AGREEMENT AND PLAN
OF MERGER
AMONG
LITTLE SWITZERLAND, INC.,
DESTINATION RETAIL HOLDINGS CORPORATION,
LSI ACQUISITION CORP.,
YOUNG CARIBBEAN JEWELLERY COMPANY LIMITED,
ALLIANCE INTERNATIONAL HOLDINGS LIMITED
AND
CEI DISTRIBUTORS INC.
DATED AS OF FEBRUARY 4, 1998
TABLE OF CONTENTS
Section Page
ARTICLE I THE MERGER.....................................................2
Section 1.01. The Merger.........................................2
Section 1.02. Effective Time.....................................3
Section 1.03. Effects of the Merger..............................3
Section 1.04. Certificate of Incorporation and By-Laws...........3
Section 1.05. Directors..........................................4
Section 1.06. Officers...........................................4
Section 1.07. Conversion of Shares...............................4
Section 1.08. Conversion of Sub's Common Stock...................5
Section 1.09. Stock Options......................................5
Section 1.10. Filing of Certificate of Merger....................7
ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES.........................7
Section 2.01. Dissenting Shares..................................7
Section 2.02. Payment for Shares.................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................11
Section 3.01. Organization......................................11
Section 3.02. Capitalization....................................12
Section 3.03. Authority Relative to this Agreement..............13
Section 3.04. Consents and Approvals; No Violations.............14
Section 3.05. SEC Reports.......................................15
Section 3.06. Absence of Certain Changes........................16
Section 3.07. Litigation........................................17
Section 3.08. Affiliate Transactions............................18
Section 3.09. Employee Benefit Plans............................18
Section 3.10. Taxes.............................................21
Section 3.11. Compliance with Applicable Laws...................22
Section 3.12. Opinion of Financial Advisor......................22
Section 3.13. Brokers...........................................23
Section 3.14. No Interference...................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT, SUB
AND THE PARENT RELATED ENTITIES..............................24
Section 4.01. Organization......................................24
Section 4.02. Authority Relative to this Agreement..............24
Section 4.03. Consents and Approvals; No Violations.............25
(i)
Section 4.04. Financing.........................................26
Section 4.05. Stockholdings.....................................26
Section 4.06. Brokers...........................................26
ARTICLE V COVENANTS.....................................................27
Section 5.01. Conduct of Business of the Company................27
Section 5.02. No Solicitations..................................31
Section 5.03. Preparation of the Proxy Statement;
Stockholder Meeting.............................34
Section 5.04. Access to Information and Management..............36
Section 5.05. Best Efforts; Cooperation.........................37
Section 5.06. Indemnification and Insurance.....................40
Section 5.07. Certain Benefits..................................44
Section 5.08. Redemption of Rights..............................46
Section 5.09. Annual Meeting; Director Nominations..............46
Section 5.10. Public Announcements..............................47
Section 5.11. Rolex.............................................48
ARTICLE VI CONDITIONS...................................................48
Section 6.01. Conditions to Each Party's Obligation
to Effect the Merger............................48
Section 6.02. Conditions to Obligations of Parent and Sub.......49
Section 6.03. Conditions to Obligations of the Company..........51
ARTICLE VII TERMINATION AND AMENDMENT...................................52
Section 7.01. Termination.......................................52
Section 7.02. Effect of Termination.............................55
Section 7.03. Amendment.........................................55
Section 7.04. Extension; Waiver.................................55
ARTICLE VIII MISCELLANEOUS..............................................56
Section 8.01. Nonsurvival of Representations and Warranties.....56
Section 8.02. Notices...........................................56
Section 8.03. Descriptive Headings..............................57
Section 8.04. Counterparts......................................57
Section 8.05. Entire Agreement; Assignment......................58
Section 8.06. Governing Law.....................................58
Section 8.07. Specific Performance..............................59
Section 8.08. Expenses and Termination Fees.....................59
Section 8.09. Publicity.........................................61
Section 8.10. Parties in Interest...............................62
Section 8.11. Severability......................................62
(ii)
Disclosure Schedule
Schedule 3.01 - Organization
Schedule 3.02 - Capitalization
Schedule 3.04 - Consents and Approvals; No Violation
Schedule 3.05 - SEC Reports
Schedule 3.06 - Absence of Certain Changes
Schedule 3.07 - Litigation
Schedule 3.08 - Affiliate Transactions
Schedule 3.09 - Employee Benefit Plans
Schedule 3.10 - Taxes
Schedule 3.11 - Compliance with Applicable Laws
Schedule 3.13 - Brokers
Schedule 4.05 - Stockholdings
Schedule 4.06 - Brokers
Schedule 5.01 - Conduct of Business of the Company
Schedule 5.07 - Certain Benefits
(iii)
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of February 4, 1998 (this
"Agreement"), by and among Little Switzerland, Inc., a Delaware corporation (the
"Company"), Destination Retail Holdings Corporation, a Nevis corporation
("Parent"), LSI Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), Young Caribbean Jewellery Company Limited, a
Cayman Islands corporation and a subsidiary of Parent ("YCJCL"), Alliance
International Holdings Limited, a Bahamian corporation and a wholly-owned
subsidiary of Parent ("AIHL"), and CEI Distributors Inc., a British Virgin
Islands corporation and a wholly-owned subsidiary of Parent ("CDI" and, together
with YCJCL and AIHL, the "Parent Related Entities").
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein (i) determined that
the consideration to be received by the stockholders of the Company for each of
the Company's outstanding shares of common stock, par value $.01 per share (the
"Shares"), in the Merger (as defined below) is in the best interests of the
stockholders of the Company and (ii) resolved to approve this Agreement and the
transactions contemplated hereby and to recommend approval and adoption of this
Agreement by the stockholders of the Company, and such approval by the Board is
effective for purposes of Section 203 of the General Corporation Law of the
State of Delaware (the "DGCL") and in order to exempt the Merger from the
provisions of Article V of the Company's Certificate of Incorporation; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Parent and Sub have each approved the merger (the "Merger") of Sub with and
into the Company in
accordance with the DGCL, pursuant to which the holders of Shares (other than
the Company, Sub, Parent, the Parent Related Entities and any direct or indirect
subsidiary of any of them), shall receive $8.10 in cash per Share.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, Parent, Sub and the Parent Related Entities hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, the Merger
shall occur as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VI hereof. Following the Merger, the Company
shall continue as the surviving corporation under the laws of the State of
Delaware under the name "Little Switzerland, Inc." (the "Surviving
Corporation"), and the separate corporate existence of Sub shall cease. At the
election of Parent, any direct or indirect wholly-owned subsidiary of Parent may
be substituted for Sub as a constituent corporation in the Merger. In the event
such a subsidiary is substituted for Sub, Parent will cause such subsidiary to
become a party to this Agreement and to assume and perform the obligations of
Sub hereunder. Notwithstanding the foregoing, Parent may elect, at any time
prior to the fifth (5th) business day immediately preceding the date on which
the Proxy Statement (as hereinafter defined) is initially mailed to the
Company's stockholders, that instead of merging Sub into the Company as
hereinabove provided, to merge the Company into Sub or another direct or
indirect wholly-owned subsidiary of Parent; provided that the
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Company shall not be deemed to have breached any of its representations,
warranties or covenants herein, nor shall any condition to Parent's or Sub's or
the Parent Related Entities' obligations hereunder be deemed to be unsatisfied,
by reason of such election. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing and to
provide that Sub or such other subsidiary of Parent shall be the Surviving
Corporation under the name "Little Switzerland, Inc."
Section 1.02. Effective Time. The Merger shall become effective upon the
filing with the Secretary of State of the State of Delaware of the certificate
of merger executed in accordance with the relevant provisions of the DGCL (the
"Certificate of Merger") (the time the Merger becomes effective being referred
to herein as the "Effective Time").
Section 1.03. Effects of the Merger. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the DGCL.
Section 1.04. Certificate of Incorporation and By-Laws.
(a) At the Effective Time, the Certificate of Incorporation of Sub (or
at the election of Parent, the Certificate of Incorporation of the Company), in
each case as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except that the name
of the Surviving Corporation shall be amended to be "Little Switzerland, Inc."
(b) The By-Laws of Sub (or at the election of Parent, the By-Laws of
the Company), in each case as in effect immediately prior to the Effective Time,
shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with applicable law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
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Section 1.05. Directors. The directors of Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation.
Section 1.06. Officers. The officers of the Surviving Corporation shall be
appointed by the directors of the Surviving Corporation.
Section 1.07. Conversion of Shares.
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled pursuant to Section 1.07(b)
hereof and other than Dissenting Shares (as hereinafter defined)) shall, at the
Effective Time, by virtue of the Merger and without any action on the part of
Parent, Sub, the Parent Related Entities, the Company or the holder thereof, be
converted into the right to receive $8.10 in cash per Share (the "Merger
Price"), payable to the holder thereof, without interest thereon, upon the
surrender of the certificate formerly representing such Share. The aggregate
cash consideration to be delivered to the holders of the Shares in accordance
herewith (equal to the product of (i) the aggregate number of Shares issued and
outstanding immediately prior to the Effective Time (other than Shares to be
canceled pursuant to Section 1.07(b) hereof and other than Dissenting Shares)
and (ii) the Merger Price) shall be referred to herein as the "Merger
Consideration."
(b) Each Share held in the treasury of the Company and each Share held
by Parent, Sub, the Parent Related Entities or by any direct or indirect
subsidiary thereof or of the Company immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, be canceled and retired and cease to exist and
no payment shall be made with respect thereto.
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(c) If at any time during the period from the date of this Agreement
to the Effective Time any change in the outstanding Shares shall occur,
including by reason of any reclassification, recapitalization, stock dividend,
stock split, combination, exchange or readjustment of Shares, the Merger Price
shall be appropriately adjusted.
Section 1.08. Conversion of Sub's Common Stock. Each share of common stock,
par value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Sub, the Parent Related Entities, the Company
or the holder thereof, be converted into and become one (1) validly issued,
fully paid and nonassessable share of the common stock, par value $.01 per
share, of the Surviving Corporation.
Section 1.09. Stock Options.
(a) Each outstanding option to purchase Shares (the "1991 Plan
Options") granted under the Company's 1991 Stock Option Plan, as amended (the
"1991 Stock Option Plan"), shall become fully vested and exercisable in
accordance with and pursuant to the terms of the 1991 Stock Option Plan upon the
execution of this Agreement, without any further action on the part of the
Company or the holders of the 1991 Plan Options. Each outstanding option to
purchase Shares (the "1992 Plan Options" and, together with the 1991 Plan
Options, the "Options") granted under the 1992 Non-Employee Director Stock
Option Plan (the "1992 Stock Option Plan" and, together with the 1991 Stock
Option Plan, the "Option Plans") is fully vested and exercisable upon grant. In
accordance with the Option Plans, the Option Plans and all outstanding Options
issued thereunder shall automatically terminate at the Effective Time, without
any further action on the part of the Company or the holders thereof, and no
8
payment shall be made or due after the Effective Time with respect thereto
except in accordance with the applicable Option Plan and as provided herein.
(b) As soon as practicable after the date hereof, Parent and the
Company shall use their reasonable best efforts (including, without limitation,
by amending the provisions of the Option Plans or the option agreements issued
thereunder to the extent permitted thereunder) to provide that, at the Effective
Time, each Option shall be canceled and each holder of an Option shall be
entitled to receive a cash payment from the Company equal to the product of (i)
the excess, if any, of the Merger Price over the per Share exercise price of
such Option and (ii) the number of Shares subject thereto (with respect to each
Option, the "Option Price"), payable to the holder thereof, without interest
thereon, upon surrender of the Option; provided that the foregoing shall be
subject to the obtaining of any necessary consents of optionees and that any
cash payments shall be treated as compensation and shall be net of any
applicable federal or state withholding tax. As soon as practicable after the
date hereof, the Company shall give written notice of the termination of the
Option Plans and the Options upon consummation of the Merger to each holder of
an Option, in accordance with the terms of the Option Plans. The Company shall
use its reasonable best efforts to obtain from each holder of an Option a
written consent to the foregoing cancellation of each Option and payment of the
Option Price with respect thereto, acknowledging that the surrender of such
Option shall be deemed a release of any and all rights such holder had or may
have had in such Option, other than the right to receive the Option Price in
respect thereof.
(c) In the event any holder of an Option does not consent to the
foregoing, such holder shall be entitled to all rights afforded to such holder
under the terms of the
9
applicable Option Plan as in effect on the date hereof, including, without
limitation, the right, for a period of at least fifteen (15) days prior to the
date of such termination, to exercise any unexercised portion of such holder's
outstanding Options which is vested and exercisable at that time in accordance
with such Option Plan; provided, however, that in no event shall Options be
exercisable after the applicable expiration date for an Option.
Section 1.10. Filing of Certificate of Merger. Upon the terms and subject
to the conditions hereof, as promptly as practicable following the satisfaction
or waiver of the conditions set forth in Article VI hereof, the Company shall
execute and file the Certificate of Merger in the manner required by the DGCL,
and the parties hereto shall take all such other further actions as may be
required by applicable law to make the Merger effective. Prior to the filing
referred to in this Section, a closing will be held at the offices of Xxxxxxx,
Procter & Xxxx LLP, Exchange Place, Boston, Massachusetts (or such other place
as the parties may agree) for the purpose of confirming all of the foregoing.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
Section 2.01. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
Shares that are outstanding immediately prior to the Effective Time and which
are held by stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of the DGCL
(collectively, the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Price with respect to each such
Share.
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Such stockholders shall be entitled to receive payment of the appraised value of
such Shares held by them in accordance with the provisions of such Section 262
of the DGCL, except that all Dissenting Shares held by stockholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Shares under Section 262 of the DGCL shall thereupon
be deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Price with respect to each
such Share without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Section 262 of the DGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
Section 2.02. Payment for Shares.
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company to act as paying agent (the "Paying Agent") in connection with the
Merger. At, or immediately prior to, the Effective Time, Parent will take all
steps necessary to enable and will cause Sub to provide the Paying Agent with
the funds necessary to make the payments contemplated by Section 1.07 hereof,
including, without limitation, by depositing the Merger Consideration with the
Paying Agent. Such funds shall be invested by the Paying Agent as directed by
Parent, provided that such investments shall be in obligations of or guaranteed
by
11
the United States of America or of any agency thereof and backed by the full
faith and credit of the United States of America, in commercial paper
obligations rated A-1 or P-1 or better by Xxxxx'x Investors Services, Inc. or
Standard & Poors' Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $50 million (based on the most recent financial statements of such
bank which are then publicly available at the Securities and Exchange Commission
(the "SEC") or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Paying Agent to mail to each person who was a record holder, as of the
Effective Time, of an outstanding certificate or certificates which immediately
prior to the Effective Time represented Shares (the "Certificates"), a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Paying Agent) and instructions for use in effecting
the surrender of the Certificates for payment therefor. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal duly
executed, and any other required documents, the holder of such Certificate shall
be entitled to receive in exchange for each Share represented thereby the Merger
Price, and such Certificate shall forthwith be canceled. No interest will be
paid or accrued on the cash payable upon the surrender of the Certificates. If
payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer, and that the person
12
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 Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.02, each Certificate (other than
Certificates representing Shares canceled pursuant to Section 1.07(b) hereof and
Dissenting Shares) shall represent for all purposes only the right to receive
the Merger Price for each Share represented thereby, without any interest
thereon.
(c) At any time following the sixth (6th) month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any consideration set
forth in Section 1.07 hereof that may be payable upon due surrender of the
Certificates held by them. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Share for
any consideration set forth in Section 1.07 hereof delivered in respect of such
Share to a public official pursuant to any abandoned property, escheat or other
similar law.
(d) After the Effective Time, there shall be no transfers of the
Shares on the stock transfer books of the Surviving Corporation which were
outstanding immediately prior to the Effective Time, and the stock ledger of the
Company shall be closed. After the Effective Time, the holders of Shares
outstanding at the Effective Time shall cease to have any rights
13
with respect to such Shares except as provided herein or by applicable law. If,
during the six (6) months immediately following the Effective Time, Certificates
representing Shares are presented to the Paying Agent, they shall be canceled
and exchanged for cash as provided in this Article II. If, after six (6) months
following the Effective Time, Certificates representing Shares are presented to
the Surviving Corporation, they shall be canceled and exchanged for cash as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, Sub and the Parent Related
Entities, except as set forth in the schedules contained in the attached
Disclosure Schedule, as follows:
Section 3.01. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
All subsidiaries of the Company are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation, except where failure thereof would not individually or in the
aggregate have a material adverse effect on the business, properties, results of
operations or financial condition of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect"). The Company and its subsidiaries have the
requisite corporate power to conduct their businesses as they are currently
conducted and are duly qualified 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 necessary, except where the lack of
such qualification would not individually or in the aggregate have a Material
Adverse Effect. The copies of the Company's and each of its subsidiaries'
Certificate of
14
Incorporation and By-Laws (or other organizational documents, as applicable)
previously made available to Parent are true, complete and correct as of the
date hereof. Schedule 3.01 sets forth a correct and complete list of all
subsidiaries of the Company.
Section 3.02. Capitalization. The authorized capital stock of the Company
consists of 20,000,000 Shares and 5,000,000 shares of preferred stock, $.01 par
value per share (the "Preferred Shares"). As of January 28, 1998, (i) 8,469,202
Shares were issued and outstanding, (ii) 879,500 Shares were reserved for
issuance upon the exercise of Options, and (iii) no Shares were held in the
Company's treasury. As of such date, there were no Preferred Shares outstanding
or subject to options, and 100,000 Preferred Shares have been designated as
"Series A Junior Participating Cumulative Preferred Stock" and reserved for
issuance upon exercise of the rights (the "Rights") issued pursuant to the
Shareholder Rights Agreement, dated as of July 25, 1991, between the Company and
State Street Bank and Trust Company, a Massachusetts trust company, as amended
(the "Rights Agreement"). All of the outstanding Shares have been duly
authorized and validly issued and are fully paid and non-assessable and free of
preemptive rights. Except as set forth in Schedule 3.02, the Company does not
have any outstanding options, warrants, subscriptions or other rights,
agreements or commitments to purchase shares of capital stock (other than
Options to purchase 879,500 Shares, Shares reserved for issuance under the
Company's 1992 Employee Stock Purchase Plan and the Rights) which obligates the
Company to issue, sell or transfer any shares of capital stock of the Company or
any other securities convertible into or evidencing the right to subscribe for
any shares of capital stock of the Company. Schedule 3.02 sets forth a correct
and complete list setting forth as of the date hereof (i) the number of Options
outstanding, (ii) the date on which
15
such Options were granted, (iii) the exercise price of each outstanding Option
and (iv) the number of Shares subject to the Options. Except as set forth in
Schedule 3.02, the Company owns, directly or indirectly, all of the outstanding
shares of capital stock of each of its subsidiaries, and such shares are duly
authorized, validly issued, fully paid and non-assessable, and free and clear of
all preemptive rights and all liens, charges, encumbrances, equities, claims and
options whatsoever. Except as set forth in Schedule 3.02, there are no
outstanding subscriptions, options, warrants or other rights, agreements or
commitments to purchase any additional shares of capital stock of any of the
Company's subsidiaries or any other securities convertible into or evidencing
the right to subscribe for any capital stock of such subsidiaries.
Section 3.03. 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 duly and validly authorized by
the Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the outstanding Shares and the
filing and recordation of appropriate merger documents as required by the DGCL).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding obligation of
Parent, Sub and the Parent Related Entities, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
16
Section 3.04. Consents and Approvals; No Violations.
(a) The Board has approved the Merger and this Agreement, and such
approval is sufficient to render the provisions of Section 203 of the DGCL and
Article V of the Company's Certificate of Incorporation inapplicable to the
Merger and the transactions contemplated by this Agreement.
(b) Except as set forth in Schedule 3.04, the execution and delivery
of this Agreement by the Company do not, and the performance of this Agreement
by the Company will not, require any filing with or notification to, or any
consent, approval, authorization or permit from, any governmental or regulatory
authority ( a "Governmental Entity") except (i) for applicable requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act") or other applicable anti-trust laws, and the
filing and recordation of the Certificate of Merger, as required by the DGCL, or
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent the Company from performing its
obligations under this Agreement and would not, individually or in the
aggregate, have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.04, the execution and delivery
of this Agreement by the Company do not, and the performance of this Agreement
by the Company and the consummation of the transactions contemplated by this
Agreement, will not (i) conflict with or violate the Certificate of
Incorporation or By-Laws (or other organizational documents, as applicable) of
the Company or of any of its subsidiaries, (ii) result in a violation or breach
17
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, 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 or (iii) violate
any order, judgment, writ, injunction, decree, statute, treaty, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, in each case, excepting such conflicts,
violations, breaches, defaults, terminations, cancellations or accelerations
which would not individually or in the aggregate have a Material Adverse Effect.
Section 3.05. SEC Reports.
(a) Except as set forth in Schedule 3.05, the Company has filed all
required forms, reports and documents with the SEC since May 31, 1994
(collectively, the "SEC Reports"), all of which were prepared in accordance with
and complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, and the Exchange Act.
(b) None of the SEC Reports, including, without limitation, any
financial statements or schedules included therein, as of the dates they were
respectively filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and the balance
sheets (including the related notes) included in the SEC Reports fairly present
the consolidated financial position of the Company and its consolidated
subsidiaries as of the respective dates thereof, and the other related
statements (including the
18
related notes) included therein fairly present the results of operations and
cash flows of the Company and its consolidated subsidiaries for the respective
fiscal periods set forth therein in accordance with generally accepted
accounting principles applied on a consistent basis, except in the case of
interim financial statements for normal recurring and certain non-recurring
adjustments necessary for a fair presentation of the financial position and
operating results of the Company and its consolidated subsidiaries for the
interim periods.
Section 3.06. Absence of Certain Changes. Except as set forth in Schedule
3.06, since November 29, 1997, there have not occurred any changes concerning
the Company or its subsidiaries (other than changes generally affecting the
industries in which the Company operates, including changes due to actual or
proposed changes in law or regulation, or changes relating to the transactions
contemplated by this Agreement, including the change in control contemplated
hereby) having a Material Adverse Effect. Except as set forth in Schedule 3.06,
since November 29, 1997, there has not been (A) any change, destruction, damage,
loss or event which has had, individually or in the aggregate, a Material
Adverse Effect; (B) any declaration, setting aside or payment of any dividend or
other distribution in respect of shares of the Company's capital stock, or any
repurchase, redemption or other acquisition by the Company or its subsidiaries
of any shares of their respective capital stock or equity interests, as
applicable; (C) any increase in the rate or terms of compensation payable or to
become payable by the Company or its subsidiaries to their directors, officers
or key employees, except increases occurring in the ordinary course of business
consistent with past practices or as was required under any employment,
severance or termination agreements or under applicable law; (D) any entry into,
or increase in the rate or terms of, any bonus, severance, pension or other
19
employee or retiree benefit plan, payment or arrangement made to, for or with
any such directors, officers or employees, except increases occurring in the
ordinary course of business consistent with past practices or as was required
under employment agreements or employee or director benefit plans or under
applicable law; (E) any labor dispute involving the employees of the Company or
its subsidiaries which has had a Material Adverse Effect; (F) any material
change by the Company in accounting methods, principles or practices, except as
required or permitted by generally accepted accounting principles; (G) any
write-off or write-down of, or any determination to write-off or write-down, any
asset of the Company or any of its subsidiaries or any portion thereof which
write-off, write-down, or determination through the date hereof exceeds $250,000
in the aggregate; (H) any split, combination or reclassification of any of the
Company's capital stock or issuance or authorization relating to the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock; or (I) any agreements by the Company to do any of
the things described in the preceding clauses (A) through (H) other than as
contemplated or provided for herein.
Section 3.07. Litigation. Except as set forth in Schedule 3.07, there is no
litigation, suit, action or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries, as to which
there is a reasonable likelihood of an adverse determination and which, if
adversely determined, individually or in the aggregate with other such
litigation, suits, actions or proceedings, could reasonably be expected to (i)
have a Material Adverse Effect, (ii) materially and adversely affect the
Company's ability to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement.
20
Section 3.08. Affiliate Transactions. Except as set forth in Schedule 3.08,
the Company has disclosed in the SEC Reports each material transaction involving
the transfer of any cash, property or rights to or from the Company or any
subsidiary of the Company from, to or for the benefit of any affiliate or former
affiliate of the Company or of any subsidiary of the Company ("Affiliate
Transactions") during the period commencing May 31, 1994 through the date hereof
and any existing commitments of the Company or any subsidiary of the Company to
engage in the future in any material Affiliate Transactions. Except as
contemplated by this Agreement and except pursuant to the Company's Certificate
of Incorporation and By-laws, the Company has not entered into any
indemnification agreements or arrangements with the current directors of the
Company.
Section 3.09. Employee Benefit Plans. With respect to all the employee
benefit plans, programs and arrangements including, but not limited to,
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and including deferred
compensation, stock option, stock purchase, stock appreciation right, stock
based, incentive and bonus plans, severance plans, and any agreements providing
retirement, medical or life insurance benefits, which are maintained or
contributed to by the Company for the benefit of any current or former employee,
officer or director of the Company or any of its subsidiaries (the "Company
Benefit Plans"), except as set forth on Schedule 3.09 and except as would not,
individually or in the aggregate, have a Material Adverse Effect (a) with
respect to each Company Benefit Plan and each management, employment, severance,
consulting or similar agreement or contract between the Company and any current
employee (a "Company Employee Agreement"), the Company has made available
21
to Parent (i) true and complete copies (or, to the extent no such copy exists,
an accurate description) thereof, including any trust agreements and insurance
contracts forming a part of any Company Benefit Plan and all amendments thereto
and written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Benefit Plan; and (iii) the two
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA in connection with each Company Benefit Plan or related
trust; (b) each Company Benefit Plan and any related trust intended to be
qualified under Sections 401(a) and 501(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code"), which is not maintained pursuant to a
standardized prototype plan, has received a favorable determination letter from
the Internal Revenue Service that it is so qualified, and nothing has occurred
since the date of such letter that could reasonably be expected to affect the
qualified status of such Company Benefit Plan or related trust; (c) each Company
Benefit Plan has been established, maintained and operated in accordance with
its terms and the requirements of applicable law and all required returns and
filings for each Company Benefit Plan and all contributions thereto have been
timely made; (d) neither the Company nor any of its subsidiaries nor any of
their "ERISA Affiliates" has incurred any direct or indirect liability under,
arising out of or by operation of Title I or Title IV of ERISA, in connection
with any Company Benefit Plan or other retirement plan or arrangement, and no
fact or event exists that could reasonably be expected to give rise to any such
liability; (e) the Company and its subsidiaries and their ERISA Affiliates and
the Company Benefit Plans have not incurred any liability under, and have
complied in all respects with, the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, the Worker Adjustment Retraining Notification
22
Act, the Americans with Disabilities Act and the Family and Medical Leave Act,
and no fact or event exists that could give rise to liability under any such
act, (f) there are no Company Benefit Plans subject to Title IV or ERISA or
Section 412 of the Code, (g) there are no actions, suits or claims pending
(other than routine claims for benefits) against any Company Benefit Plan or
against the assets of any Company Benefit Plan; (h) neither the Company, any
subsidiary nor any ERISA Affiliate has engaged in a transaction with respect to
a Company Benefit Plan which, assuming the taxable period of such transaction
expires as of the date hereof, could subject such entity to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA; (i)
neither the Company nor any subsidiary maintains or contributes to any Company
Benefit Plan which provides, or has any liability to provide, life insurance,
medical or other employee welfare benefits to any current employee upon their
retirement or termination of employment, except as may be required by law; (j)
the execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Company Benefit Plan which will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any current or former
employee or director and will not result in any breach or violation of, or
default under, any such Company Benefit Plan; and (k) no payment or benefit
which will or may be made by the Company or any subsidiary will be characterized
as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code or which will be disallowed as a deduction pursuant to Section 162(m) of
the Code. For purposes of this Agreement, "ERISA Affiliate" shall mean any
business or
23
entity which is a member of a "controlled group" or an "affiliated service
group" with the Company, within the meaning of any of Sections 414(b), (c), (m)
or (o) of the Code, or is under common control with the Company, within the
meaning of Section 4001 of ERISA.
Section 3.10. Taxes.
(a) Except as set forth on Schedule 3.10, each of the Company and its
subsidiaries (i) has filed all Tax Returns (as defined below) which the Company
was aware it was required to file (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so) and all
such Tax Returns are accurate and complete in all material respects, and (ii)
has paid all Taxes (as defined below) shown on such Tax Returns as required to
be paid by it, except, in each case, those where the failure to file such Tax
Returns or pay such Taxes would not have a Material Adverse Effect. Except as
set forth on Schedule 3.10, the most recent audited financial statements
contained in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 29, 1997 reflect, to the knowledge of the Company, an adequate
reserve for all material Taxes payable by the Company and its subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements. Except as set forth on Schedule 3.10, no event has occurred, and no
condition or circumstance exists, which presents a material risk that any
material Tax described in the preceding sentence will be imposed upon the
Company. To the knowledge of the Company, and except as set forth on Schedule
3.10, no deficiencies for any Taxes have been proposed, asserted or assessed
against the Company or any of its subsidiaries, and no requests for waivers of
the time to assess any such Taxes are pending. Schedule 3.10 lists all
24
(i) Tax sharing agreements and (ii) agreements for exemptions with Governmental
Entities to which the Company or its subsidiaries is a party.
(b) For purposes of this Agreement, "Taxes" means all federal, state,
local and foreign income, property, sales, franchise, employment, excise and
other taxes, tariffs or governmental charges of any nature whatsoever, together
with any interest, penalties or additions to Tax with respect thereto.
(c) For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
Section 3.11. Compliance with Applicable Laws. Except as set forth on
Schedule 3.11, the business of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect. Except as set forth on Schedule 3.11, no investigation
or review by any Governmental Entity concerning any such possible violations by
the Company or any of its subsidiaries is pending or, to the knowledge of the
Company, threatened, nor has any Governmental Entity indicated an intention to
conduct the same, in each case, other than those the outcome of which have not,
or which, insofar as reasonably can be foreseen, in the future are not
reasonably likely to have, a Material Adverse Effect.
Section 3.12. Opinion of Financial Advisor. The Board has received the
opinion of Xxxxxxxxxxx Xxxxxxx & Co., Inc. ("Xxxxxxxxxxx"), dated January 31,
1998, that, as of such
25
date, the consideration to be received by the stockholders of the Company (other
than Xxxxxxx XX Xxxxx ("Xxxxx") and his affiliates) pursuant to the Merger is
fair to such stockholders from a financial point of view, a copy of which
opinion has been made available to Parent.
Section 3.13. Brokers. Except as set forth on Schedule 3.13, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has made available
to Parent true, complete and correct copies of all agreements or arrangements
between the Company and any broker, investment banker, financial advisor or
other such person relating to such fee or commission.
Section 3.14. No Interference. Since October 1, 1997, none of the officers
or directors of the Company have contacted (i) any vendor or supplier of the
Company or other entity with whom the Company has a material commercial
relationship concerning any transfer of such person's existing relationship with
the Company to another business entity which would compete with the Company or
the Surviving Corporation or (ii) any employee of the Company concerning the
termination of such employee's employment with the Company and their employment
with another business entity which would compete with the Company or the
Surviving Corporation.
26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, SUB
AND THE PARENT RELATED ENTITIES
Parent, Sub and the Parent Related Entities jointly and severally represent
and warrant to the Company as follows:
Section 4.01. Organization. Each of Parent, Sub and the Parent Related
Entities is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
corporate power to conduct its business as it is currently conducted. The copies
of each of Parent's, Sub's and the Parent Related Entities' Certificate of
Incorporation and By-Laws (or other organizational documents, as applicable)
previously delivered to the Company are true, complete and correct as of the
date hereof. Parent, Sub and the Parent Related Entities have a combined net
worth in excess of $48 million. "Net worth" is defined for purposes of this
Section 4.01 as an amount equal to the difference between (i) total assets of
Parent, Sub and the Parent Related Entities and (ii) total liabilities thereof,
all as determined in accordance with United States generally accepted accounting
principles applied on a consistent basis.
Section 4.02. Authority Relative to this Agreement. Each of Parent, Sub
and the Parent Related Entities 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 each of
Parent, Sub and the Parent Related Entities and the consummation by each of
Parent, Sub and the Parent Related Entities of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
27
Parent, Sub and the Parent Related Entities, respectively, and, if necessary,
the stockholders of each of Sub and the Parent Related Entities, and no other
organizational proceedings on the part of Parent, Sub or the Parent Related
Entities are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the filing
and recordation of the appropriate merger documents as required by the DGCL).
This Agreement has been duly and validly executed and delivered by each of
Parent, Sub and the Parent Related Entities and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding agreement of each of Parent, Sub and the Parent Related Entities,
enforceable against each of Parent, Sub and the Parent Related Entities in
accordance with its terms.
Section 4.03. Consents and Approvals; No Violations. Except for applicable
requirements of the Exchange Act, the HSR Act or other applicable anti-trust
laws and the filing and recordation of the Certificate of Merger, as required by
the DGCL, no filing with or notification to, and no consent, approval,
authorization or permit from, any Governmental Entity, is necessary for the
execution and delivery of this Agreement by Parent, Sub or the Parent Related
Entities or the consummation by Parent of the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by each of Parent, Sub
and the Parent Related Entities do not, and the performance of this Agreement by
each of Parent, Sub and the Parent Related Entities, will not (i) conflict with
or violate any provision of the Certificate of Incorporation or By-Laws (or
other organizational documents, as applicable) of Parent, Sub or any Parent
Related Entity, (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 rise to any
right of
28
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Parent, Sub or any Parent
Related Entity is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, statute, treaty, rule or regulation applicable to Parent, Sub or any
Parent Related Entity or any of their respective properties or assets, in each
case, excepting such violations, breaches, defaults, terminations, cancellations
or accelerations which will not prevent or materially delay the consummation by
Parent, Sub and the Parent Related Entities of the transactions contemplated
hereby.
Section 4.04. Financing. Parent and Sub have financing commitments in place
which, together with cash presently on hand, will provide sufficient funds to
purchase and pay for the Shares pursuant to the Merger in accordance with the
terms of this Agreement and to consummate the transactions contemplated hereby.
Neither Parent, Sub nor any of the Parent Related Entities has any reason to
believe that any condition to such financing commitments cannot or will not be
waived or satisfied prior to the Effective Time. Parent has provided to the
Company true, complete and correct copies of all financing commitment letters,
including any exhibits, schedules or amendments thereto.
Section 4.05. Stockholdings. Except as set forth in Schedule 4.05, neither
Parent, Sub nor any of the Parent Related Entities nor any of their affiliates
owns any Shares.
Section 4.06. Brokers. Except as set forth on Schedule 4.06, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated
29
by this Agreement based upon arrangements made by or on behalf of Parent, Sub or
the Parent Related Entities.
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business of the Company. Except as otherwise
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to: (i) carry on their respective businesses in the ordinary course
consistent with past practice and (ii) use all reasonable efforts consistent
with good business judgment to preserve intact their current businesses. Except
as otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, neither the Company nor any of its
subsidiaries will (except as expressly contemplated or permitted by this
Agreement or to the extent that Parent shall otherwise consent in writing):
(a) (i) Declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
any of its capital stock, other than dividends and distributions by any
wholly-owned subsidiary of the Company or dividends and distributions on the
common stock by World Gift Imports (Barbados) Limited, a corporation organized
under the laws of Barbados and subsidiary of the Company, (ii) split, combine or
reclassify any of its capital stock or (iii) repurchase, redeem or otherwise
acquire any of its securities;
(b) Authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments,
30
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation rights), except
pursuant to the Company's 1992 Employee Stock Purchase Plan as currently in
effect (or as amended as contemplated by Schedule 5.01), Options outstanding on
the date of this Agreement in accordance with their present terms and the Rights
in accordance with their present terms;
(c) Acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business, which are material to the Company and
its subsidiaries taken as a whole, except as set forth in Schedule 5.01;
(d) Incur any indebtedness for borrowed money, guarantee any
indebtedness, issue or sell debt securities or warrants or rights to acquire any
debt securities, guarantee (or become liable for) any debt of others, make any
loans, advances or capital contributions, mortgage, pledge or otherwise encumber
any material assets, create or suffer any material lien thereupon other than
working capital borrowings pursuant to credit facilities in existence on the
date hereof; provided, however, that the Company shall not amend in any material
respect any credit facility in existence on the date hereof including, without
limitation, in order to increase the aggregate amount of credit available
thereunder;
(e) Pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment, discharge, settlement or satisfaction (i) in
the ordinary course of business consistent with past practice; (ii) in
connection with the transactions contemplated by this Agreement; or (iii) in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by,
31
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated subsidiaries contained in the SEC Reports;
(f) Change any of the accounting principles or practices used by it
(except as required by generally accepted accounting principles);
(g) Except as required by law or contemplated by this Agreement or as
set forth on Schedule 5.01, (i) enter into, adopt, amend or terminate any
employee benefit plan, (ii) enter into, adopt, amend or terminate any agreement,
arrangement, plan or policy between the Company and one or more of its directors
or officers, (iii) increase in any manner the compensation or fringe benefits of
any employee (excluding executive officers whose compensation or fringe benefits
will be subject to clause (iv) below) or pay any benefit not required by any
plan and arrangement as in effect as of the date hereof, except for normal
increases in the ordinary course of business consistent with past practice or
(iv) increase in any manner the compensation or fringe benefits of any executive
officer or director or pay any benefit not required by any plan and arrangement
as in effect as of the date hereof;
(h) Adopt any amendments to the Company's or any of its subsidiaries'
Certificates of Incorporation or By-Laws (or other organizational documents, as
applicable);
(i) Acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership or other business organization or
(B) any assets, including real estate, except (x) purchases of inventory,
furnishings and equipment in the ordinary course of business consistent with
past practice or (y) purchases of other assets the cost of which do not equal,
in the aggregate, more than $750,000;
32
(j) Make any new capital expenditure or expenditures, other than
capital expenditures not to exceed, in the aggregate, $750,000;
(k) Enter into a new agreement or amend or terminate any existing
agreement which could reasonably be expected to have a Material Adverse Effect;
(l) Expand the number of persons on the Board or add any other person
to the Board, including, without limitation, by filling the vacancy on the Board
caused by the death of Xxxxxxx X. Xxxxxxx;
(m) Adopt any amendments to the Rights Agreement; provided, however,
that the Company may amend the Rights Agreement in connection with an
Acquisition Proposal (as hereinafter defined) after the Board (i) receives
advice from its financial advisors that such Acquisition Proposal, if
consummated as proposed, would result in a transaction more favorable to the
Company's stockholders from a financial point of view than the transactions
contemplated by this Agreement (including consideration of, among other matters,
the ability of a Third Party (as hereinafter defined) to obtain any financing
necessary to consummate the Acquisition Proposal) and (ii) receives advice from
its outside legal counsel and based upon such advice that the failure to take
such action could reasonably be expected to be a breach of its fiduciary duties
under applicable law;
(n) Amend, supplement or modify the Success Fee Agreement, dated
February 4, 1998, between C. Xxxxxxx Xxxxx ("Xxxxx") and the Company (the
"Success Fee Agreement") or make any payments to Xxxxx except (i) pursuant to
the Success Fee Agreement, (ii) pursuant to the Consulting Agreement, dated June
2, 1996, between the Company and Xxxxx, (iii) pursuant to Sections 1.07 and 1.09
hereof with respect to any Shares
33
or Options issued to or beneficially owned by Xxxxx or (iv) for any director or
similar fees as Chairman of the Board or reimbursement of expenses incurred in
connection therewith; or
(o) Enter into an agreement to take any of the foregoing actions or
take, or enter into an agreement to take, any action that would result in any of
the conditions to the Merger set forth in Article VI not being satisfied.
Section 5.02. No Solicitations.
(a) Unless this Agreement is terminated in accordance with its terms,
and except as otherwise provided in this Section 5.02, neither the Company nor
any of its subsidiaries shall, and the Company shall use its best efforts to
ensure that none of its affiliates, officers, directors, representatives or
agents shall, directly or indirectly, initiate, solicit, encourage or enter into
any agreement with respect to or participate in negotiations with, provide any
non-public information to, or otherwise cooperate in any way in connection with,
or enter into any agreement with respect to, any Third Party concerning (i) any
offer or proposal relating to any acquisition or purchase of more than fifteen
percent (15%) of the outstanding shares of capital stock of the Company; (ii)
any merger, consolidation, share exchange, recapitalization, business
combination or other similar transaction involving the Company; (iii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all of the assets of the Company and its subsidiaries in a single
transaction or series of related transactions; or (iv) any tender offer or
exchange offer for fifteen percent (15%) or more of the outstanding shares of
capital stock of the Company (each, an "Acquisition Proposal"); except that
nothing contained in this Section 5.02 or in any other provision hereof shall
prohibit the Company or the Board from (i) taking and disclosing to the
34
Company's stockholders a position in good faith with respect to a tender or
exchange offer by a Third Party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act (and in the event that such position taken by the Board
shall be its recommendation of acceptance to the stockholders of the Company
with respect to such tender offer or exchange offer (x) upon advice of its
financial advisors that the tender offer or exchange offer, if consummated as
proposed, would result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transactions contemplated
by this Agreement (including consideration of, among other matters, the ability
of the Third Party to obtain any financing necessary to consummate the
Acquisition Proposal), and (y) after receiving advice from its outside legal
counsel and based upon such advice that the failure to take such position could
reasonably be expected to be a breach of its fiduciary duties under applicable
law), (ii) making such disclosure to the Company's stockholders as, in the good
faith judgment of its Board, after receiving advice from its outside legal
counsel and based upon such advice, is required under applicable law or (iii)
failing to make or withdrawing or modifying its recommendations, consents or
approvals referred to in Section 5.03 hereof if the Board, after receiving
advice from its outside legal counsel and based upon such advice, determines in
good faith that the failure to take such action could reasonably be expected to
be a breach of the directors' fiduciary duties under applicable law. For
purposes of this Agreement, "Third Party" shall mean any corporation,
partnership, person, or other entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act) other than Parent, Sub or any of the Parent Related
Entities or any of their respective directors, officers, partners, members,
managers, employees, representatives, and agents. Notwithstanding the foregoing,
the Company may negotiate with,
35
and provide information to, any Third Party which after the date hereof makes an
unsolicited written bona fide offer (including any unsolicited written bona fide
offer subject to customary due diligence) to consummate an Acquisition Proposal
if the Board determines in good faith, (x) upon advice of its financial advisors
that the Acquisition Proposal, if consummated as proposed, would result in a
transaction more favorable to the Company's stockholders from a financial point
of view than the transactions contemplated by this Agreement, including
consideration of, among other matters, the ability of the Third Party to obtain
any financing necessary to consummate the Acquisition Proposal (any such
Acquisition Proposal being referred to herein as a "Superior Proposal"); and (y)
after receiving advice from its outside legal counsel and based upon such advice
that the failure to take any such action could reasonably be expected to be a
breach of the directors' fiduciary duties under applicable law. The Company
agrees to terminate, immediately following the execution of this Agreement, any
pending discussions or negotiations with Third Parties (other than Parent, Sub
and the Parent Related Entities) with respect to any possible Acquisition
Proposal.
(b) The Company shall notify Parent no later than 24 hours after
receipt by the Company of any Acquisition Proposal, unless the Board determines
in good faith, after receiving advice from its outside legal counsel and based
upon such advice, that doing so could reasonably be expected to be a breach of
the directors' fiduciary duties under applicable law. To the extent notice is
provided to Parent in accordance with the previous sentence, such notice shall
indicate in reasonable detail the terms and conditions of such Acquisition
Proposal, including, without limitation, the amount and form of the proposed
consideration and whether such Acquisition Proposal is subject to financing, due
diligence or any other material
36
conditions. Notwithstanding the foregoing, the Company is not required to
disclose to Parent the identity of the Third Party making such Acquisition
Proposal.
Section 5.03. Preparation of the Proxy Statement; Stockholder Meeting.
(a) As soon as practicable after the date hereof, the Company shall,
in consultation with Parent and Sub, prepare and file with the SEC a preliminary
proxy statement (the "Preliminary Proxy Statement") relating to the Merger and
the transactions contemplated by this Agreement in accordance with the Exchange
Act and the rules and regulations under the Exchange Act. The Company, Parent,
Sub and the Parent Related Entities shall cooperate with each other in the
preparation of the Preliminary Proxy Statement. The Company shall use all
reasonable efforts to respond promptly to any comments made by the SEC with
respect to the Preliminary Proxy Statement, and to cause the definitive proxy
statement and related materials (together with any amendments or supplements
thereto, the "Definitive Proxy Statement" and together with the Preliminary
Proxy Statement, the "Proxy Statement") to be mailed to the Company's
stockholders at the earliest practicable date. The Company agrees to afford
Parent and its legal counsel a reasonable opportunity (i) to review and comment
upon the Preliminary Proxy Statement prior to its being filed with the SEC and
to provide Parent and its legal counsel with copies of any comments the Company
or its counsel may receive from the SEC or its staff with respect thereto
promptly after the receipt of such comments and (ii) to review and comment upon
the Definitive Proxy Statement prior to its being mailed to the Company's
stockholders.
(b) The Proxy Statement to be sent to the Company's stockholders in
connection with the Stockholders' Meeting (as defined below) will not, on the
date the Proxy
37
Statement is filed with the SEC, on the date the Proxy Statement is first mailed
to the Company's stockholders and at the time of the Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier communication with respect
to the Stockholders' Meeting or the solicitation of proxies therefor which has
become false or misleading, in each case, other than with respect to information
supplied by Parent, Sub or any of the Parent Related Entities or any of their
respective affiliates or representatives in writing expressly for inclusion in
the Proxy Statement. On the date the Proxy Statement is filed with the SEC, on
the date the Proxy Statement is first mailed to the Company's stockholders and
at the time of the Stockholders' Meeting, none of the information supplied in
writing by Parent, Sub or any of the Parent Related Entities or any of their
respective affiliates or representatives expressly for inclusion in the Proxy
Statement will contain any untrue statement of a material fact or will 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 or necessary to correct any statement in any earlier
communication with respect to the Stockholders' Meeting or the solicitation of
proxies therefor which has become false or misleading. The Company shall use its
best efforts to ensure that the Proxy Statement complies as to form in all
material respects with the Exchange Act and the rules and regulations
thereunder.
(c) The Company shall take all action necessary, in accordance with
the DGCL, the Exchange Act and other applicable law, the rules of the Nasdaq
National Market
38
Inc. ("Nasdaq"), and its Certificate of Incorporation and By-Laws, to convene a
special meeting of its stockholders (the "Stockholders' Meeting"), for the
purpose of considering and voting upon this Agreement and the transactions
contemplated hereby, including the Merger unless, after receiving advice from
its outside legal counsel and based upon such advice, such action could
reasonably be expected to be a breach of the directors' fiduciary duties under
applicable law. The Board shall recommend that the holders of the Shares vote in
favor of and approve this Agreement and the Merger at the Stockholders' Meeting;
provided, however, that prior to such Stockholders' Meeting, such recommendation
may be withdrawn, modified or amended if a majority of the Board determines in
good faith, after receiving advice from its outside legal counsel and based upon
such advice, that such recommendation could reasonably be expected to be a
breach of the directors' fiduciary duties under applicable law.
Section 5.04. Access to Information and Management.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements by which the Company is bound, the Company shall (and
shall cause its subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of Parent reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and permit such persons to
make such inspections as they may reasonably require and, during such period,
the Company shall (and shall cause its subsidiaries to) furnish promptly to
Parent all information concerning the Company's business, operations, properties
and personnel as Parent may reasonably request. In addition, upon reasonable
notice, the Company shall (and shall cause its subsidiaries to) afford to the
officers, accountants, counsel and other
39
representatives of Parent reasonable contact, during normal business hours
during the period prior to the Effective Time, with the Company's officers and
managers regarding the Company's business, operations, properties and personnel.
(b) All information obtained by the officers, employees, accountants,
counsel or other representatives of Parent pursuant to Section 5.04(a) hereof,
Section 5.05 hereof or any other Section of this Agreement shall be "Evaluation
Material", as defined in the Confidentiality Agreement between the Company and
Parent, except as otherwise provided in such Confidentiality Agreement. By
execution of this Agreement, each of Sub and the Parent Related Entities agree
to be bound by the terms of such Confidentiality Agreement to the same extent as
if they were parties thereto. In the event of termination of this Agreement for
any reason, each party shall promptly return all "Evaluation Material" obtained
from the Company or its representatives or advisers, and any copies made of, or
reports or analyses based on, such Evaluation Material, to the Company.
Section 5.05. Best Efforts; Cooperation.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement including, without limitation,
(i) the preparation and filing of all applicable forms under the HSR Act and any
other applicable anti-trust laws and (ii) the preparation and filing of all
other forms, registrations, proxy statements and notices required to be filed to
consummate the transactions contemplated hereby and the taking of such actions
as are necessary to obtain any
40
requisite approvals, consents, orders, exemptions, and waivers by any public or
private third party, except in each such case to the extent that the Board may
determine in good faith, after receiving advice from its outside legal counsel
and based upon such advice, that any such action could reasonably be expected to
be a breach of the directors' fiduciary duties under applicable law. Each party
shall promptly consult with the other with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
(b) The Company agrees, and will cause its officers and directors, not
to interfere with Parent's efforts in seeking to ensure the retention by the
Surviving Corporation of the Company's suppliers, vendors and any other entities
with whom the Company has a material commercial relationship. The Company
agrees, and will cause its officers and directors, not to contact any (i)
supplier, vendor or other entity with whom the Company has a material commercial
relationship concerning any transfer of such person's existing relationship with
the Company to another business entity which would compete with the Company or
the Surviving Corporation or (ii) employee of the Company concerning the
termination of such employee's employment with the Company and their employment
with another business entity which would compete with the Company or the
Surviving Corporation. The Company agrees to use its commercially reasonable
efforts to cooperate with Parent in its efforts in seeking to ensure the
retention by the Surviving Corporation of the Company's suppliers, vendors and
any other entities with whom the Company has a material commercial relationship.
The parties hereto acknowledge and agree that such cooperation by the Company
may take the form
41
of assisting Parent in contacting and setting up meetings with the Company's
suppliers and vendors and providing to Parent reasonable information with
respect to such suppliers and vendors; provided, however, that the Company shall
not be required to incur any material expenses in cooperating with Parent in
connection with the foregoing. The Company further agrees, and will cause its
officers and directors, not to interfere with Parent's efforts in seeking to
ensure the retention by the Surviving Corporation of the Company's employees.
The Company agrees to use its commercially reasonable efforts to cooperate with
Parent in its efforts in seeking to ensure the retention by the Surviving
Corporation of the Company's employees. The parties hereto acknowledge and agree
that such cooperation by the Company may take the form of introducing Parent to
such employees and providing to Parent reasonable information with respect to
such employees; provided, however, that the Company shall not be required to
incur any expense (including, without limitation, any liability to pay any stay
bonus to any such employee) in cooperating with Parent in connection with the
foregoing.
(c) Upon the execution hereof, the Company (i) shall provide Parent
with true, correct and complete records and information regarding the employee
defalcation described in the SEC Reports, (ii) shall provide to Parent
reasonable information with respect to its existing internal controls to prevent
defalcations and consult in good faith with Parent with respect to methods for
improving such internal controls and (iii) shall implement any additional
internal controls deemed appropriate by the Company in its sole discretion after
such consultation with Parent. The Company agrees to cooperate with the
officers, investment bankers, accountants, counsel and other representatives of
Parent in connection with the preparation of offering documents relating to
securities to be issued by Parent in order to pay
42
the Merger Consideration, including, without limitation, by obtaining from its
independent public accountants (i) consents to include or incorporate by
reference the Company's consolidated financial statements in such offering
documents and (ii) customary comfort letters with respect to such securities
offering; provided, however, that Parent shall pay any and all costs and
expenses incurred in connection with the foregoing.
Section 5.06. Indemnification and Insurance.
(a) From the Effective Time and for a period of six (6) years
thereafter, the Surviving Corporation and Parent (collectively, the
"Indemnifying Parties") shall provide exculpation and indemnification for each
person who is now or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director, employee, fiduciary
or agent of the Company or any of its subsidiaries (the "Indemnified Parties")
which is the same as the exculpation and indemnification provided to the
Indemnified Parties by the Company and its subsidiaries immediately prior to the
Effective Time in its Certificate of Incorporation or By-Laws as in effect on
the date hereof; provided, however, that such exculpation and indemnification
only covers actions on or prior to the Effective Time, including, without
limitation, all transactions contemplated by this Agreement.
(b) In addition to the rights provided in Section 5.06(a) above, in
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including without
limitation, any action by or on behalf of any or all security holders of the
Company or by or in the right of the Company or any claim, action, suit,
proceeding or investigation in which any Indemnified Party is, or is threatened
to be, made a party based on, or arising out of (i) the fact that he is or was
an officer, employee or
43
director of the Company or any of its subsidiaries or any action or omission by
such person in his capacity as an officer, employee or director of the Company
or any of its subsidiaries, or (ii) this Agreement or the transactions
contemplated by this Agreement, whether in any case asserted before or after the
Effective Time, the Company, the Indemnifying Parties and the Indemnified
Parties hereby agree to use their reasonable best efforts to cooperate in the
defense of such claim, action, suit, proceeding or investigation. The
Indemnified Parties shall have the right to select counsel, subject to the
consent of the Indemnifying Parties (which consent shall not be unreasonably
withheld or delayed). It is understood and agreed that the Company shall
indemnify and hold harmless, and, after the Effective Time, the Indemnifying
Parties shall indemnify and hold harmless, as and to the full extent permitted
by applicable law, each Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in accordance
herewith (collectively, the "Losses") in connection with any such threatened or
actual claim, action, suit, proceeding or investigation. In addition, in the
event of any such threatened or actual claim, action, suit, proceeding or
investigation, the Company shall, and, after the Effective Time, the
Indemnifying Parties shall, promptly pay and advance reasonable expenses and
costs (as evidenced by a written invoice therefor) incurred by each Indemnified
Person as they become due and payable in advance of the final disposition of the
claim, action, suit, proceeding or investigation to the fullest extent and in
the manner permitted by law. Notwithstanding the foregoing, neither the Company
nor the Indemnifying Parties shall be obligated to advance any expenses or costs
prior to receipt of an undertaking by or on behalf of the Indemnified Party to
repay any expenses advanced if it shall ultimately be determined by a
44
court of competent jurisdiction that the Indemnified Party is not entitled to be
indemnified against such expense. Notwithstanding anything to the contrary set
forth in this Agreement, neither the Company nor the Indemnifying Parties, as
the case may be, (i) shall be liable for any settlement affected without their
prior written consent, as applicable, and (ii) shall have any obligation
hereunder to any Indemnified Party to the extent that a court of competent
jurisdiction shall determine in a final and non-appealable order that such
indemnification is prohibited by applicable law. In the event of a final and
non-appealable determination by a court that any payment of expenses is
prohibited by applicable law, the Indemnified Party shall promptly refund to the
Company or the Indemnifying Parties, whichever is applicable, the amount of all
such expenses theretofore advanced pursuant hereto. Any Indemnified Party
wishing to claim indemnification under this Section 5.06, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify the
Company and the Indemnifying Parties of such claim and the relevant facts and
circumstances with respect thereto; provided, however, that the failure to
provide such notice shall not affect the obligations of the Company or the
Indemnifying Parties except to the extent that such failure has caused the
Indemnifying Parties to be liable for additional Losses, in which event the
Indemnifying Parties shall not be liable for such additional Losses.
(c) The Company shall use its best efforts to purchase, immediately
following the execution of this Agreement, directors' and officers' liability
insurance policy coverage for the Company's directors and executive officers for
a period of six (6) years following the Effective Time, the premium for which
shall not exceed $150,000 in the aggregate (provided that if the premium of such
coverage exceeds such amount, the Company
45
shall be obligated to obtain a policy with the greatest dollar amount of
coverage available for a cost not exceeding such amount), which will provide the
directors and officers with coverage on substantially similar terms as currently
provided by the Company to such directors and officers.
(d) This Section 5.06 is intended for the irrevocable benefit of, and
to grant third party rights to, the Indemnified Parties and their heirs and
shall be binding on all successors and assigns of the Company. Each of the
Indemnified Parties shall be entitled to enforce the covenants contained in
Section 5.06, and Parent, Sub, the Parent Related Entities and the Surviving
Corporation acknowledge and agree that each Indemnified Party would suffer
irreparable harm and that no adequate remedy at law exists for a breach of such
covenants and such Indemnified Party shall be entitled to injunctive relief and
specific performance in the event of any breach of any provision of this
Section. Each Parent Related Entity acknowledges the obligations set forth in
this Section 5.06, which obligations are expressly intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party covered hereby.
In the event the Indemnifying Parties fail to satisfy their obligations
hereunder, each of the Parent Related Entities hereby agrees to assume those
obligations as if each were an Indemnifying Party hereunder.
(e) In the event that the Surviving Corporation or any of its
respective 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, the successors
and assigns of such entity shall assume the obligations set forth in this
Section
46
6.05, which obligations are expressly intended to be for the irrevocable benefit
of, and shall be enforceable by, each Indemnified Party covered hereby.
Section 5.07. Certain Benefits.
(a) Each of Parent, Sub and the Parent Related Entities acknowledges
that consummation of the transactions contemplated by this Agreement will
constitute a change in control of the Company (to the extent such concept is
applicable) for the purposes of all employee or employee benefit agreements,
contracts, plans, programs, policies or arrangements of the Company as set forth
in Schedule 5.07. From and after the Effective Time, the Company, Parent, the
Parent Related Entities and their subsidiaries (including the Surviving
Corporation) will honor in accordance with their terms all cash bonus plans,
stock option and stock incentive plans, employment agreements, consulting
agreements, change-of- control agreements, and severance agreements or plans
between the Company or any of its subsidiaries and any officer, director, or
employee of the Company or any of its subsidiaries in effect prior to the
Effective Time which are set forth on Schedule 5.07.
(b) Upon consummation of the Merger, each employee of the Company or
any of its subsidiaries shall be eligible to participate in any and all employee
benefit plans of Parent or the Surviving Corporation generally made available to
similarly situated employees thereof on the same basis and without distinction.
To the extent that any employee of the Company or any of its subsidiaries
becomes a participant in any such plan, such employee shall be given credit
under such plans for all service prior to the Effective Time with the Company
and its subsidiaries, or any predecessor employer (to the extent such credit was
given by the Company under a similar plan) and prior to the time such employee
becomes such a
47
participant, for all purposes (including, without limitation, eligibility,
waiting periods and vesting, excluding benefit accruals). In addition, if any
employees of the Company or any of its subsidiaries employed as of the Effective
Time become covered by a medical plan of Parent, any of its affiliates or the
Surviving Corporation, such medical plan shall not impose any exclusion on
coverage for preexisting medical conditions with respect to these employees,
which exclusion is not generally applicable to employees of Parent, any of its
affiliates or the Surviving Corporation.
(c) This Section 5.07 is intended for the irrevocable benefit of, and
to grant third party rights to, the employees of the Company employed as of the
Effective Time, and shall be binding on all successors and assigns of Parent,
the Company and the Surviving Corporation. Each of the employees of the Company
employed as of the Effective Time shall be entitled to enforce the covenants
contained in this Section 5.07. Notwithstanding the foregoing, (i) but subject
to the terms of the agreements described in Section 5.07(a), nothing in this
Agreement shall be interpreted or construed to confer upon the employees of the
Company any right with respect to continuance of employment by the Company,
Parent or the Surviving Corporation, nor shall this Agreement interfere in any
way with the right of the Company, Parent or the Surviving Corporation to
terminate the employee's employment at any time and (ii) nothing in this
Agreement shall interfere in any way with the right of the Parent or the
Surviving Corporation to amend, terminate or otherwise discontinue any or all
plans, practices or policies of Parent or the Surviving Corporation in effect
from time to time. Finally, the parties hereto agree that Parent in its sole
discretion shall determine which employees are similarly situated; provided,
however, that such determination shall be made in
48
good faith and may not be based on whether the employee was, prior to the
Effective Time, an employee of the Company or any of its subsidiaries.
Section 5.08. Redemption of Rights. The Board shall have duly amended the
Rights Agreement prior to the execution of this Agreement so that neither the
execution nor the delivery of this Agreement will trigger or otherwise affect
any rights or obligations under the Rights Agreement, including causing the
occurrence of a "Distribution Date" or a "Stock Acquisition Date," as defined in
the Rights Agreement. The Company shall redeem all outstanding Rights at a
redemption price of $.01 per Right effective immediately prior to the Effective
Time; the Rights Agreement permits and shall permit such redemption.
Section 5.09. Annual Meeting; Director Nominations. Immediately following
the execution and delivery of this Agreement by the parties hereto, the Company
agrees to postpone the 1997 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") currently scheduled to be held on February 5, 1998 until the
earliest practicable date following the earlier of (x) June 30, 1998 or (y) the
date of termination of this Agreement pursuant to Section 7.01 hereof. If this
Agreement is terminated pursuant to Section 7.01(a), 7.01(b), 7.01(c), 7.01(e)
or 7.01(h) hereof, then: (i) immediately following any such termination, Parent
shall cause Aspen Investments, Inc. ("Aspen") to, and Aspen shall, withdraw any
and all nominations of candidates for election as Class III Directors of the
Company at the rescheduled Annual Meeting, including, without limitation, its
nominees, Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxxx (and, in the event Aspen does
not withdraw such nominations in writing to the Company, any and all such
nominations shall be deemed to have been withdrawn as of the date of such
termination of this Agreement and to have not satisfied the requirements of
49
Section 3 of Article II of the Company's By-laws); (ii) neither Parent, Sub, any
of the Parent Related Entities nor Aspen, nor any affiliate thereof (including,
without limitation, Crane), shall submit or cause the submission of any
nominations of candidates for election as Class III Directors of the Company,
and no nominees thereof shall be placed on the ballot or otherwise considered at
the rescheduled Annual Meeting; and (iii) none of Parent, Sub, any of the Parent
Related Entities nor Aspen, nor any affiliate thereof (including, without
limitation, Crane), shall solicit any proxies from the stockholders of the
Company in connection with the rescheduled Annual Meeting. Aspen acknowledges
the obligations set forth in this Section 5.09 and has executed this Agreement
to bind itself to its obligations hereunder. The obligations set forth herein
are expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, the Company.
Section 5.10. Public Announcements. Notwithstanding anything to the
contrary in this Agreement, including, without limitation, Section 8.09 hereof,
prior to the Effective Time, neither Parent, Sub, any of the Parent Related
Entities nor Aspen shall, or shall permit any of its subsidiaries or affiliates
(including, without limitation, Crane) to, issue or cause the publication of any
press release or other public announcement concerning the employees of the
Company or Parent's or the Surviving Corporation's plans for such employees
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; provided, however, that the provisions of this Section
5.10 shall not apply to any disclosure contained in an offering memorandum or
prospectus relating to a sale of securities by Parent, as long as Parent has
provided the Company with preliminary copies of any such offering memorandum or
prospectus (and copies of any changes thereto) and has consulted in good faith
50
with the Company with respect to any disclosure therein concerning the employees
of the Company or Parent's or the Surviving Corporation's plans for such
employees.
Section 5.11. Rolex. If Montrex Rolex, S.A. or any of its affiliated
entities (collectively, "Rolex") terminates or changes the terms of any
relationship or agreement between Rolex and the Company (or its subsidiaries),
the Company agrees, after consultation with Parent in good faith, to use its
commercially reasonable efforts to mitigate the impact of such termination or
change, including, without limitation, by transferring the Company's existing
inventory of Rolex products among the Company's stores. In addition, the Company
agrees not to liquidate in any manner its existing inventory of Rolex products,
including, without limitation, by selling such inventory back to Rolex or by
selling such inventory on a wholesale basis.
ARTICLE VI
CONDITIONS
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.
The obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver, where permissible, on or prior to the Effective Time of
the following conditions:
(a) This Agreement shall have been adopted by the requisite
affirmative vote of the stockholders of the Company, if any, required by
the Company's Certificate of Incorporation, By-Laws and applicable law.
(b) The consummation of the Merger shall not be prohibited by any
injunction, order, decree or ruling (an "Injunction") of a United States
federal or state court of competent jurisdiction (each party agreeing to
use its best efforts to have any
51
such Injunction stayed or reversed), and there shall not have been any
action taken or any statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger, or any executive order or decree issued,
by any Governmental Entity that is in effect and that makes consummation of
the Merger illegal.
(c) Any waiting period applicable to the Merger under the HSR Act and
any other applicable anti-trust laws shall have terminated or expired.
Section 6.02. Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or written waiver on or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in Article III that are qualified as to materiality or
Material Adverse Effect shall be true and correct and the representations and
warranties of the Company set forth in Article III that are not so qualified
shall be true and correct except to the extent that any failure to be true and
correct would not have a Material Adverse Effect, in each case as of the date of
this Agreement and as of the Effective Time as though made on and as of the
Effective Time, except to the extent such representations and warranties speak
as of an earlier date, and Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to the effect set forth in this paragraph.
Notwithstanding the foregoing, the occurrence of any Excluded Event (as defined
herein) or any change or event that occurs as a result of an Excluded Event
shall not be taken into account in determining whether a representation or
warranty of the Company set forth in Article III is true and correct for
purposes of this Section 6.02(a).
52
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Dissenting Shares. The number of Dissenting Shares shall
constitute no greater than five percent (5%) of the total number of Shares
outstanding immediately prior to the Effective Time.
(d) No Company Material Adverse Effect. Since the date hereof, there
shall not have been any changes or events which, individually or in the
aggregate, have had a Material Adverse Effect; provided, however, that the
occurrence of any Excluded Event shall not be deemed to have a Material Adverse
Effect. The term "Excluded Event" shall mean any or all of the following events:
(i) if the Company has complied with the provisions of Section 5.05(b) hereof,
the termination or the change in terms (for any reason) by Rolex of any
relationship or agreement between the Company (or its subsidiaries) and Rolex;
(ii) in the event of any termination or change in terms (for any reason) by
Rolex of any relationship or agreement between the Company (or its subsidiaries)
and Rolex, a reduction of sales of Rolex products by the Company and its
subsidiaries on a consolidated basis from the date of any such termination or
change in terms until the Effective Time (as compared to the same time period
for the fiscal year ended May 31, 1997); (iii) if the Company has complied with
the provisions of Section 5.05(b) hereof, the termination or the change in terms
(for any reason) of any relationship or agreement between the Company (or its
subsidiaries) and any of its existing
53
vendors or suppliers (other than Rolex) whose products in the aggregate
accounted for 5% or less of the Company's sales (not including sales
attributable to Rolex) for the fiscal year ended May 31, 1997; or (iv) subject
to compliance with Section 5.01(d) hereof, any increase in the amounts
outstanding under the Company's working capital borrowings pursuant to credit
facilities in existence on the date hereof, including, without limitation, those
which result from the occurrence of an Excluded Event; provided, however, the
occurrence of events or changes which are not Excluded Events and/or exceed the
levels or numbers set forth above shall not be deemed by operation of this
Section 6.02 to have a Material Adverse Effect on the Company or its
subsidiaries.
Section 6.03. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
written waiver on or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent, Sub and the Parent Related Entities set forth in Article IV that are
qualified as to materiality shall be true and correct and the representations
and warranties of Parent, Sub and the Parent Related Entities set forth in
Article IV that are not so qualified shall be true and correct in all material
respects (provided, however, that the representations and warranties in the
first sentence of Section 4.04 hereof shall be true and correct in all
respects), in each case as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time (except for the
representation and warranty set forth in the third sentence of Section 4.01
hereof with respect to the net worth of Parent, Sub and the Parent Related
Entities, which shall be true and correct in all material respects as of the
date of this
54
Agreement and as of the time immediately prior to the Effective Time as though
made on and as of the time immediately prior to the Effective Time), and the
Company shall have received a certificate signed on behalf of Parent and Sub by
the chief executive officer and the chief financial officer of Parent and Sub to
the effect set forth in this paragraph. Notwithstanding the foregoing, the
Company shall not have the right to terminate this Agreement solely by reason of
the failure of Parent, Sub and the Parent Related Entities to satisfy the
condition that the representation and warranty set forth in the third sentence
of Section 4.01 hereof with respect to the net worth thereof be true and correct
in all material respects as of the time immediately prior to the Effective Time.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Effective Time, and the Company
shall have received a certificate signed on behalf of Parent and Sub by the
chief executive officer and the chief financial officer of Parent and Sub to
such effect.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by the stockholders of the Company:
(a) by mutual consent of Parent and the Company;
55
(b) by either Parent or the Company, if any United States federal or
state court of competent jurisdiction or other Governmental Entity shall have
issued an Injunction or taken any other action (which the parties shall use
their best efforts to stay or reverse) permanently restraining, enjoining or
otherwise prohibiting the Merger, and such Injunction or other action shall have
become final and non-appealable;
(c) by the Company, if Parent, Sub or any of the Parent Related
Entities have failed to perform in any material respect any of their respective
obligations required to be performed by them under this Agreement and such
failure continues for five (5) business days after receipt by Parent of a
written notice from the Company describing such failure, unless failure to so
perform has been caused by or results from a breach of this Agreement by the
Company;
(d) by the Company, provided that the Company has complied with the
provisions of Section 5.02 hereof, if the Company shall have received a Superior
Proposal, and the Board determines in good faith (i) upon advice of its
financial advisors that the Superior Proposal, if consummated as proposed, would
result in a transaction more favorable to the Company's stockholders from a
financial point of view than the transaction contemplated by this Agreement
(including consideration of, among other matters, the ability of the Third Party
to obtain any financing necessary to consummate the Acquisition Proposal); and
(ii) after consultation with and based upon advice from its outside legal
counsel, that the failure to accept such Superior Proposal could reasonably be
expected to be a breach of the directors' fiduciary duties under applicable law;
provided, that such termination pursuant to this Section 7.01(d) shall
56
not be effective until the Company has made payment in full of the fee required
by Section 8.08(b) hereof;
(e) by the Company, if, within ten (10) business days after receipt by
Parent of notice from the Company that all of the conditions set forth in
Article VI hereof have been satisfied or waived, the Merger has not been
consummated and neither Parent nor Sub has deposited the Merger Consideration
with the Paying Agent as provided in Section 2.02 hereof;
(f) by Parent, if the Board shall have (A) withdrawn, modified or
amended in any adverse respect its approval or recommendation of this Agreement,
the Merger or the transactions contemplated hereby, (B) failed to include in the
Proxy Statement such recommendation, (C) endorsed or recommended to its
stockholders any Acquisition Proposal or (D) resolved to do any of the
foregoing;
(g) by Parent or the Company, if, without any material breach by such
terminating party of its obligations under this Agreement, the Merger shall not
have occurred on or before June 30, 1998; provided, however, that neither Parent
nor the Company shall terminate this Agreement prior to the expiration of two
hundred forty (240) days following the date hereof if the Merger has not
occurred by reason of the nonsatisfaction of the condition set forth in Section
6.01(c) hereof or the pendency of a non-final Injunction, and Parent, Sub and
the Company shall use their best efforts to cause such condition to be satisfied
(including, without limitation, complying with the requirements of the Federal
Trade Commission or other comparable Governmental Entity to divest of assets or
otherwise in connection with the consummation of the
57
transactions contemplated hereby or in settlement of any action brought by it)
or have any such Injunction stayed or reversed;
(h) by either Parent or the Company, if the stockholders of the
Company shall have failed to give any required approval; or
(i) by Parent, if the Company shall have failed to perform in any
material respect any of its obligations under this Agreement and such failure
continues for five (5) business days after receipt by the Company of a written
notice from Parent describing such failure, unless failure to so perform has
been caused by or results from a breach of this Agreement by Parent or Sub.
Section 7.02. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.01 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or stockholders,
other than the provisions of Sections 5.04(b) and 8.08 hereof. Nothing contained
in this Section 7.02 shall relieve any party from liability for any breach of
this Agreement.
Section 7.03. Amendment. This Agreement may be amended by the parties
hereto, at any time before or after approval of this Agreement by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.04. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the
58
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 8.02. Notices. All notices and other communications hereunder shall
be in writing (and shall be deemed given upon receipt) if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) 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, Sub or any Parent Related Entity, to
Destination Retail Holdings Corporation
Xxxxxxxxxxxxx Xxxxxx
X.X. Xxx X 00000
Xxxxxxxx, Bahamas
Attention: Xxxxxxx XX Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
59
with a copy to
Battle Xxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
(b) if to the Company, to
Little Switzerland, Inc.
161-B Crown Bay Cruise Ship Port
X.X. Xxx 000
Xx. Xxxxxx, X.X.X.X. 00000
Attention: Xxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 8.03. Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 8.04. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become
60
effective when two or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
Section 8.05. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof (other than the Confidentiality Agreement, any provisions of such
agreement which are inconsistent with the transactions contemplated by this
Agreement being waived hereby) and (b) shall not be assigned by operation of law
or otherwise, provided that Parent may cause Sub to assign its rights and
obligations to Parent or any other direct or indirect wholly-owned subsidiary of
Parent who becomes a party to this Agreement and agrees to perform and assume
the obligations of Sub hereunder, but no such assignment shall relieve either
Parent or Sub of its obligations hereunder if such assignee does not perform
such obligations.
Section 8.06. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable principles of conflicts of law. Each of the Company, Parent, Sub and
the Parent Related Entities hereby irrevocably and unconditionally consent to
the jurisdiction of the courts of the State of Delaware and the United States
District Court for the District of Delaware for any action, suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, and agrees not to commence any action, suit or proceeding related
thereto except in such courts. Each of the Company, Parent, Sub and the Parent
Related Entities further hereby irrevocably and unconditionally waive any
objection to the laying of venue of any lawsuit, claim or other proceeding
arising out of or relating to this Agreement in the courts of the State
61
of Delaware or the United States District Court for the District of Delaware,
and hereby further irrevocably and unconditionally waive and agree not to plead
or claim in any such court that any such lawsuit, claim or other proceeding
brought in any such court has been brought in an inconvenient forum. Each of the
Company, Parent, Sub and the Parent Related Entities further agree that service
of any process, summons, notice or document by U.S. registered mail to its
address set forth above shall be effective service of process for any action,
suit or proceeding brought against it in any such court.
Section 8.07. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist, and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, without the posting of any bond whatsoever in addition to any other
remedy at law or equity.
Section 8.08. Expenses and Termination Fees.
(a) Subject to Sections 5.05 and 8.08(b) hereof, 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 costs and expenses.
(b) As a condition to the willingness of Parent, Sub and the Parent
Related Entities to enter into this Agreement and to compensate Parent, Sub and
the Parent Related Entities for entering into this Agreement, taking action to
consummate the transactions hereunder and incurring the costs and expense
related thereto, the Company shall pay to Parent two million four hundred eighty
one thousand one hundred dollars ($2,481,100) (the
62
"Termination Fee") if the Company shall have terminated this Agreement pursuant
to the provisions of Section 7.01(d) hereof or Parent shall have terminated this
Agreement pursuant to the provisions of Section 7.01(f) hereof. Any payment
required by the previous sentence shall be payable by the Company to Parent (by
wire transfer of immediately available funds to an account designated by Parent)
within two (2) business days after demand by Parent. In the event that the
Company shall fail to pay the Termination Fee when due, the term "Termination
Fee" shall be deemed to include interest on such unpaid Termination Fee,
commencing on the date that the Termination Fee became due, at a rate per annum
equal to the rate of interest publicly announced by Citibank, N.A., from time to
time, in the City of New York, as such bank's Prime Rate. Notwithstanding the
foregoing, the Company shall have no obligation under this subparagraph (b) if
at the time of the termination of this Agreement, Parent, Sub or any of the
Parent Related Entities shall be in material breach of its respective
obligations under this Agreement; provided, that on the date of the termination
of this Agreement notice of such breach has been provided by the Company and
that such breach has not been cured within the requisite cure period, then the
Company shall not be obligated to make the payment required under this
subparagraph (b).
(c) Notwithstanding anything to the contrary in this Agreement, the
parties hereto expressly acknowledge and agree that, with respect to any
termination of this Agreement pursuant to Section 7.01(d) or Section 7.01(f)
hereof, the payment of any amount pursuant to Section 8.08(b) hereof shall
constitute liquidated damages with respect to any claim for damages or any other
claim which any party would otherwise be entitled to assert against any other
party with respect to this Agreement and the transactions contemplated hereby
and
63
shall constitute the sole and exclusive remedy available to them, in each case,
other than with respect to any claim under Section 5.04(b) hereof. The parties
hereto further expressly acknowledge and agree that, in light of the difficulty
of accurately determining actual damages with respect to the foregoing upon any
termination of this Agreement pursuant to Section 7.01(d) or Section 7.01(f)
hereof, the rights to payment under Section 8.08(b) hereof: (i) constitute a
reasonable estimate of the damages that will be suffered by reason of any such
proposed or actual termination of this Agreement pursuant to Section 7.01(d) or
Section 7.01(f) hereof and (ii) shall be in full and complete satisfaction of
any and all damages arising as a result of the foregoing (other than any claim
under Section 5.04(b) hereof). Except for nonpayment of the amount set forth in
Section 8.08(b) hereof and any claim under Section 5.04(b) hereof, the parties
hereby agree that, upon any termination of this Agreement pursuant to Section
7.01(d) or Section 7.01(f) hereof, in no event shall either party seek or obtain
any recovery or judgment against any of the other party's assets or against any
of the other party's directors, officers, employees, partners, managers, members
or shareholders and in no event shall either party be entitled to seek or obtain
any other damages of any kind, including, without limitation, consequential,
indirect or punitive damages.
Section 8.09. Publicity. Except as otherwise required by law or the
rules of any national securities exchange or the National Association of
Securities Dealers, for so long as this Agreement is in effect, neither the
Company nor Parent, Sub or any of the Parent Related Entities shall, or shall
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by
64
this Agreement without the prior written consent of the other party, which
consent shall be delivered promptly and not be unreasonably withheld.
Section 8.10. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except pursuant to Sections 5.06 and 5.07 hereof.
Parent shall cause Sub to perform its obligations hereunder and shall be fully
liable, severally and jointly, for any failure of Sub to perform such
obligations.
Section 8.11. Severability. The invalidity or unenforceability of a
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
65
IN WITNESS WHEREOF, the Company, Parent, Sub and the Parent Related
Entities have caused this Agreement to be signed by their respective officers
there unto duly authorized as of the date first written above.
Attest: LITTLE SWITZERLAND, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ C. Xxxxxxx Xxxxx
----------------------------- -------------------------------
Name: C. Xxxxxxx Xxxxx
Title: Chairman of the Board of
Directors
Attest: DESTINATION RETAIL HOLDINGS
CORPORATION
/s/ Xxxxx X. XxxXxxxx By: /s/ Xxxxxxx X.X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxx X.X. Xxxxx
Title: President
Attest: LSI ACQUISITION CORP.
/s/ Xxxxx X. XxxXxxxx By: /s/ Xxxxxxx X.X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxx X.X. Xxxxx
Title: President
Attest: YOUNG CARIBBEAN JEWELLERY
COMPANY LIMITED
/s/ Xxxxx X. XxxXxxxx By: /s/ Xxxxxxx X.X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxx X.X. Xxxxx
Title: President
Attest: ALLIANCE INTERNATIONAL
HOLDINGS LIMITED
/s/ Xxxxx X. XxxXxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Attest: CEI DISTRIBUTORS INC.
/s/ Xxxxx X. XxxXxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
This Agreement has been duly executed by the following party for the
purpose of acknowledging such party's obligations as set forth in Sections 5.09
and 5.10 hereof, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, the Company against the
following party.
Attest: ASPEN INVESTMENTS, INC.
/s/ Xxxx Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
