges of immaterial assets made in the ordinary course of
business and consistent with past practices; (ix) any commencement or settlement
of material legal proceedings; (x) any action taken by a Governmental Entity
which affects, in any material respect, the business of the Company, except, in
the case of each of the foregoing clauses (i) through (x), as expressly
contemplated by this Agreement.
SECTION 3.9 Litigation. Except as set forth in Section 3.9 of the
----------
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity which could reasonably be expected to have
a Company Material Adverse Effect or would reasonably be expected to prevent or
materially delay the consummation of the transactions contemplated by this
10
Agreement. Except as set forth in Section 3.9 of the Company Disclosure
Schedule, none of the Company or its subsidiaries is subject to any outstanding
order, writ, injunction or decree of any Governmental Entity that could
reasonably be expected to have a Company Material Adverse Effect or would
reasonably be expected to prevent or materially delay the consummation of the
transactions contemplated hereby.
SECTION 3.10 Compliance with Applicable Law.
(a) Except as set forth in Section 3.10 of the Company Disclosure
Schedule, the Company and its subsidiaries hold all material permits, licenses,
authorizations, variances, exemptions, orders and approvals from all
Governmental Entities, and have filed all material notifications, registrations
and listings to all Governmental Entities, all of which are in full force and
effect, including, without limitation, all authorizations and notifications
under the Federal Food, Drug, and Cosmetic Act of 1938, as amended ("FDCA"), and
the regulations of the Food and Drug Administration ("FDA") promulgated
thereunder ("FDA Permits"), necessary for the lawful conduct of their respective
businesses (the "Company Permits"), except for failures to hold such permits,
licenses, authorizations, variances, exemptions, orders and approvals and
failures to have filed such notifications, registrations and listings, which
would not reasonably be expected to have a Company Material Adverse Effect. The
Company and its subsidiaries are in compliance with the terms of the Company
Permits. To the Knowledge of the Company, the Company has not received any
notice from any Governmental Entity that the businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except that no representation or warranty
is made in this Section 3.10 with respect to Environmental Laws (as defined in
Section 3.12 below) and except for violations or possible violations which are
not material to the Company's business. To the knowledge of the Company, no
investigation or review by any Governmental Entity with respect to the Company
or its subsidiaries is pending or threatened nor has any Governmental Entity
indicated to the Company an intention to conduct the same.
(b) Since December 31, 2000, none of the Company, any subsidiary or,
to the knowledge of the Company, any director, officer, agent, employee or other
person acting on behalf of any of the foregoing has used any corporate funds for
unlawful contributions, payments, gifts or entertainment or for the payment of
other unlawful expenses relating to political activity, or made any direct or
indirect unlawful payments to governmental or regulatory officials or others.
(c) The Merger and the transactions contemplated by this Agreement
will not cause the revocation or cancellation of any Company Permit except for
any such event that would not individually or in the aggregate have a material
adverse effect on the Company's business taken as a whole.
(d) As to each product subject to the FDCA and the FDA regulations
promulgated thereunder or similar laws or regulations in any foreign
jurisdiction (each such product, a "Regulated Produced" and, collectively, the
"Regulated Products") that is manufactured, tested, distributed and/or marketed
by the Company or any of its subsidiaries, such Regulated Product is being
manufactured, tested, distributed and/or marketed by the Company or any of its
subsidiaries in material compliance with all applicable requirements under
11
the FDCA, the FDA regulations promulgated thereunder, and such similar laws or
regulations, including those relating to investigational use, premarket
clearance, good manufacturing practices, labeling, advertising, record keeping,
requisite filings and security, as applicable. Except as set forth in Section
3.10 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has received any notice or other communication from the FDA or any
other Governmental Entity (i) alleging the adulteration, misbranding, or other
regulatory noncompliance of any of the Company's products or (ii) otherwise
alleging any violation of any laws or regulations by the Company or any of its
subsidiaries, except for notice or communications which would not reasonably be
expected to have a Company Material Adverse Effect.
(e) Except as set forth in Section 3.10 of the Company Disclosure
Schedule, no Regulated Products have been recalled, withdrawn, suspended or
discontinued by the Company or any of its subsidiaries in the United States or
outside the United States (whether voluntarily or otherwise) pursuant to
direction of the FDA or any other Governmental Entity. No proceedings in the
United States or outside of the United States of which the Company has knowledge
seeking recall, withdrawal, suspension, injunction, criminal penalties or
seizure relative to any Regulated Product are pending against the Company or any
of its subsidiaries, nor have any such proceedings been pending at any prior
time, except as set forth in Section 3.10 of the Company Disclosure Schedule.
(f) Except for instances that individually or in the aggregate have
not had and are not reasonably expected to have a Company Material Adverse
Effect, (i) none of the Company, any of its subsidiaries or, to the knowledge of
the Company, any of their respective officers, employees or agents has made an
untrue statement of a material fact or fraudulent statement to the FDA or any
other Governmental Entity, failed to disclose a material fact required to be
disclosed to the FDA or any other Governmental Entity, or committed an act, made
a statement, or failed to make a statement that, at the time such disclosure was
made, could reasonably be expected to provide a basis for the FDA to invoke its
policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or to
seek prosecution under 18 U.S.C. 1001 or for any other Governmental Entity to
invoke any similar policy or law; and (ii) none of the Company, any of its
subsidiaries or, to the knowledge of the Company, any of their respective
officers, employees or agents, has been convicted of any crime or engaged in any
conduct prohibited by the FDCA or FDA regulations or any similar laws or
regulations.
(g) Neither the Company nor any of its subsidiaries has received any
notice that the FDA or any other Governmental Entity has commenced, or
threatened to initiate, any action for seizure, injunction, criminal penalty, or
to request the recall of any product of the Company or any of its subsidiaries.
(h) To the knowledge of the Company, the formulation, manufacturing,
storing, labeling, promotion, advertising and sale of the Company's products are
in compliance in all material respects with applicable United States federal,
state and local laws and regulations and foreign laws and regulations, except
for such violations that would not reasonably be expected to have a Company
Material Adverse Effect.
12
SECTION 3.11 Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 3.11(a) of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
savings, profit-sharing, retention, severance and other material fringe or
employee benefit plans, programs or arrangements maintained or contributed to by
the Company or any of its subsidiaries for the benefit of or relating to any
employee of the Company, or any of its current ERISA Affiliates, as defined
below, excluding plans, programs, agreements and arrangements under which the
Company or any ERISA Affiliate has no remaining obligations, and any plans,
programs, agreements and arrangements that are required to be maintained by the
Company or any of its ERISA Affiliates under the laws of any foreign
jurisdiction (together the "Employee Plans"), other than those referred to in
Section 4(b)(4) of ERISA. The Company has made available to Parent true,
accurate and complete copies of the following documents relating to each
Employee Plan: (i) plan documents and all amendments thereto; (ii) summary of
material terms of each Employee Plan that has not been reduced to writing; (iii)
trust agreements, insurance policies and other financing documents, together
with all amendments thereto; (iv) Form 5500s with all required schedules and
attachments for the last three years; (v) the most recent summary plan
description, to the extent required to be provided by law; (vi) annual
compliance test results for any 401(k) savings or profit-sharing plan for the
last three years, including, without limitation, the actual deferral percentage
test, actual contribution percentage test, and multiple use test and (vii)
statements of compliance filed with the Department of Labor pursuant to
Department of Labor Regulation Section 2520.104-23 for any Employee Plan
intended to satisfy the alternate method of compliance under Title I of ERISA.
To the Company's knowledge, each of the Company's and its ERISA Affiliates'
Employee Plans is being maintained and administered in all material respects in
accordance with its terms and applicable laws. Except as publicly as set forth
in Section 3.11(a) of the Company Disclosure Schedule, the Company, each of its
ERISA Affiliates and all such Employee Plans are in material compliance with all
applicable provisions of ERISA and the Internal Revenue Code of 1986 (the
"Code").
(b) Neither the Company nor any ERISA Affiliate has, within the six
year period immediately preceding the date hereof, sponsored, maintained or
participated in, or contributed to any Employee Plan that is or was subject to
Title IV of ERISA or Section 412 of the Code or is or was a "Multiemployer Plan"
as defined in Section 3(37) of ERISA. Each Employee 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 with respect to all
amendments for which the remedial amendment period has expired, there are no
events or circumstances which exist which would adversely impact the qualified
status of such plan and the IRS has not taken any action to revoke the qualified
status of the Employee Plan. No "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code has occurred with respect to
any Employee Plan, which is not otherwise exempt by statute, regulation or
administrative ruling or opinion. No Employee Plan or fiduciary of any Employee
Plan has been the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency. To the Company's
knowledge, there are no actions, suits or claims pending (other than routine
claims for benefits) that could reasonably be
13
expected to be asserted against any Employee Plan or the assets or fiduciaries
of any Employee Plan.
(c) Except as set forth in Section 3.11(c) of the Company Disclosure
Schedule, there will be no material payment, accrual of additional benefits,
acceleration of payments or vesting in any benefit under any Employee Plan or
any agreement or arrangement disclosed under this Section 3.11 solely by reason
of entering into or in connection with the transactions contemplated by this
Agreement.
(d) No Employee Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA (other than a plan covering only one individual
employee or former employee and his or her dependents) provides material
benefits to former employees of the Company or its ERISA Affiliates other than
pursuant to Section 4980B of the Code.
(e) Except as set forth in Section 3.11(e) of the Company Disclosure
Schedule, there are no material controversies pending or, to the knowledge of
the Company, threatened between the Company or any of its subsidiaries and any
of their respective employees. The Company is not and has never been a party to
any collective bargaining agreement or other similar labor agreement with
respect to any persons employed by the Company or any of its subsidiaries in the
United States. The Company has no knowledge, after reasonable inquiry, of any
material activities or proceedings of any labor union to organize any employees
of the Company or its subsidiaries. The Company has no knowledge, after
reasonable inquiry, of any material strikes, slowdowns, work stoppages, lockouts
or threats thereof by or with respect to any employees of the Company or any of
its subsidiaries.
(f) For purposes of this Agreement, an "ERISA Affiliate" shall mean,
as of the indicated time, each entity whether or not incorporated, deemed under
common control with the Company pursuant to Code Section 414(b), (c), (m), or
(o).
(g) As of December 31, 2001, the Company had approximately 2,445
full-time employees (those who are regularly scheduled to work 32 or more hours
per week), 39 part-time employees (those who are regularly scheduled to work
less than 32 hours per week), 313 temporary employees, 0 leased employees and 75
independent contractors. To the Company's knowledge, the Company is not
delinquent in payments to any of its employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees.
(h) Schedule 3.11 accurately lists each material employment or
consulting agreement with an individual employee of the Company, other than
offer letters sent to prospective employees who are not senior management or
executive level employees.
(i) To the Company's knowledge, each person who performs services to
the Company is and has been properly classified as a "common law employee,"
"leased employee" or "independent contractor" for all purposes under the law and
the Plans.
(j) To the Company's knowledge, all employees presently employed by
the Company and its subsidiaries in the United States are authorized for
employment by the Company in accordance with the United States immigration laws
(including, but not limited to,
14
the Immigration and Nationality Act, the Immigration Reform and Control Act and
the Illegal Immigration Reform Act and Immigrant Responsibility Act, each as
amended and the regulations promulgated thereunder).
SECTION 3.12 Environmental Laws and Regulations. To the Company's
----------------------------------
knowledge, each of the Company and its subsidiaries is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) (collectively "Environmental Laws"), except for non-compliance that
would not reasonably be expected to have a Company Material Adverse Effect,
which compliance includes but is not limited to, the possession by the Company
and its subsidiaries of all material permits and other material authorizations
by Governmental Entities required under applicable Environmental Laws and
compliance with the terms and conditions thereof; and none of the Company or its
subsidiaries has received written notice of or, to the knowledge of the Company,
is the subject of any action, cause of action, claim, investigation, demand or
notice by any person or entity alleging liability under or non-compliance with
any Environmental Law that would reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.13 Taxes.
-----
(a) Definitions. For purposes of this Agreement:
(i) the term "Income Tax" shall mean any federal, state, local
or foreign Tax (A) based upon, measured by, or calculated with respect to net
income or profits (including capital gains Taxes, alternative minimum Taxes and
Taxes on items of Tax preference), or (B) based upon, measured by, or calculated
with respect to multiple bases (including corporate franchise Taxes), if one or
more of the principal bases on which such Tax may be based, measured by, or
calculated with respect to amounts described in clause (a)(i)(A);
(ii) the term "Tax" (including "Taxes") means (A) all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, withholding, estimated, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits or other taxes of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto, (B)
any liability for payment of amounts described in clause (a)(ii)(A) whether as a
result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (C) any liability for the payment of amounts described in
clauses (a)(ii)(A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person; and
(iii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document required to be filed
with respect to Taxes.
(b) Except as set forth in Section 3.13 of the Company Disclosure
Schedule; and subject to subsection (c) of this Section 3.13:
15
(i) the Company and its subsidiaries (and any predecessor
corporations of the Company or any of its subsidiaries) have timely filed
(taking into account extensions) all Income Tax Returns they are required to
have filed, and all Income Tax Returns filed by the Company and its subsidiaries
are accurate and correct in all respects;
(ii) the Company and its subsidiaries (and any predecessor
corporations of the Company or any of its subsidiaries) have timely paid all
Income Taxes that have become due or payable (other than Taxes being contested
in good faith and for which adequate reserves have been established) and have
adequately reserved for in accordance with generally accepted accounting
principles all Income Taxes (whether or not shown on any Tax Return) that have
accrued but are not yet due or payable and have made all estimated tax payments
required to be made;
(iii) the Company has not received notice of any claim for
assessment or collection of Income Taxes that is presently being asserted
against the Company or its subsidiaries or notice of any presently pending audit
examination, litigation, proceeding, proposed adjustment or matter in
controversy with respect to any Income Taxes due and owing by the Company or any
of its subsidiaries;
(iv) neither the Company nor any subsidiary of the Company has
filed any agreement or waiver extending the period of the statute of limitations
applicable to the assessment or collection of any federal Income Tax which
remains open;
(v) neither the Company nor any subsidiary of the Company is or
ever has been a party to any tax indemnity agreement, tax sharing agreement, or
other agreement under which it reasonably expects to become liable to another
person as a result of the imposition of Income Tax upon any person, or the
assessment or collection of such a Tax;
(vi) the Company (and each of its subsidiaries) is not a party to
any agreement which would require it to make any payment which would constitute
a "parachute payment" for purposes of Section 280G;
(vii) to the Company's knowledge, the Company (and each of its
subsidiaries) has complied with all information reporting and backup withholding
Tax requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party;
(viii) to the knowledge of the Company, none of the Company's (and
none of its subsidiary's) assets are treated as "tax exempt use property" within
the meaning of Section 168(h) of the Code, and the Company (and each of its
subsidiaries) has not filed a consent under Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company (or
any of its subsidiaries). The Company (and each of its subsidiaries) is not, and
has not been at any time within the period specified in Section 897(c)(1)(A)(II)
of the Code, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code;
16
(ix) the Company (and each of its subsidiaries) is not, nor has
it ever been, a member of an affiliated group filing a consolidated federal
income Tax Return (other than such a group of which the Company is the parent
corporation) and the Company (and each of its subsidiaries) does not have any
liability for the Taxes of any individual or entity (other than the Company and
its subsidiaries and their predecessors) under section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise;
(x) the Company (and each of its subsidiaries) will not be
required to include in a taxable period ending after the Closing Date taxable
income attributable to income that economically accrued in a taxable period
ending on or before the Closing Date as a result of the installment method of
accounting, the completed contract method of accounting, any method of reporting
revenue from contracts which are required to be reported on the percentage of
completion method (as defined in Section 460(b) of the Code) but that were
reported using another method of accounting, or any other method of accounting,
except to the extent such methods of accounting have been properly reflected in
the financial statements included in the Company SEC Reports;
(xi) the Company (and each of its subsidiaries) is not required
to include in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of other laws or regulations) in its current or in any future
taxable period by reason of a change in accounting method, nor does the Company
(or any of its subsidiaries) have any knowledge that the Internal Revenue
Service (or other taxing authority) has proposed or is considering proposing any
such change in accounting method, except to the extent such methods of
accounting have been properly reflected in the financial statements included in
the Company SEC Reports;
(xii) there are no material liens on any of the assets of the
Company (or any of its subsidiaries) that arose in connection with any failure
(or alleged failure) to pay any Tax; and
(xiii) the Company has made available to Parent correct and
complete copies of all material Tax Returns, material examination reports, and
material statements of deficiency assessed against or agreed to by the Company
(or any of its subsidiaries) since December 31, 2000.
(c) The representations contained in subparagraphs (i) through (xiii) of
Section 3.13(b) are true and correct with respect to all Taxes and all Tax
Returns with respect to Taxes, except for such failures that would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.14 Intellectual Property.
---------------------
(a) Schedule 3.14(a) of the Company Disclosure Schedule sets forth a
complete list of: (i) the Company's and its subsidiaries' registrations and
applications for patents, trademarks, service marks, trade names, trade secrets,
copyrights and other intellectual property rights (patents, trademarks, trade
secrets, generically, "IP Rights") and material unregistered IP
17
Rights; and (ii) licenses and other contracts relating to IP Rights granted by
or to the Company or its subsidiaries.
(b) Except as set forth on Schedule 3.14(b):
----------------
(i) No litigation is pending and no claim has been made
against the Company or any of its subsidiaries nor, to the knowledge of the
Company or its subsidiaries, are there any grounds for a claim: (A) alleging
that any IP Right, product, process, method, substance or other material
presently sold by or employed by the Company or any of its subsidiaries
infringes or misappropriates any IP Rights owned by others; (B) challenging the
title, inventorship, validity, enforceability, or alleging misuse, of any IP
Right owned or used by Company or its subsidiaries.
(ii) Neither the Company nor any of its subsidiaries has
asserted any claim of infringement, misappropriation or misuse by any Person of
any IP Rights owned by the Company or any of its subsidiaries or as to which any
of them have exclusive use.
(iii) No employee, officer or consultant of the Company or any
of its subsidiaries has any proprietary, financial or other interest in any IP
Rights owned or, to the knowledge of the Company, used by the Company or its
subsidiaries in their businesses.
(iv) Neither the Company nor any of its subsidiaries has any
obligation to compensate any Person for the use of any IP Rights and neither the
Company nor any of its subsidiaries has granted any license or other right to
use any of the IP Rights of the Company or its subsidiaries, whether requiring
the payment of royalties or not.
(v) No settlement agreements, consents, judgments, orders,
covenants not to xxx or similar obligations to which the Company or any of its
subsidiaries is party limit or restrict the use of the IP Rights owned or used
by the Company or its subsidiaries.
(vi) No IP Right owned or used by the Company or its
subsidiaries is subject to any lien, demand, encumbrance or security interest.
(vii) The Company and its subsidiaries have taken all
reasonable measures to protect and preserve the security, confidentiality and
value of the IP Rights that they own or use, including without limitation trade
secrets and other confidential information.
(viii) Neither the Company nor any of its subsidiaries has
within one (1) year prior to the Effective Time abandoned any domestic or
foreign patent or trademark application or registration, or rights to submit any
such patent or trademark application, for material IP Rights used in or
necessary for the conduct of the business as currently conducted or as currently
contemplated to be conducted.
(ix) To the knowledge of the Company, all trade secrets and
other confidential information owned and used by the Company and its
subsidiaries in the two years preceding the Effective Time are presently valued
and protectable and are not part of the public domain or knowledge, nor, have
they been used, divulged or appropriated for the benefit of any
18
Person other than the Company or its subsidiaries or otherwise to the detriment
of the Company or its subsidiaries.
(x) To the knowledge of the Company, no employee or consultant
of the Company or its subsidiaries has used any trade secrets or other
confidential information of any other person in the course of his work for the
Company or its subsidiaries.
(xi) To the knowledge of the Company, the consummation of the
transactions contemplated by this Agreement will not result in the loss or
impairment of any IP Rights owned or used by the Company or its subsidiaries.
SECTION 3.15 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding shares of Class A Common Stock, voting together as
one class, is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this Agreement.
SECTION 3.16 Brokers. No broker, finder or investment banker other
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than Barrington Associates (the "Company Financial Adviser") and Xxxxxx Xxxxxxx
& Co. Incorporated ("Xxxxxx Xxxxxxx") is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has provided to Parent copies of all agreements between the Company and
the Company Financial Advisor and the Company and Xxxxxx Xxxxxxx.
SECTION 3.17. No Additional Representations. In entering into this
-----------------------------
Agreement, Company has not been induced by, or relied upon, any representations,
warranties or statements by Parent or Acquisition not set forth or referred to
in this Agreement, the Parent Disclosure Schedule or the other documents
required to be delivered thereby or referred to herein, whether or not such
representations, warranties or statements have actually been made, in writing or
orally, and Company acknowledges that, in entering into this Agreement, Parent
and Acquisition have been induced by and relied upon the representations and
warranties of Company herein set forth or referred to in this Agreement, the
Company Disclosure Schedule and the other documents required to be delivered
thereby or referred to herein. Company has made its own investigation of Parent
and Acquisition prior to the execution of this Agreement and has not been
induced by or relied upon any representations, warranties or statements as to
the advisability of entering into this Agreement other than as set forth above.
SECTION 3.18 Takeover Statutes. As currently contemplated by the
-----------------
terms of this Agreement, no "business combination," "fair price," "moratorium,"
"control share," "shareholder protection" or other similar anti-takeover statute
or regulation enacted under state or federal laws in the United States,
(including, without limitation, Sections 78.378 to 78.3793, inclusive, and
Sections 78.411 to 78.444, inclusive, of the NRS) applicable to the Company or
any of its subsidiaries is applicable to the Merger, this Agreement or the other
transactions contemplated hereby.
SECTION 3.19 Affiliate Transactions. Except as set forth in Section
----------------------
3.19 of the Company Disclosure Schedule, there are no contracts, commitments,
agreements, arrangements
19
or other transactions between the Company or any of its subsidiaries, on the one
hand, and any (i) present officer or director of the Company or any of its
subsidiaries or any of their immediate family members or (ii) affiliate of any
such present officer, director, family member or beneficial owner, on the other
hand, in each case required to be disclosed pursuant to Item 404 of SEC
Regulation S-K. Since January 1, 2001 (a) no executive officer of the Company
has received payments from the Company in capacities as both an employee and as
a distributor, and (b) to the actual knowledge of the Company's executive
officers, no other officer of the Company has received payments from the Company
in capacities as both an employee and as a distributor.
SECTION 3.20 Insurance. The Company has in full force and effect
---------
insurance policies which, taken together, provide adequate insurance coverage
for the assets and the operations of the Company for risks normally insured
against by a person carrying on the same business as the Company and for risks
to which the Company is normally exposed, except for those risks and related
losses to the Company which do not individually or in the aggregate constitute a
Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Except as set forth on the Disclosure Schedule previously
delivered by the Parent to the Company (the "Parent Disclosure Schedule") (it
being agreed that any disclosure set forth on any particular schedule of the
Parent Disclosure Schedules shall be deemed disclosed in another schedule of the
Parent Disclosure Schedule if disclosure with respect to the particular schedule
is sufficient to make it reasonably clear to Company the relevance of the
disclosure to such other schedule), the Parent and Acquisition hereby jointly
represent and warrant to the Company as follows:
SECTION 4.1 Organization.
------------
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted. Parent has heretofore delivered to the Company accurate and complete
copies of the Articles of Incorporation and Bylaws as currently in effect of
Parent and Acquisition.
(b) Each of Parent and Acquisition is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Parent Material Adverse Effect.
The term "Parent Material Adverse Effect" shall mean any change
or effect that, individually or in the aggregate, is or is reasonably likely to
be materially adverse to the business, assets, operations, results of
operations, prospects or financial condition of the Parent and its subsidiaries,
taken as a whole other than any changes or effects arising out of (i) general
20
economic conditions, (ii) the financial markets and (iii) the entering into or
the public disclosure of this Agreement or the transaction contemplated hereby.
SECTION 4.2 Authority Relative to this Agreement. Each of
------------------------------------
Parent and Acquisition has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the consummation by Parent of the transactions contemplated hereby have been
duly and validly authorized by the boards of directors of Parent and Acquisition
and by Parent as the sole stockholder of Acquisition and no other corporate
proceedings on the part of Parent or Acquisition are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of Parent and
Acquisition and, assuming due authorization, execution and delivery by the
Company, constitutes a valid, legal and binding agreement of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 4.3 Information Supplied. None of the information
--------------------
supplied by Parent or Acquisition in writing for inclusion in the Proxy
Statement will, at the time that the Proxy Statement is mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty is made by Parent with respect to statements
made or incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference therein.
SECTION 4.4 Consents and Approvals; No Violations. Except as
-------------------------------------
set forth in Section 4.5 of the Parent Disclosure Schedule, and except for
filings, permits, authorizations, consents and approvals as may be required
under and other applicable requirements of the Exchange Act, the HSR Act,
foreign antitrust laws and the filing of the articles of merger as required by
the NRS, no filing with or notice to, and no permit authorization, consent or
approval of, any Governmental Entity is necessary for the execution and delivery
by Parent or Acquisition of this Agreement or the consummation by Parent or
Acquisition of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Parent Material Adverse Effect.
Neither the execution, delivery and performance of this Agreement by Parent or
Acquisition nor the consummation by Parent or Acquisition of the transactions
contemplated hereby will (a) conflict with or result in any breach of any
provision of the respective Articles of Incorporation or Bylaws of Parent or
Acquisition or any of Parent's other subsidiaries, (b) result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or
21
Acquisition or any of Parent's other subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound and which
contemplates a payment to or from Parent or Acquisition or any of Parent's other
subsidiaries, or (c) to Parent's knowledge, violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Parent or Acquisition or
any of Parent's other subsidiaries or any of their respective properties or
assets except, in the case of (b) or (c), for violations, breaches or defaults
which would not have a Parent Material Adverse Effect.
SECTION 4.5 Adequate Funds. Parent has delivered to the
--------------
Company true and complete copies of the (i) debt financing commitment letters
from UBS AC, Stamford Branch (the "Senior Lender") and UBS Warburg LLC ("UBSW")
and (ii) equity commitment letters from Whitney V, L.P. and Golden Gate Private
Equity, Inc., in each case as set forth in the Parent Disclosure Schedule (the
debt financing commitment letters and the equity commitment letters as
collectively referred to as the "Financing Letters").
To the knowledge of Parent and Acquisition, the proceeds of the
financings as set forth in the Financing Letters (the "Financings"), together
with unrestricted and available cash of the Company of at least $165 million are
expected to be sufficient to consummate the Merger, pay all fees and expenses
related to any of the foregoing, refinance up to $10.6 million of indebtedness
of the Company and provide working capital for Acquisition.
SECTION 4.6 No Prior Activities. Except for obligations
-------------------
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
SECTION 4.7 Ownership of Securities. As of the date hereof,
-----------------------
neither Parent nor, to Parent's knowledge, any of its affiliates or associates
(as such terms are defined under the Exchange Act), (i) beneficially owns,
directly or indirectly, or (ii) is party to an agreement, arrangement or
understanding (other than this Agreement) for the purpose of acquiring, holding
or disposing of, in each case, shares of Company Common Stock.
SECTION 4.8 Brokers. No broker, finder or investment banker is
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entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Acquisition.
SECTION 4.9 No Additional Representations; Investigation by
-----------------------------------------------
Parent and Acquisition.
----------------------
(a) In entering into this Agreement, Parent and Acquisition have
not been induced by, or relied upon, any representations, warranties or
statements by the Company not set forth or referred to in this Agreement, the
Company Disclosure Schedule or the other documents referred to herein or
required to be delivered thereby, whether or not such representations,
warranties or statements have actually been made, in writing or orally, and
Parent and Acquisition acknowledge that, in entering into this Agreement,
Company has been induced by
22
and relied upon the representations and warranties of Parent and Acquisition
herein set forth or referred to in this Agreement or the other documents
required to be delivered thereby or referred to herein. Parent and Acquisition
have made their own investigation of Company prior to the execution of this
Agreement and have not been induced by or relied upon any representations,
warranties or statements as to the advisability of entering into this Agreement
other than as set forth above.
(b) Parent and Acquisition have conducted their own independent
review and analysis of the businesses, assets, condition, operations and
prospects of the Company and its subsidiaries. In entering into this Agreement,
Parent and Acquisition have relied solely upon the items set forth in (a) above
and their own investigation and analysis, and Parent and Acquisition:
(i) acknowledge that, other than as set forth in this Agreement,
the Company Disclosure Schedule or the other documents required to be delivered
by the Company or referred to herein, none of the Company, its subsidiaries or
any of their respective directors, officers, employees, affiliates, agents or
representatives (including without limitation Barrington Associates) makes any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to Parent or
Acquisition or their agents or representatives;
(ii) agree, to the fullest extent permitted by law (except with
respect to fraud), that none of the Company, its subsidiaries or any of their
respective directors, officers, employees, stockholders, affiliates, agents or
representatives (including without limitation Barrington Associates) shall have
any liability or responsibility whatsoever to Parent or Acquisition on any basis
(including without limitation in contract, tort or otherwise) based upon any
information provided or made available, or statements made, to Parent or
Acquisition; and
(c) acknowledge that, as of the date hereof, they have no knowledge
of any representation or warranty of the Company being untrue or inaccurate in
any material respect.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business.
-------------------
(a) Conduct of Business by the Company. Except as expressly
----------------------------------
set forth in this Agreement or as consented to in writing by Parent during the
period from the date of this Agreement to the Effective Time, the Company shall
use, and shall cause its subsidiaries to use, reasonable commercial efforts to
carry on their respective businesses in the usual, regular and ordinary course,
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations and to preserve current relationships with
customers, distributors and suppliers.
(b) Negative Covenants. Without limiting the generality of the
------------------
foregoing, and except as expressly set forth in this Agreement or as consented
to in writing by Parent (which consent shall not be unreasonably withheld or
delayed) between the date of this Agreement and
23
the Effective Time or until the earlier termination of this Agreement pursuant
to its terms, the Company shall not, and shall not permit any of its
subsidiaries to:
(i) amend its Articles of Incorporation or Bylaws (or other
similar governing instrument);
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance and sale of shares of Company
Common Stock pursuant to options previously granted;
(iii) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any of subsidiaries; provided, however, that the Company may pay
one regular $0.15 quarterly cash dividend on the Company Common Stock in
accordance with past practice to be declared and paid after the date hereof;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(v) alter, through merger, liquidation, reorganization,
restructuring or any other fashion, the corporate structure of ownership of any
subsidiary;
(vi) (A) incur or assume any long-term or short-term debt
(including, without limitation, obligations under conditional sale or title
retention agreements, obligations assumed as deferred purchase price,
capitalized lease obligations in excess of $1,000,000, obligations under swap or
hedging agreements in excess of $3,000,000, performance bonds or letters of
credit) or issue any debt securities, except for bank borrowings under existing
lines of credit in the ordinary course of business for working capital purposes
in accordance with the budget previously delivered to Parent; (B) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business consistent with past practice and except for
obligations of subsidiaries of Company incurred in the ordinary course of
business; (C) other than in the ordinary course of business, make any loans,
advances or capital contributions to or investments in any other person (other
than to subsidiaries of Company or customary loans or advances to employees or
customers in each case in the ordinary course of business consistent with past
practice); (D) pledge or otherwise encumber shares of capital stock of Company
or its subsidiaries; (E) mortgage or pledge any of its material assets, tangible
or intangible, or create or suffer to exist any material Lien thereupon (other
than tax liens for Taxes not yet due) or (F) forgive any material debts owing to
the Company or its subsidiaries;
24
(vii) except as set forth in Section 5.1 of the Company
Disclosure Schedule or as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph shall not prevent
Company or its subsidiaries from entering into or terminating and settling
employment agreements, severance agreements or other compensation arrangements
with employees in the ordinary course of business and consistent with past
practice; provided that any such agreements entered into are terminable by the
Company immediately without penalty and that the aggregate amount payable in any
such terminations or settlements does not exceed $100,000;
(viii) except as set forth in Section 5.1 of the Company
Disclosure Schedule and other than in the ordinary course of business, acquire,
sell, lease or dispose of any assets not including inventory in any single
transaction or series of related transactions having a fair market value in
excess of $2,000,000 in the aggregate;
(ix) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(x) (A) except as set forth in Section 5.1 of the Company
Disclosure Schedule acquire or agree to acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (B) enter into
any contract or agreement, other than in the ordinary course of business
consistent with past practice, that would be material to Company and its
subsidiaries, taken as a whole; (C) authorize any new capital expenditure or
expenditures that individually is in excess of $2,000,000, provided that none of
the foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(xi) settle or compromise any pending or threatened suit,
action or claim that (A) relates to the transactions contemplated hereby or (B)
the settlement or compromise of which would result in payments by the Company in
the aggregate of $1,000,000 or more;
(xii) adopt a shareholder rights plan or any similar plan or
instrument or declare a dividend of preferred share purchase rights under the
Rights Agreement dated July 27, 2000 between the Company and U.S. Stock Transfer
Corporation or take any other action which would have the effect of impairing or
delaying the consummation of the Merger;
(xiii) pay, discharge, or satisfy any material claim,
liabilities, or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice, or fail to pay or otherwise satisfy
25
(except if being contested in good faith) any material accounts payable,
liabilities, or obligations when due and payable;
(xiv) pay or incur any obligation to pay any fee relating to
the Merger to a broker, finder or investment banker other than as set forth in
Section 3.16; or
(xv) take or agree in writing or otherwise to take any of the
actions described in Section 5.1(b).
SECTION 5.2 Other Potential Acquirors.
-------------------------
(a) The Company agrees that it shall cease (and will instruct its
Representatives, as defined herein, to cease) all existing negotiations with any
third parties with respect to a Takeover Proposal. Except as otherwise set forth
in this Section 5.2, the Company shall not permit any of its subsidiaries to,
nor authorize nor permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of the Company or any of its
subsidiaries ("Representatives") to, directly or indirectly: (i) solicit,
initiate, or encourage the submission of, any Takeover Proposal, or take any
other action to facilitate any inquiries or make any proposal that constitutes,
or may reasonably be expected to lead to, any Takeover Proposal, (ii) engage in
negotiations or discussions with, or furnish any information or data, or afford
access to the properties, books or records of the Company or its subsidiaries to
any third party relating to a Takeover Proposal, or (iii) enter into any
agreement with respect to any Takeover Proposal or approve any Takeover
Proposal. For purposes of this Agreement, "Takeover Proposal" means any written
proposal or offer (whether or not delivered to the Company's stockholders
generally) for a merger, consolidation, recapitalization, liquidation,
dissolution or similar transaction, purchase of substantial assets, tender offer
or other business combination involving the Company or any of its subsidiaries
or any proposal or offer to acquire in any manner, directly or indirectly, a
substantial equity interest in, or a substantial portion of the assets or
business of, the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement and so long as the Company is in compliance with the provisions of
Section 5.2(a), if the Company and its Board of Directors or the Special
Committee prior to the Company Stockholders' Meeting determine in good faith
after discussion with independent counsel that an unsolicited Takeover Proposal
would likely result in a Superior Proposal and the Board of Directors or the
Special Committee determines in good faith that the failure to participate in
discussions or negotiations with or to furnish information to the Potential
Acquiror, as defined below, would be inconsistent with the Board of Directors'
fiduciary duties under applicable law, then the Company and its Board of
Directors or Special Committee: (i) may participate in discussions or
negotiations (including, as a part thereof, make any counterproposal) with or
furnish information to any third party making an unsolicited Takeover Proposal
(a "Potential Acquiror"), and (ii) shall be permitted to take and disclose to
the Company's stockholders a position with respect to any tender or exchange
offer by a third party, or amend or withdraw such position, pursuant to Rules
14d-9 and 14e-2 of the Exchange Act.
26
(c) Any non-public information furnished to a Potential Acquiror
shall be pursuant to a confidentiality agreement substantially similar to the
confidentiality provisions of the confidentiality agreement entered into between
the Company and Whitney & Co., LLC.
(d) The Board of Directors of the Company or the Special
Committee shall not approve or recommend, as the case may be, or propose to
approve or recommend, as the case may be, or enter into any agreement with
respect to, any Takeover Proposal unless the Board and the Special Committee
determine in good faith, after receiving advice from their financial advisor,
that such Takeover Proposal would, if so completed, result in a Superior
Proposal. For purposes of this Agreement, "Superior Proposal" means a written
Takeover Proposal made by a third party with respect to which: (i) the Board of
Directors of the Company and the Special Committee determine, based on such
matters that they deem relevant, including, without limitation, the likelihood
of consummation, the trading market, liquidity of any securities offered in
connection with the Takeover Proposal and the factors set forth in NRS Section
78.138, that the Takeover Proposal is superior as compared with the Merger, and
(ii) if the Takeover Proposal (x) is subject to a financing condition or (y)
involves consideration that is not entirely cash or does not permit stockholders
to receive the payment of the offered consideration in respect of all shares at
the same time, the Company's Board of Directors and the Special Committee have
been furnished with the written opinion of Company Financial Advisor or a
nationally recognized financial advisor that (in the case of clause (x)), the
Takeover Proposal is readily financeable and (in the case of clause (y)) that
the Takeover Proposal provides a higher value per share than the consideration
per share to be paid to the Company's stockholders pursuant to the Merger.
(e) Except as set forth in this Section 5.2, neither the Board
of Directors of the Company, nor the Special Committee, shall (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
Board of Directors' approval or recommendation of the Merger or this Agreement,
(y) approve any letter of intent, agreement in principle, acquisition agreement
or similar agreement (other than a confidentiality agreement in connection with
a Superior Proposal which is entered into by the Company in accordance with
Section 5.2(c)) relating to any Takeover Proposal (each, an "Acquisition
Agreement"), or (z) approve or recommend, or propose to approve or recommend,
any Takeover Proposal. Notwithstanding the foregoing or anything else to the
contrary contained in this Agreement, in response to a Superior Proposal which
was not solicited by the Company, and which did not otherwise result from a
breach of Section 5.2(a), the Board of Directors of the Company may, subject to
the immediately following sentence, terminate this Agreement pursuant to and
subject to the terms of Section 7.5 and, concurrently with such termination,
cause the Company to enter into an Acquisition Agreement with respect to a
Superior Proposal, but only if the Company's Board of Directors determines,
after consultation with its independent counsel, that failure to terminate this
Merger Agreement and accept the Superior Proposal would be inconsistent with the
Company's Board of Directors fiduciary duties to stockholders. Such actions may
be taken by the Company's Board of Directors only if it has delivered to Parent
prior to or on the date of the Company Stockholders' Meeting written notice of
the intent of the Company's Board of Directors to take the actions referred to
in the preceding sentence, together with a copy of the related Acquisition
Agreement and a description of any terms of the Takeover Proposal not contained
therein. The Board of Directors shall not terminate this Agreement and enter
into an Agreement with respect to a Superior Proposal pursuant to this Section
5.2(e) until the end of the second business day following delivery of such
notice to Parent, after which the Board of Directors, taking into
27
account such matters that they deem relevant (including, without limitation,
including, without limitation, the likelihood of consummation, the trading
market, liquidity of any securities offered in connection with the Takeover
Proposal and the factors set forth in NRS Section 78.138, as well as any
indications from Parent that it will make an alternative proposal), may proceed
with such Superior Proposal and enter into an Acquisition Agreement in
connection with the Superior Proposal.
(f) The Company promptly, and in any event within 48 hours, shall
advise the Parent orally and in writing of the submission of any Takeover
Proposal, the identity of the person making any such Takeover Proposal and the
material terms of any such Takeover Proposal; provided, however, neither Parent
nor Acquisition shall interfere with the Company, the Board of Directors or the
Special Committee with respect to any such Takeover Proposal (including any
deliberations related to any such Takeover Proposal or any matter related
thereto). The Company shall keep the Parent fully informed of the status and
material terms of any such Takeover Proposal.
SECTION 5.3 Preparation of the Proxy Statement; Stockholders' Meeting.
---------------------------------------------------------
(a) As promptly as reasonably practicable after the execution of this
Agreement, the Company shall prepare and file with the SEC the Proxy Statement.
The Company shall obtain and furnish the information required to be included in
the Proxy Statement and shall respond promptly to any comments made by the SEC
with respect to the Proxy Statement and cause the Proxy Statement and form of
proxy to be mailed to the Company's stockholders at the earliest practicable
date. Parent shall cooperate in the preparation of the Proxy Statement and shall
as soon as reasonably practicable after the date hereof furnish the Company with
all information for inclusion in the Proxy Statement as the Company may
reasonably request. The Company agrees, as to information with respect to the
Company, its officers, directors, stockholders and subsidiaries contained in the
Proxy Statement, and Parent agrees, as to information with respect to Parent and
its officers, directors, stockholders and subsidiaries contained in the Proxy
Statement that such information, at the date the Proxy Statement is mailed and
(as amended or supplemented) at the time of the Company Stockholders Meeting,
will not be false or misleading with respect to any material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. Parent and its counsel shall be given the opportunity to review the
Proxy Statement and all amendments or supplements thereof prior to their being
filed with the SEC, and the Company shall not make any such filing without
consulting with Parent. The Company will advise Parent, promptly after it
receives notice thereof, of the time when the Proxy Statement has been cleared
by the SEC or any request by the SEC for an amendment of the Proxy Statement or
comments from the SEC thereon and proposed responses thereto or requests by the
SEC for additional information and Company shall furnish copies to Parent. The
Company, on the one hand, and Parent, on the other hand, agree to promptly
correct any information provided by either of them for use in the Proxy
Statement if any, if and to the extent that it shall have become materially
false or misleading, and the Company further agrees to take all steps reasonably
necessary to cause the Proxy Statement as so corrected to be filed with the SEC
and to use all reasonable efforts to cause the Proxy Statement to be
disseminated to the Company's stockholders, in each case, as and to the extent
required by applicable laws.
28
(b) Parent agrees promptly to advise the Company if at any time
prior to the Company Stockholders' Meeting any information provided by it in the
Proxy Statement is or becomes incorrect or incomplete in any material respect
and to provide the Company with the information needed to correct such
inaccuracy or omission. Parent will furnish the Company with such supplemental
information as may be necessary in order to cause the Proxy Statement, insofar
as it relates to Parent and its subsidiaries, to comply with applicable law
after the mailing thereof to the stockholders of the Company.
(c) The Company agrees promptly to advise Parent if at any time
prior to the Company Stockholders' Meeting any information provided by it in the
Proxy Statement is or becomes incorrect or incomplete in any material respect
and to provide Parent with the information needed to correct such inaccuracy or
omission. The Company will furnish Parent with such supplemental information as
may be necessary in order to cause the Proxy Statement, insofar as it relates to
the Company and its subsidiaries, to comply with applicable law after the
mailing thereof to the stockholders of the Company.
(d) Concurrently with the filing of the Proxy Statement, Parent
and Acquisition and their respective affiliates (to the extent required by law)
shall prepare and file with the SEC, together with the Company, a Rule 13E-3
Transaction Statement on Schedule 13E-3 (together with all supplements and
amendments thereto, the "Schedule 13E-3") with respect to the transactions
contemplated by this Agreement. The Company shall promptly furnish to Parent all
information concerning the Company as may reasonably be requested in connection
with the preparation of the Schedule 13E-3. The Company shall promptly
supplement, update and correct any information provided by it for use in the
Schedule 13E-3 if and to the extent that such information is or shall have
become incomplete, false or misleading. In any such event, Parent shall take all
reasonable steps necessary to cause the Schedule 13E-3 as so supplemented,
updated or corrected to be filed with the SEC and Parent and Company shall take
all reasonable steps to cause same to be disseminated to the holders of Company
Common Stock, in each case, as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given an opportunity to
review and comment on the Schedule 13E-3 and each supplement, amendment or
response to comments with respect thereto prior to its being filed with or
delivered to the SEC and Parent shall consider any such comments in good faith.
Parent agrees to provide the Company and its counsel with copies of any comments
that Parent or its counsel may receive from the staff of the SEC promptly after
receipt thereof.
(e) As soon as reasonably practicable following the clearance of
comments from the staff of the SEC regarding the Proxy Statement, the Company
shall call and hold the Company Stockholders' Meeting for the purpose of
obtaining the Stockholder Approval. Subject to the fiduciary duties of its Board
of Directors, the Company shall use its reasonable best efforts to solicit
proxies from its stockholders and to secure the vote or consent of stockholders
required by applicable law or otherwise to obtain the Stockholder Approval. The
Company, through its Board of Directors, shall recommend to its stockholders the
obtaining of the Stockholder Approval, provided, however, that subject to the
provisions of Section 7.1, the Company's Board of Directors may withdraw, modify
or amend its recommendation if (i) the Company receives a Superior Proposal and
(ii) after complying with the provisions of Section 5.2 the Board of Directors
by a majority vote determines in its good faith judgment that it is required in
order to comply with its fiduciary duties to recommend the Superior Proposal.
29
SECTION 5.4 Access to Information; Confidentiality. Upon notice
--------------------------------------
by Parent and permission granted by the Company, which shall not be unreasonably
delayed or withheld, the Company shall, and shall cause its subsidiaries to,
afford Parent and its lenders and other investors, and the officers, employees,
accountants, counsel, financial advisors and other representatives of Parent and
its lenders and other investors, reasonable access during normal business hours
during the period prior to the Effective Time, and in a manner reasonably
designed to minimize disruption to the operations of the Company and its
subsidiaries, and to all their respective properties, books, contracts,
agreements, commitments, returns, personnel and records and, during such period,
the Company shall, and shall cause each of its subsidiaries to, furnish promptly
to Parent, (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, each of the Company and Parent will hold, and will cause its lenders and
other investors and their respective officers, employees, accountants, counsel,
financial advisers and other representatives and affiliates to hold, any
confidential information in accordance with the confidentiality agreement
entered into between the Company and Whitney & Co., LLC.
SECTION 5.5 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the Company, Parent and Acquisition agrees (and shall
cause their respective subsidiaries) to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement,
including without limitation (i) the making of all necessary applications,
registrations and filings (including filings with Governmental Entities, if
any), (ii) the obtaining of all necessary actions or nonactions, licenses,
consents, approvals or waivers from Governmental Entities and other third
parties, (iii) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement and (iv) the defending of any lawsuits or other
legal proceedings, judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby or thereby, including the
using of all reasonable best efforts necessary to lift, rescind or mitigate the
effect of any injunction or restraining order or other order adversely affecting
the ability of any party hereto to consummate the transactions contemplated
hereby.
(b) The Company shall give prompt written notice to Parent, and
Parent shall give prompt written notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any Material Respect, as defined in Section 8.3(c), (ii)
the failure by it to comply with or satisfy in any Material Respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, (iii) the occurrence of an event or events which individually or
in the aggregate, is reasonably likely to have a Company Material Adverse
Effect, or (iv) the commencement of or, to the extent the Company has knowledge
of the threat of, any litigation involving or affecting the Company or any
subsidiary, or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer of the Company or any
subsidiary, in his or her capacity as such or as a fiduciary under a Benefit
Plan of the Company or any subsidiary, which, if pending
30
on the date hereof, would have been required to have been disclosed in or
pursuant to this Agreement or which directly relates to the consummation of the
Merger, or any material development in connection with any litigation disclosed
by the Company in or pursuant to this Agreement or the Company SEC Reports. Each
of Parent, Acquisition and the Company hereby represent that, other than as
previously disclosed to each other on the Disclosure Schedule (which disclosures
shall not constitute a breach), as of the date hereof they do not have any
actual knowledge of a breach of the representations and warranties being made by
such other party pursuant to this Agreement.
SECTION 5.6 Stock Options. Each Company Stock Option outstanding
-------------
pursuant to the Stock Option Plan or otherwise, whether or not then exercisable,
shall be canceled as of the Effective Time and thereafter only entitle the
holder thereof, upon surrender thereof, to receive the amount specified in
Section 2.3, which cancellation shall be in accordance with the terms of any
Company Stock Option and Stock Option Plan. Prior to the Effective Time, the
Company shall mail to each Person who is a holder of outstanding Company Stock
Options granted pursuant to the Stock Option Plan or otherwise a letter in a
form reasonably acceptable to Parent which describes the treatment of and
payment for such options pursuant to this Section 5.6 and provides instructions
for use in obtaining payment for such options hereunder.
SECTION 5.7 Takeover Statutes; Inconsistent Actions. If any "fair
---------------------------------------
price," "moratorium," "control share," "business combination," "shareholder
protection" or similar or other anti-takeover statute or regulation (including,
without limitation, Sections 78.378 through 78.3793 and Sections 78.411 through
78.444 of the NRS) shall become applicable to the Merger or any of the other
transactions contemplated hereby, the Company and the Board of Directors of the
Company shall grant such approvals and take all such actions so that the Merger
and the other transactions contemplated hereby may be consummated on the terms
contemplated hereby and otherwise eliminate the effects of such statute or
regulation on the Merger and the transactions contemplated hereby.
SECTION 5.8 Indemnification, Exculpation and Insurance.
------------------------------------------
(a) The Articles of Incorporation and the Bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification and exculpation from liability set forth in the Company's
Articles of Incorporation and Bylaws on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified in any manner
that would adversely affect the rights thereunder of individuals who on or prior
to the Effective Time were directors, officers, employees or agents of the
Company, unless such modification is required by law.
(b) After the Effective Time, the Surviving Corporation shall
indemnify and hold harmless (and shall also advance expenses as incurred to the
fullest extent permitted under applicable law to) each person who is or has been
prior to the date hereof or who becomes prior to the Effective Time an officer
or director of the Company or any of the Company's subsidiaries (the
"Indemnified Persons") against (a) all losses, claims, damages, costs, expenses
(including, without limitation, counsel fees and expenses), settlement payments
or liabilities arising out of or in connection with any claim, demand, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was an officer or
31
director of the Company or any of its subsidiaries whether or not pertaining to
any matter existing or occurring at or prior to the Effective Time and whether
or not asserted or claimed prior to or at or after the Effective Time
("Indemnified Liabilities") and (b) all Indemnified Liabilities based in whole
or in part on or arising in whole or in part out of or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the fullest
extent required or permitted under applicable law or under the Surviving
Corporation's Articles of Incorporation or Bylaws. The parties hereto intend, to
the extent not prohibited by applicable law, that the indemnification provided
for in this Section 5.8(b) shall apply without limitation to negligent acts or
omissions by an Indemnified Person. Parent hereby guarantees the payment and
performance of the Surviving Corporation's obligations in this Section 5.8(b).
Each Indemnified Person is intended to be a third party beneficiary of this
Section 5.8(b) and may specifically enforce its terms. This Section 5.8(b) shall
not limit or otherwise adversely effect any rights any Indemnified Person may
have under any agreement with the Company or under the Company's Articles of
Incorporation or Bylaws.
(c) For six years from the Effective Time, Parent shall maintain
in effect directors' and officers' liability insurance for current and former
officers and directors of the Company and its subsidiaries who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been heretofore made available to Parent) on terms no less
favorable to such indemnified parties than the terms of such current insurance
coverage in effect for the Company on the date hereof and providing coverage
only with respect to matters occurring prior to the Effective Time, to the
extent that such coverage can be maintained at an annual net cost to the
Surviving Corporation of not greater than 150% of the annual premium for the
Company's current insurance policies and, if such coverage cannot be so
maintained at such cost, providing as much of such insurance as can be so
maintained at a net cost equal to 150% of the annual premium for the Company's
current insurance policies.
(d) The obligations of the Company, the Surviving Corporation
and Parent contained in this Section 5.8 shall be binding on the successors and
assigns of Parent and the Surviving Corporation. If Parent, the Surviving
Corporation or any of their successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in each
such case, proper provisions shall be made so that the successors and assigns of
Parent or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 5.8.
SECTION 5.9 Fees and Expenses. Except as provided in Section 7.5,
-----------------
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses. The Company shall not pay expenses of
any individual stockholder.
SECTION 5.10 Public Announcements. Parent and Acquisition, on the
--------------------
one hand, and the Company, on the other hand, will not issue any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, without first obtaining the prior consent of
the other party; provided, however, in the event of any press release that may
be required by applicable law, court process, or by obligations pursuant to any
listing agreement with any national securities exchange or the
32
NASDAQ National Market, the parties will use reasonable best efforts to consult
with each other before issuing, and to provide each other the opportunity to
review and comment upon, any such press release or other public statement.
SECTION 5.11 Status of Company Employees; Employee Benefits.
----------------------------------------------
(a) For a period beginning at the Effective Time and ending on the
90th day following the Effective Time, Parent shall to the extent practicable
cause the Surviving Corporation to provide employee benefits and programs to the
employees of the Company and its subsidiaries who are employed by the Surviving
Corporation or its subsidiaries at the date hereof ("Company Employees") that,
in the aggregate are substantially comparable or more favorable, as a whole,
than those in existence as of the date hereof and disclosed in writing to Parent
prior to the execution hereof, except for those set forth in Section 5.11(a) of
the Parent Disclosure Schedule.
(b) To the extent Parent determines to cover Company Employees under
employee benefit plans and arrangements maintained by Parent or its subsidiaries
("Parent Benefit Plans") instead of employee benefit plans and arrangements of
the Company, then for a period of ninety (90) days following the Effective Time,
any pre-existing condition exclusion under any Parent Benefit Plan providing
medical or dental benefits shall be waived for any Company Employee who,
immediately prior to commencing participation in such Parent Benefit Plan, was
participating in an Employee Plan providing medical or dental benefits and had
satisfied any pre-existing condition provision under such Employee Plan (to the
extent that such pre-existing condition would have been waived under the similar
Company benefit plan, as in effect immediately prior to the Effective Time). Any
expenses that were taken into account under an Employee Plan providing medical
or dental benefits in which the Company Employee participated immediately prior
to commencing participation in a Parent Benefit Plan providing medical or dental
benefits shall be taken into account to the same extent under such Parent
Benefit Plan, in accordance with the terms of such Parent Benefit Plan, for
purposes of satisfying applicable deductible, coinsurance and maximum out-of-
pocket provisions and life-time benefit limits.
SECTION 5.12 Governmental Approvals. Parent shall use reasonable best
----------------------
efforts to promptly prepare and file, but in any event, will file no later than
twenty days after the date hereof, all necessary documentation to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, registrations, licenses, findings of suitability,
consents, variances, exemptions, orders, approvals and authorizations of all
third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement ("Governmental
Approvals") and shall file initial applications and documents related to all
such Governmental Approvals within such time as necessary for such Governmental
Approvals to be granted on or before the Effective Time and shall act reasonably
and promptly thereafter in responding to additional requests in connection
therewith.
SECTION 5.13 Japanese Subsidiary Minority Shares. Notwithstanding
-----------------------------------
anything contained in this Agreement to the contrary, the parties hereby agree
that, following the date hereof and prior to the Effective Time, the Company
shall use its commercially reasonable efforts to negotiate, enter into and
perform agreements or arrangements providing for the
33
purchase, exchange, cancellation or other disposal of the Japanese Subsidiary
Minority Shares ("J-Sub Minority Shares") such that the Company shall become the
sole owner of all outstanding shares of capital stock or other equity securities
of Japanese Subsidiary (other than director's qualifying shares). The
consideration for the J-Sub Minority Shares may consist of cash, Company Common
Stock or other property; provided that, unless Parent shall otherwise agree in
writing, such consideration shall not exceed $5,000,000 (with the value of any
such consideration that may consist of shares of Company Common Stock being
equal to the Merger Consideration per share of Company Common Stock and the
value of any other non-cash consideration being equal to the fair market value
thereof as determined by the Company's Board of Directors in the exercise of its
reasonable business judgment).
SECTION 5.14 Rights Plan. The Company shall either (x) promptly
-----------
redeem all preferred share purchase rights under the Rights Agreement (the
"Rights Agreement") dated July 27, 2000 between the Company and U.S. Stock
Transfer Corporation or (y) amend the Rights Agreement to exempt the Merger and
the transaction contemplated hereby from the Rights Agreement, and take all
other action to ensure that the Rights shall not become exercisable and no
Distribution Date (as such terms are defined in the Rights Agreement) shall
occur thereunder prior to the Closing Date.
SECTION 5.15 Indemnification by Company. The Company shall
--------------------------
indemnify Parent, its stockholders, Acquisition and their respective affiliates
and each of their respective current and former officers, directors, employees,
agents and representatives (individually an "Indemnitee" and collectively the
"Indemnitees"), to the fullest extent permitted by applicable law, but only with
respect to any actual out-of-pocket defense cost or expense incurred by an
Indemnitee directly in connection with the defense of any claim asserted against
an Indemnitee which is directly based on an allegation that an Indemnitee has
induced or acted in concert with the Company or any of its directors to act
contrary to or in violation of any duty under applicable law, to which the
Company and any of its directors are subject, to the extent, but only to the
extent, such allegation directly relates to the negotiation, execution or
delivery of this Agreement by the parties hereto (an "Indemnifiable Matter");
provided, however, in no event shall the Company be responsible for indemnifying
or making any payment to, or on behalf of, any Indemnitee hereunder with respect
to any settlement, judgment, contribution, indemnification or similar payment
made to or on behalf of any party in connection with the settlement,
disposition, resolution or dismissal of any action, case, proceeding,
allegation, arbitration or other similar proceeding other than one requiring
payment by Parent or Acquisition of fees and expenses of counsel for the
claiming party. Promptly after receipt by an Indemnitee of notice of the
assertion of any claim or the commencement of any action against such Indemnitee
in respect to which indemnity or reimbursement may be sought against under this
Section 5.15 (an "Assertion") such Indemnitee shall notify the Company in
writing of the Assertion, but the failure to so notify shall not relieve the
Company of any liability it may have to such Indemnitee hereunder except to the
extent that such failure shall have actually prejudiced the Company in defending
against such Assertion. In the event that following receipt of notice from the
Indemnitee, the Company notifies the Indemnitee that the Company desires to
defend the Indemnitee against such Assertion, the Company shall have the right
to defend the Indemnitee by appropriate proceedings and shall have the sole
power to direct and control such defense. If any Indemnitee desires to
participate in any such defense it may do so at its sole cost and expense;
provided that if the defendants in any such action shall include the Company
and/or
34
its officers or directors as well as an Indemnitee and such Indemnitee shall
have received the written advice of counsel that there exist defenses available
to such Indemnitee that are materially different from those available to the
Company and/or such officers or directors, the Indemnitee shall have the right
to select one separate counsel (and one local counsel in such jurisdictions as
are necessary) reasonably acceptable to the Company to participate in the
defense of such action on its behalf, at the expense of the Company. If any
Indemnitee retains such counsel, then to the extent permitted by law, the
Company shall periodically advance to such Indemnitee its reasonable legal and
other out-of-pocket expenses relating to the Indemnifiable Matter (including the
reasonable cost of any investigation and preparation incurred in connection
therewith). No Indemnitee shall settle any Assertion without the prior written
consent of the Company, nor shall the Company settle any Assertion in which an
Indemnitee is named as a defendant without either (i) the written consent of all
Indemnitees against whom such Assertion was made (which consents shall not be
unreasonably withheld), or (ii) obtaining an unconditional general release from
the party making the Assertion for all Indemnitees as a condition of such
settlement. The provisions of this Section 5.15 are intended for the benefit of,
and shall be enforceable by, the respective Indemnitees.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
------
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval shall have
--------------------
been obtained.
(b) No Injunctions or Restraints. No litigation brought by a
----------------------------
Governmental Entity shall be pending, and no litigation shall be threatened by
any Governmental Entity, which seeks to enjoin or prohibit the consummation of
the Merger, and 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.
(c) HSR Act. The applicable waiting period (and any extension
-------
thereof) under the HSR Act shall have expired or been terminated.
(d) Consents and Approvals. Each of the parties shall have
----------------------
received evidence, in form and substance reasonably satisfactory to the other
party, that such licenses, permits, consents, approvals, waivers, findings of
suitability, authorizations, qualifications and orders of, and declarations,
registrations and filings required to be made or obtained by the Company or
Parent from all Governmental Entities as are required in connection with the
Merger and the consummation of the transactions contemplated hereby, including
Governmental Approvals, have been obtained or made, as applicable, by the
Company or Parent and are in full force and effect.
35
(e) Consent of Los Angeles Superior Court. (i) The Los Angeles
-------------------------------------
Superior Court shall have issued an order (the "Order") in substantial effect
approving, including without limitation, the sale, disposition or any other
transaction by the trustees of the Xxxx Xxxxxx Family Trust (the "Trustees")
relating to the securities of the Company or any of its subsidiaries or
affiliates held directly or indirectly by the Trustees, in a transaction or
series of transactions contemplated by this Agreement and any documents or
instruments related thereto; and (ii) the Order shall have become final (an
order which is no longer appealable).
SECTION 6.2 Additional Conditions to Obligations of Parent and
--------------------------------------------------
Acquisition. The obligations of Parent and Acquisition to effect the Merger are
-----------
also subject to the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all Material Respects as of the date of this Agreement and shall be true and
correct in all Material Respects as of the Closing Date as though made on and as
of the Closing Date (provided that those representations and warranties which
address matters only as of a particular date shall remain true and correct in
all Material Respects as of such date), provided that notwithstanding the
foregoing, the representations and warranties of the Company set forth in
Section 3.2 hereof shall be true and correct in all respects and Parent shall
have received a certificate of an executive officer of the Company to that
effect.
(b) Agreements and Covenants. The Company shall have performed
------------------------
or complied in all Material Respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date. Parent shall have received a certificate of an executive officer
of the Company to that effect.
(c) Certificates and Other Deliveries. The Company shall have
---------------------------------
delivered, or caused to be delivered, to Parent (i) a certificate of good
standing from the Secretary of State of the State of Nevada and of comparable
authority in other jurisdictions in which the Company and its subsidiaries are
incorporated or qualified to do business stating that each is a validly existing
corporation in good standing; (ii) duly adopted resolutions of the Board of
Directors and stockholders of the Company approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby, certified
by the Secretary of the Company; and (iii) a true and complete copy of the
Articles of Incorporation or comparable governing instruments, as amended, of
the Company and its subsidiaries certified by the Secretary of State of the
state of incorporation or comparable authority in other jurisdictions, and a
true and complete copy of the Bylaws or comparable governing instruments, as
amended, of the Company and its subsidiaries certified by the Secretary of the
Company and its subsidiaries, as applicable.
(d) No Company Material Adverse Effect. From the date of this
----------------------------------
Agreement through and including the Effective Time, no event or events shall
have occurred which, individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 6.3 Additional Conditions to Obligations of the Company.
---------------------------------------------------
The obligations of the Company to effect the Merger are also subject to the
following conditions:
36
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Parent set forth in this Agreement shall be true and correct
in all Material Respects as of the date of this Agreement and shall be true and
correct in all Material Respects as of the Closing Date as though made on and as
of the Closing Date (provided that those representations and warranties which
address matters only as of a particular date shall remain true and correct in
all Material Respects as of such date), and Company shall have received a
certificate of an executive officer of the Parent to that effect.
(b) Agreements and Covenants. Parent shall have performed or
------------------------
complied in all Material Respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. The Company shall have received a certificate of an executive officer of
Parent to such effect.
(c) Financing of Parent in Place. At the Effective Time,
----------------------------
Parent shall have, and shall have provided the Company with satisfactory
evidence of the availability of, funds sufficient for the payment of the
aggregate Merger Consideration and performance of Parent's obligations with
respect to the transactions contemplated by this Agreement subject to Sections
2.2 and 4.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company, if
the Board of Directors of each so determines by the affirmative vote of a
majority of the members of its Board of Directors;
(b) by Parent (provided that Parent is not then in Material
Breach, as defined in this Section 7.1, of any representation, warranty,
covenant or other agreement contained herein), upon a Material Breach of any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case, except for the covenants of the
Company in Section 5.2(a) for which no cure shall be permitted; provided,
however, that no cure period shall be applicable in the case of any breach based
on an act of encouraging the submission of a Takeover Proposal only if the act
of encouragement is established by Parent or Acquisition by clear and
unequivocal conduct on the part of the Company, continuing thirty (30) days
following notice to the Company of such breach or untruth and of a nature such
that the conditions set forth in Section 6.2(a) or Section 6.2(b), as the case
may be, would be incapable of being satisfied by the then-scheduled Outside Date
(defined below);
(c) by the Company (provided that the Company is not then in
Material Breach of any representation, warranty, covenant or other agreement
contained herein), upon a Material Breach of any representation, warranty,
covenant or agreement on the part of Parent or Acquisition set forth in this
Agreement, or if any representation or warranty of Parent or Acquisition shall
have become untrue, in either case (except for the representations, warranties
37
and covenants of Parent and Acquisition contained in Section 4.5 or 6.3(c) for
which no cure period shall be permitted) continuing thirty (30) days following
notice to Parent of such breach or untruth and of a nature such that the
conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may be,
would be incapable of being satisfied by the then-scheduled Outside Date;
(d) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the consummation of
the Merger and such order, decree or ruling or other action shall have become
final and nonappealable;
(e) by either Parent or the Company, if the Merger shall not
have occurred by August 31, 2002 (the "Outside Date"), unless the failure to
consummate the Merger is the result of a breach of covenant set forth in this
Agreement or a Material Breach of any representation or warranty set forth in
this Agreement by the party seeking to terminate this Agreement, provided that
either Parent or the Company may extend the Outside Date, but no more than three
times in the aggregate, and each time by one month, but in no event beyond
November 30, 2002, by providing written notice thereof to the other party
between three (3) and five (5) business days prior to the next scheduled Outside
Date if (i) (x) the Merger shall not have been consummated by such date because
the requisite Governmental Approvals required under Section 6.1(d) have not been
obtained and are still being pursued, or (y) the condition set forth in Section
6.1(e) shall not have been fully satisfied and (ii) the party requesting such
extension has satisfied all the conditions to Closing required to be satisfied
by it and has not violated any of its obligations under this Agreement in a
manner that was the cause of or resulted in the failure of the Merger to occur
on or before the Outside Date;
(f) by either Parent or the Company (provided that the
terminating party is not in Material Breach of any representation, warranty,
covenant or other agreement contained hereunder), if any approval of the
stockholders of the Company required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of the Company's stockholders or at any adjournment or
postponement thereof called for such purpose;
(g) by Parent, if the Board of Directors of the Company (i)
withdraws or modifies adversely its recommendation of the Merger following the
receipt by the Company of a Takeover Proposal, or (ii) recommends a Takeover
Proposal to Company stockholders, provided that any disclosure that the Board of
Directors of the Company is compelled to make with respect to the receipt of a
proposal for a Takeover Proposal in order to comply with its fiduciary duties or
Rules 14d-9 or 14e-2 shall not constitute the withdrawal or material weakening
of such Board's recommendation so long as the Company has otherwise complied in
all material respects with Section 5.2; or
(h) by the Company if, as a result of a Superior Proposal, the
Board of Directors of the Company determines, in its good faith judgment and in
the exercise of its fiduciary duties that the failure to terminate this
Agreement and accept such Superior Proposal could be inconsistent with the
proper exercise of such fiduciary duties and the Company has otherwise complied
in all material respects with Section 5.2.
38
For purposes of Sections 7.1(b), (c), (e) and (f), "Material
Breach" shall mean (i) when used in connection with a representation, warranty,
covenant or agreement made by the Company or Parent, as the case may be, set
forth in this Agreement which is qualified by materiality or by Company Material
Adverse Effect or Parent Material Adverse Effect, as the case may be, a breach
in any respect (taking into account such qualifications as to materiality or by
Company Material Adverse Effect or Parent Material Adverse Effect, as the case
may be); and (ii) when used in connection with a representation, warranty,
covenant or agreement made by the Company or Parent, as the case may be, set
forth in this Agreement that is not so qualified by materiality or by Company
Material Adverse Effect or Parent Material Adverse Effect, as the case may be, a
breach in any material respect.
SECTION 7.2 Effect of Termination. In the event of termination of
---------------------
this Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Acquisition or the Company or their
respective officers or directors, except as set forth in the last sentence of
Section 5.4, Section 5.9, Section 5.15, Section 7.5 and Article VIII which shall
survive termination and except to the extent that such termination results from
the willful breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the
---------
parties at any time before or after approval hereof by the stockholders of the
Company; provided, however, that after such stockholder approval there shall not
be made any amendment that by law requires further approval by the stockholders
of the Company without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing, signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
SECTION 7.5 Termination Fee; Expense Reimbursement.
--------------------------------------
(a) The Company agrees that in order to compensate Parent for
the direct and substantial damages suffered by Parent in the event of
termination of this Agreement under certain circumstances, which damages cannot
be determined with reasonable certainty, the Company shall pay to Parent the
amount of $27 million (the "Termination Fee") if, but only if: (i) (x) Parent
shall terminate this Agreement pursuant to Section 7.1(b), and (y) prior to such
termination a Takeover Proposal shall have been made and not withdrawn and
within 12 months of the termination of this Agreement, the Company enters into a
definitive agreement with respect to, and thereafter consummates, a transaction
regarding such Takeover Proposal; (ii) (x)
39
Parent or Company shall terminate this Agreement pursuant to Section 7.1(e), and
(y) prior to such termination a Takeover Proposal shall have been made and not
withdrawn and within 12 months of the termination of this Agreement, the Company
enters into a definitive agreement with respect to, and thereafter consummates,
a transaction regarding such Takeover Proposal; (iii) (x) Parent or Company
shall terminate this Agreement pursuant to Section 7.1(f) at any time after the
date of this Agreement, and (y) prior to the date of the Company Stockholders
Meeting a Takeover Proposal shall have been made, and within 12 months of such
termination of this Agreement the Company enters into a definitive agreement
with respect to, and thereafter consummates, a transaction regarding such
Takeover Proposal; (iv) Parent shall terminate this Agreement pursuant to
Section 7.1(g); or (v) the Company terminates this Agreement pursuant to Section
7.1(h). The Termination Fee payable under Sections 7.5(a)(i), 7.5(a)(ii) and
7.5(a)(iii) shall be paid upon the Company consummating a transaction regarding
a Takeover Proposal as described in Sections 7.5(a)(i)(y), 7.5(a)(ii)(y) and
7.5(a)(iii)(y), respectively. The Termination Fee payable under Sections
7.5(a)(iv) shall be paid concurrently upon receipt by the Company of notice of
termination by Parent pursuant to such Section 7.5(a)(iv). The Termination Fee
payable under Sections 7.5(a)(v) shall be paid concurrently upon notice of
termination by the Company pursuant to such Section 7.5(a)(v). The Termination
Fee shall be reduced by any Expenses paid under Section 7.5(b) so that in no
event shall the aggregate of the Termination Fee and Expenses exceed $27
million. Under no circumstances shall the Company be required to pay more than
one Termination Fee.
(b) The Company agrees to pay Parent its Expenses (as defined
below) if, but only if: Parent or the Company shall terminate this Agreement
pursuant to Sections 7.1(b), 7.1(e), 7.1(f), 7.1(g) or Section 7.1(h). The term
"Expenses" shall mean all actual and documented out-of-pocket expenses not
exceeding $10 million in the aggregate incurred by Parent and its affiliates in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of accountants, attorneys and
financial advisors, all costs of Parent and its affiliates relating to the
financing of the Merger (including, without limitation, advisory and commitment
fees and reasonable fees and expenses of counsel to potential lenders), costs
and expenses otherwise borne by Parent and its affiliates pursuant to Section
5.9. The Expenses payable under Section 7.5(b) shall be paid concurrently with
notice of termination of this Agreement by the Company or Parent, as the case
may be, and submission of appropriate documentation of such out-of-pocket
expenses. Under no circumstances shall the Company be required to pay more than
one payment of Expenses.
(c) All payments under this Section 7.5 shall be made by wire
transfer of immediately available funds to an account designated by the
recipient of such funds.
(d) The Company acknowledges that the agreements contained in
this Section 7.5 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Parent would not enter into
this Agreement. Accordingly, if the Company fails to promptly pay any amounts
owing pursuant to this Section 7.5 when due, the Company shall in addition
thereto pay to the Parent and its affiliates all costs and expenses (including
fees and disbursements of counsel) incurred in collecting such amounts, together
with interest on such amounts (or any unpaid portion thereof) from the date such
payment was required to be made until the date such payment is received by the
Parent and its affiliates at the prime rate of Citibank, N.A. as in effect from
time to time during such period. Payment of the
40
Termination Fee and/or Expenses described in this Section 7.5 shall constitute
the sole and exclusive remedy of the Parent and Acquisition against the Company
for any damages suffered or incurred in connection with this Agreement. It is
specifically agreed that the amount to be paid pursuant to this Section 7.5
represents liquidated damages and not a penalty. Any amounts paid by Company to
Parent pursuant to this Section 7.5 shall be reduced by any amounts paid by
Company to Parent pursuant to Paragraph N of that certain Exclusivity Agreement,
by and between the Company and Whitney & Co., LLC dated March 6, 2002, as
amended.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None
---------------------------------------------
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time. Notwithstanding the foregoing, this Section 8.1 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
SECTION 8.2 Notices. All notices, requests, claims, demands and
-------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Acquisition, to:
c/o Whitney & Co., LLC
000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
41
(b) if to the Company, to:
Herbalife International, Inc.
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Attention: President
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx
SECTION 8.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "knowledge" means a fact, event, circumstance or occurrence
actually known, or that reasonably should have been known by an executive
officer of a comparable company with comparable responsibilities by virtue of
such responsibilities, by any of the executive officers of the Company or
Parent, as the case may be;
(c) "Material Respect" shall mean (i) when used in connection
with a representation, warranty, covenant, condition or agreement to be complied
with or satisfied by the Company or Parent, as the case may be, that is
qualified by materiality or by Company Material Adverse Effect or Parent
Material Adverse Effect, as the case may be, any respect (taking into account
such qualifications as to materiality or Company Material Adverse Effect or
Parent Material Adverse Effect, as the case may be); and (ii) when used in
connection with a representation, warranty, covenant, condition or agreement to
be complied with or satisfied by the Company or Parent, as the case may be,
which is not so qualified by materiality or by Company Material Adverse Effect
or Parent Material Adverse Effect, as the case may be, any material respect.
(d) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity;
(e) a "subsidiary" with respect to any person means ownership
directly or indirectly of an amount of the voting securities, other voting
ownership or voting partnership interests of another person which is sufficient
to elect at least a majority of its board of directors or other governing body
or, if there are no such voting interests, more than 50% of the equity
interests; and
(f) "Significant Subsidiary" means a subsidiary of the Company
that accounted for more than $25,000,000 of net revenue during 2001.
42
SECTION 8.4 Interpretation. When a reference is made in this
--------------
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" and
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
SECTION 8.5 Counterparts; Facsimile. This Agreement may be
-----------------------
executed in one or more counterparts and via facsimile, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, and the confidentiality agreement, by and between the Company and
Whitney & Co., LLC, constitute the entire agreement, and supersede all prior
agreements and understandings (including but not limited to that certain
Exclusivity Agreement, by and between the Company and Whitney & Co., LLC dated
March 6, 2002, as amended, (other than the provisions of Paragraph M thereof)),
both written and oral, among the parties with respect to the subject matter of
this Agreement and except for the provisions of Article II and Sections 5.6, 5.8
and 5.15 are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
SECTION 8.7 Governing Law. This Agreement shall be governed by,
-------------
and construed and enforced in accordance with, the laws of the State of Nevada,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties; provided that Parent and
Acquisition may assign their rights under this Agreement to a wholly-owned
direct or indirect subsidiary of Parent so long as Parent remains liable for all
obligations of Parent, Acquisition or such wholly-owned direct or indirect
subsidiary under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9 Enforcement. The parties agree that irreparable
-----------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Nevada or in Nevada state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of Nevada or
any Nevada state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions
43
contemplated by this Agreement in any court other than a federal or state court
sitting in the State of Nevada.
SECTION 8.10 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES
--------------------
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS
OF THIS WAIVER, (c) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (d) EACH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.10.
SECTION 8.11 Personal Liability. This Agreement shall not
------------------
create or be deemed to create or permit any personal liability or obligation on
the part of any direct or indirect stockholder of the Company or Parent or
Acquisition (other than Parent, in the case of Acquisition) or any officer,
director, employee, member, partner, manager, agent, representative, trustee or
investor of any party hereto or any affiliate thereof.
SECTION 8.12 Financing. Notwithstanding anything contained
---------
elsewhere herein, the parties acknowledge and agree that it shall not be a
condition to the obligations of Parent or Acquisition to effect the Merger that
Parent has sufficient funds for the payment of the aggregate Merger
Consideration.
SECTION 8.13 Materiality. Notwithstanding any numeric or
-----------
monetary thresholds or limitations contained herein, the parties hereby
specifically acknowledge and agree that no such limitations or thresholds shall
be deemed to constitute an acknowledgment or indication as to the materiality of
the item in question or of any other item whatsoever; provided that any such
numeric or monetary limitations contained herein shall have applicability to the
threshold or limitation to which they are expressly referenced.
44
IN WITNESS WHEREOF, Parent, Acquisition and the Company have caused
this Agreement and Plan of Merger to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
PARENT:
WH HOLDINGS (CAYMAN ISLANDS) LTD., a
Cayman Islands corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
------------------------------------
Its: President
------------------------------------
ACQUISITION:
WH ACQUISITION CORP., a Nevada
corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
------------------------------------
Its: President
------------------------------------
COMPANY:
HERBALIFE INTERNATIONAL, INC., a Nevada
corporation
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
------------------------------------
Its: Chairman of the Board of
Directors
------------------------------------
Signature Page
