CONFORMED COPY
_________________________________________________________
AGREEMENT AND PLAN OF MERGER
Between
CONFETTI ACQUISITION, INC.
and
AMSCAN HOLDINGS, INC.
Dated as of August 10, 1997
_________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE 1.
THE MERGER . . . . . . . . . 4
SECTION 1.1 The Merger. . . . . . . . . . . . . . 4
SECTION 1.2 Closing. . . . . . . . . . . . . . . . 4
SECTION 1.3 Effective Time. . . . . . . . . . . . 5
SECTION 1.4 Effects of the Merger. . . . . . . . . 5
SECTION 1.5 Certificate of Incorporation; By-Laws. 6
SECTION 1.6 Directors and Officers. . . . . . . . 6
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS . . . . . . 7
SECTION 2.1 Effect on Capital Stock. . . . . . . . 7
SECTION 2.2 Dissenting Shares. . . . . . . . . . . 10
SECTION 2.3 Mixed Consideration Elections. . . . . 11
SECTION 2.4 Treatment of Options. . . . . . . . . 14
SECTION 2.5 Surrender of Shares; Transfer Books. . 16
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . 24
SECTION 3.1 Organization and Qualification;
Subsidiaries. . . . . . . . . . . . . 24
SECTION 3.2 Certificates of Incorporation and
By-Laws. . . . . . . . . . . . . . . . 26
SECTION 3.3 Capitalization. . . . . . . . . . . . 27
SECTION 3.4 Authority Relative to This Agreement. 30
SECTION 3.5 No Conflict; Required Filings and
Consents. . . . . . . . . . . . . . . 33
SECTION 3.6 Compliance. . . . . . . . . . . . . . 36
SECTION 3.7 SEC Filings; Financial Statements . . 36
SECTION 3.8 Absence of Certain Changes or Events . 38
SECTION 3.9 Absence of Litigation . . . . . . . . 39
SECTION 3.10 Properties . . . . . . . . . . . . . . 40
SECTION 3.11 Employee Benefit Plans . . . . . . . . 44
SECTION 3.12 Tax Matters . . . . . . . . . . . . . 48
SECTION 3.13 Environmental Laws . . . . . . . . . . 51
SECTION 3.14 Intellectual Property . . . . . . . . 56
SECTION 3.15 Labor Matters . . . . . . . . . . . . 58
SECTION 3.16 Business Relationships; No Restrictive
Agreements . . . . . . . . . . . . . . 59
SECTION 3.17 Form S-4; Proxy Statement . . . . . . 60
SECTION 3.18 Brokers . . . . . . . . . . . . . . . 62
SECTION 3.19 Opinion of Company Financial Advisor . 63
SECTION 3.20 Board Recommendation . . . . . . . . . 63
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF NEWCO . . 64
SECTION 4.1 Corporate Organization . . . . . . . . 64
SECTION 4.2 Authority Relative to This Agreement . 65
SECTION 4.3 No Conflict; Required Filings and
Consents . . . . . . . . . . . . . . . 66
SECTION 4.4 Form S-4; Proxy Statement . . . . . . 68
SECTION 4.5 Brokers . . . . . . . . . . . . . . . 68
SECTION 4.6 Financing . . . . . . . . . . . . . . 69
SECTION 4.7 Newco Not an Interested Stockholder . 69
SECTION 4.8 Solvency of the Company Following the
Merger . . . . . . . . . . . . . . . . 69
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER . . 70
SECTION 5.1 Conduct of Business Pending the Merger 70
ARTICLE 6.
ADDITIONAL AGREEMENTS . . . . . . . 76
SECTION 6.1 Stockholders Meeting . . . . . . . . . 76
SECTION 6.2 Form S-4 and Proxy Statement . . . . . 77
SECTION 6.3 Access to Information; Confidentiality 80
SECTION 6.4 No Solicitation . . . . . . . . . . . 82
SECTION 6.5 ESOP . . . . . . . . . . . . . . . . . 85
SECTION 6.6 Directors' and Officers' Indemnification
and Insurance . . . . . . . . . . . . 85
SECTION 6.7 Notification of Certain Matters . . . 89
SECTION 6.8 Further Action; Best Efforts . . . . . 89
SECTION 6.9 Public Announcements . . . . . . . . . 95
SECTION 6.10 Disposition of Litigation . . . . . . 96
SECTION 6.11 Affiliates . . . . . . . . . . . . . . 96
SECTION 6.12 Stop Transfer Order . . . . . . . . . 97
SECTION 6.13 Transfer Taxes . . . . . . . . . . . . 97
SECTION 6.14 Employee Plans and Benefits . . . . . 97
ARTICLE 7.
CONDITIONS OF MERGER . . . . . . . 98
SECTION 7.1 Conditions to Obligation of Each Party to
Effect the Merger . . . . . . . . . . 98
SECTION 7.2 Conditions to Obligation of Newco . . 99
SECTION 7.3 Conditions to Obligation of the Company 104
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER . . . . 105
SECTION 8.1 Termination . . . . . . . . . . . . . 105
SECTION 8.2 Effect of Termination . . . . . . . . 107
SECTION 8.3 Fees and Expenses . . . . . . . . . . 107
SECTION 8.4 Amendment . . . . . . . . . . . . . . 110
SECTION 8.5 Waiver . . . . . . . . . . . . . . . . 110
ARTICLE 9.
GENERAL PROVISIONS . . . . . . . 111
SECTION 9.1 Non-Survival of Representations,
Warranties and Agreements . . . . . . 111
SECTION 9.2 Notices . . . . . . . . . . . . . . . 111
SECTION 9.3 Certain Definitions . . . . . . . . . 112
SECTION 9.4 Severability . . . . . . . . . . . . . 114
SECTION 9.5 Entire Agreement; Assignment . . . . . 115
SECTION 9.6 Parties in Interest . . . . . . . . . 115
SECTION 9.7 Governing Law . . . . . . . . . . . . 116
SECTION 9.8 Headings . . . . . . . . . . . . . . . 116
SECTION 9.9 Counterparts . . . . . . . . . . . . . 116
Annex A - Form of Affiliate Letter
Exhibit A - Certificate of Incorporation
of Amscan Holdings, Inc.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
August 10, 1997 (the "Agreement"), between Confetti
Acquisition, Inc., a Delaware corporation ("Newco"), and
Amscan Holdings, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of
the Company and Newco have determined that the merger of
Newco with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this
Agreement, based on the availability of the Cash Election
Price to any stockholder who so elects, would be fair to
and in the best interests of their respective
stockholders, and such Boards of Directors have approved
the Merger, pursuant to which each share of common stock,
par value $.10 per share (the "Company Common Stock"),
issued and outstanding immediately prior to the Effective
Time (as defined in Section 1.3) (other than (a) shares
of Company Common Stock owned, directly or indirectly, by
the Company or any Subsidiary (as defined in Section 9.3)
of the Company or by Newco or any Subsidiary of Newco and
(b) Dissenting Shares (as defined in Section 2.2)), will
be converted into either (A) at the election of the
holder thereof and subject to the terms hereof, the right
to retain one-one hundred fifty thousandth (1/150,000) of
each share of their Company Common Stock and the right to
receive $9.33 per share in cash or (B) the right to
receive $16.50 per share in cash;
WHEREAS, the Merger and this Agreement require
the affirmative vote by the holders of a majority of the
shares of the Company Common Stock outstanding and
entitled to vote for the adoption and approval thereof
(the "Company Stockholder Approval");
WHEREAS, Newco is a newly formed corporation
organized at the direction of GS Capital Partners II,
L.P.;
WHEREAS, as a condition to Newco's willingness
to enter into this Agreement and consummate the
transactions contemplated hereby, Newco has required that
the "Stockholder" (as defined in the Voting Agreement (as
defined below)) agree, among other things, to vote all
shares of Company Common Stock beneficially owned by the
Stockholder and certain related persons (as defined in
Section 9.3) in accordance with the Voting Agreement and
comply with the other provisions of the Voting Agreement,
and to make a Mixed Consideration Election (as defined
herein) with respect to all shares of Company Common
Stock owned by the Stockholder; and in order to induce
Newco to enter into this Agreement, the Stockholder will
execute and
deliver the Voting Agreement, dated as of the
date hereof, among Newco, the Estate of Xxxx X.
Xxxxxxxxxxx, and Xxxxxxxxx Xxxxxxxxxxx (the "Voting
Agreement");
WHEREAS, in connection with this Agreement,
Newco and certain employees of the Company entered into
certain agreements as of the date hereof relating to
their employment with the Company following the Effective
Time and relating to their ownership of the capital stock
of Newco (collectively, the "Employment Arrangements");
WHEREAS, certain terms used herein are defined
in Section 9.3;
WHEREAS, Newco and the Company desire to make
certain representations, warranties, covenants and
agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be
recorded as a recapitalization for financial reporting
purposes.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties hereto agree as
follows:
ARTICLE 1.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and
subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State
of Delaware (the "DGCL"), at the Effective Time (as
defined in Section 1.3), Newco shall be merged with and
into the Company. As a result of the Merger, the
separate corporate existence of Newco shall cease and the
Company shall survive the Merger.
SECTION 1.2 Closing. Unless this Agreement
shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of
the conditions set forth in Article 7, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. on
the second business day after satisfaction or waiver of
the conditions set forth in Article 7 (the "Closing
Date"), at the offices of Wachtell, Lipton, Xxxxx & Xxxx,
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another date, time or place is agreed to in writing by
the parties hereto.
SECTION 1.3 Effective Time. As soon as
practicable after the satisfaction or waiver of the
conditions set forth in Article 7, the parties hereto
shall cause the Merger to be consummated by filing this
Agreement or a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of
Delaware, in such form as required by and executed in
accordance with the relevant provisions of the DGCL (the
date and time of the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of
Merger) being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger
shall have the effects set forth in the applicable
provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective
Time all the property, rights, privileges, immunities,
powers and franchises of the Company and Newco shall vest
in the Company following the Merger, and all debts,
liabilities and duties of the Company and Newco shall
become the debts, liabilities and duties of the Company
following the Merger.
SECTION 1.5 Certificate of Incorporation;
By-Laws. (a) At the Effective Time and without any
further action on the part of the Company or Newco or
their respective stockholders, the certificate of
incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended and
restated so as to read in its entirety in the form set
forth as Exhibit A hereto and, as so amended, until
thereafter further amended as provided therein and under
the DGCL, it shall be the certificate of incorporation of
the Company following the Merger.
(b) At the Effective Time and without any
further action on the part of the Company or Newco or
their respective stockholders, the by-laws of Newco as in
effect immediately prior to the Effective Time shall be
the by-laws of the Company following the Merger and
thereafter may be amended or repealed in accordance with
their terms and the certificate of incorporation of the
Company following the Merger and as provided under the
DGCL.
SECTION 1.6 Directors and Officers. The
directors of Newco immediately prior to the Effective
Time shall be the initial directors of the Company
following the Merger, each to hold office in accordance
with the certificate of incorporation and by-laws of the
Company following the Merger, and the officers of the
Company immediately prior to the Effective Time
shall be
the initial officers of the Company following the Merger,
in each case until their respective successors are duly
elected or appointed (as the case may be) and qualified.
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. As of
the Effective Time, by virtue of the Merger and without
any action on the part of the Company, Newco or any
holder of any shares of Company Common Stock or any
shares of capital stock of Newco:
(a) Common Stock of Newco. Each share of
common stock, par value $.10 per share, of Newco ("Newco
Common Stock") issued and outstanding immediately prior
to the Effective Time shall be converted into a number of
fully paid and nonassessable shares of the common stock,
par value $.10 per share, of the Company following the
Merger equal to the quotient of (i) 900 divided by (ii)
the number of shares of Newco Common Stock outstanding
immediately prior to the Effective Time.
(b) Cancellation of Treasury Stock and
Newco-Owned Company Common Stock. Each share of Company
Common Stock that, immediately prior to the Effective
Time, is owned by the Company or by any Subsidiary of the
Company, and each share of Company Common Stock that,
immediately prior to the Effective Time, is owned by
Newco or any Subsidiary of Newco shall automatically be
cancelled and retired and shall cease to exist, and no
cash, Company Common Stock or other consideration shall
be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock.
Except as otherwise provided herein, each issued and
outstanding share of Company Common Stock (other than any
such shares to be cancelled pursuant to Section 2.1(b)
and any Dissenting Shares (as defined in Section 2.2))
shall be converted into the following (the "Merger
Consideration"):
(i) for each such share of Company Common
Stock with respect to which an election to retain
Company Common Stock has been effectively made and
not revoked or lost, pursuant to Section 2.3
("Electing Shares"), the right to retain one-one
hundred fifty thousandth (1/150,000) of a fully paid
and nonassessable share of Company Common Stock and
the right to
receive in cash from the Company
following the Merger an amount equal to $9.33 (such
Company Common Stock and cash, together, being the
"Mixed Consideration"); or
(ii) for each such share of Company
Common Stock, other than Electing Shares, the right
to receive in cash from the Company following the
Merger an amount equal to $16.50 (the "Cash Election
Price").
(d) Cancellation and Retirement of Company
Common Stock. As of the Effective Time, all shares of
Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than those shares
issued pursuant to Section 2.1(a) (the "New Shares") and
those shares retained pursuant to Section 2.1(c)(i) after
giving effect to Section 2.5(e) (the "Retained Shares"))
shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of
Company Common Stock (other than New Shares and Retained
Shares) shall, to the extent such certificate represents
such shares, cease to have any rights with respect
thereto, except the right to receive cash, including cash
in lieu of fractional shares of Company Common Stock, to
be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section
2.5.
SECTION 2.2 Dissenting Shares. (a)
Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time
and which are held by stockholders who have not voted in
favor of or consented to the Merger and who shall have
delivered a written demand for appraisal of such shares
in the time and manner provided in Section 262 of the
DGCL and shall not have failed to perfect or shall not
have effectively withdrawn or lost their rights to
appraisal and payment under the DGCL (the "Dissenting
Shares") shall not be converted into the right to receive
the Merger Consideration, but shall be entitled to
receive the consideration as shall be determined pursuant
to Section 262 of the DGCL; provided, however, that, if
any such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right
to appraisal and payment under the DGCL, such holder's
shares of Company Common Stock shall thereupon be deemed
to have been converted, at the Effective Time, into the
right to receive the Merger Consideration set forth in
Section 2.1(c)(ii) of this Agreement, without any
interest thereon. (b) The Company shall give Newco (i) prompt
notice of any demands for appraisal pursuant to Section
262 received by the Company, withdrawals of such demands
and any other instruments served pursuant to the DGCL and
received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall
not, except with the prior written consent of Newco, make
any payment with respect to any such demands for
appraisal or offer to settle or settle any such demands.
SECTION 2.3 Mixed Consideration Elections.
(a) Each person who, on or prior to the Election
Date Preferred to in (c) below, is a record holder of shares
of Company Common Stock will be entitled, with respect to
all or any portion of his shares, to make an
unconditional election (a "Mixed Election") on or prior
to such Election Date to retain and receive, as
applicable, Mixed Consideration, on the basis hereinafter
set forth.
(b) Prior to the mailing of the Proxy
Statement (as defined in Section 3.17), Newco shall
appoint a bank or trust company to act as exchange agent
(the "Exchange Agent") for the payment of the Merger
Consideration.
(c) Newco shall prepare and mail a form of
election, which form shall be subject to the reasonable
approval of the Company (the "Form of Election"), with
the Proxy Statement to the record holders of Company
Common Stock as of the record date for the Stockholders
Meeting (as defined in Section 6.1), which Form of
Election shall be used by each record holder of shares of
Company Common Stock who wishes to elect to retain and
receive, as applicable, Mixed Consideration for any or
all shares of Company Common Stock held by such holder.
The Company will use its best efforts to make the Form of
Election and the Proxy Statement available to all persons
who become holders of Company Common Stock during the
period between such record date and the Election Date
referred to below. Any such holder's election to retain
and receive, as applicable, Mixed Consideration shall
have been properly made only if the Exchange Agent shall
have received at its designated office, by 5:00 p.m., New
York City time, on the business day (the "Election Date")
next preceding the date of the Stockholders Meeting, a
Form of Election properly completed and signed and
accompanied by certificates for the shares of Company
Common Stock to which such Form of Election relates, duly
endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company (or by an
appropriate guarantee of delivery of such certificates as
set forth in such Form of Election from a firm which is a
member of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or
correspondent in the United States, provided such
certificates are in fact delivered to the Exchange Agent
within three NASDAQ trading days after the date of
execution of such guarantee of delivery).
(d) Any Form of Election may be revoked by the
stockholder after submitting it to the Exchange Agent
only by written notice received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Election
Date (which shall be the record date for determination of
stockholders entitled to make the Mixed Election), unless
Newco and such stockholder agree otherwise. In addition,
all Forms of Election shall automatically be revoked if
the Exchange Agent is notified in writing by Newco and
the Company that the Merger has been abandoned. If a
Form of Election is revoked, the certificate or
certificates (or guarantees of delivery, as appropriate)
for the shares of Company Common Stock to which such Form
of Election relates shall be promptly returned to the
stockholder submitting the same to the Exchange Agent.
(e) The good faith determination of the
Exchange Agent as to whether or not elections to retain
and receive, as applicable, Mixed Consideration have been
properly made or revoked pursuant to this Section 2.3
with respect to shares of Company Common Stock, and as to
when elections and revocations were received by it, shall
be binding. If the Exchange Agent determines that any
election to retain and receive, as applicable, Mixed
Consideration was not properly made with respect to
shares of Company Common Stock, such shares shall be
treated by the Exchange Agent as shares which were not
Electing Shares at the Effective Time, and such shares
shall be exchanged in the Merger for cash pursuant to
Section 2.1(c)(ii). The Exchange Agent may, with the
mutual agreement of Newco and the Company, make such
rules as are consistent with this Section 2.3 for the
implementation of the elections provided for herein as
shall be necessary or desirable fully to effect such
elections.
SECTION 2.4 Treatment of Options. (a) Except
as otherwise agreed by Newco and any such holder of an
Option (as defined below) prior to the Effective Time,
including pursuant to the Employment Arrangements,
immediately prior to the Effective Time, each outstanding
stock option held by any current or former employee or
director (an "Option") granted under the 1996 Stock
Option Plan for Key Employees (the "Stock Plan"), whether
or not then exercisable, shall be cancelled by the
Company, and except as otherwise agreed by the Company,
Newco and the holder, the holder thereof shall be
entitled to receive at
the Effective Time or as soon as
practicable thereafter from the Company in consideration
for such cancellation an amount in cash equal to the
product of (a) the number of shares of Company Common
Stock previously subject to such Option and (b) the
excess, if any, of the Cash Election Price over the per
share exercise price of the shares of Company Common
Stock previously subject to such Option, reduced by the
amount of any withholding or other taxes required by law
to be withheld (the "Option Cash-Out Amount").
(b) The Company shall use its reasonable best
efforts to take all such action as is necessary prior to
the Effective Time to terminate the Stock Plan so that on
and after the Effective Time no current or former
employee or director shall have any Option to purchase
shares of Company Common Stock or any other equity
interest in the Company under the Stock Plan and to
provide that from and after the Effective Time, to the
extent any Option has not been cancelled as contemplated
by Section 2.4(a), upon exercise of any such Option, the
holder thereof shall be entitled to receive only the
Option Cash-Out Amount. The Company shall use its
reasonable best efforts to obtain any consents necessary
to release the Company from any liability in respect of
any Option.
SECTION 2.5 Surrender of Shares; Transfer
Books. (a) Exchange Agent. Following the Effective
Time, the Company shall deposit with the Exchange Agent,
for the benefit of the holders of shares of Company
Common Stock, as and when needed, the cash portion of the
Merger Consideration for exchange in accordance with this
Article 2. Such funds shall be invested by the Exchange
Agent as directed by the Company, provided that such
investments shall be (i) securities issued or directly
and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof
having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit,
eurodollar time deposits and bankers' acceptances with
maturities not exceeding six months and overnight bank
deposits with any commercial bank, depository institution
or trust company incorporated or doing business under the
laws of the United States of America, any state thereof
or the District of Columbia, provided that such
commercial bank, depository institution or trust company
has, at the time of investment, (A) capital and surplus
exceeding $250 million and (B) outstanding short-term
debt securities which are rated at least A-1 by Standard
& Poor's Rating Group Division of The XxXxxx-Xxxx
Companies, Inc. or at least P-1 by Xxxxx'x Investors
Service, Inc. or carry an equivalent rating by a
nationally recognized rating agency if both of the two
named rating agencies cease to publish ratings of
investments, (iii) repurchase obligations with a term of
not more than 30 days for underlying
securities of the
types described in clauses (i) and (ii) above entered
into with any financial institution meeting the
qualifications specified in clause (ii) above, (iv)
commercial paper having a rating in the highest rating
categories from Standard & Poor's Rating Group Division
of The XxXxxx-Xxxx Companies, Inc. or Xxxxx'x Investors
Service, Inc. or carrying an equivalent rating by a
nationally recognized rating agency if both of the two
named rating agencies cease to publish ratings of
investments and in each case maturing within six months
after the date of acquisition and (v) money market mutual
or similar funds having assets in excess of $1 billion.
Any net profit resulting from, or interest or income
produced by, such investments will be payable to the
Company upon the Company's request.
(b) Exchange Procedures for Shares of Company
Common Stock. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or
certificates which prior thereto represented shares of
Company Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and
acceptance thereof by the Exchange Agent, be entitled to
a certificate or certificates representing the number of
full shares of Company Common Stock, if any, to be
retained by the holder thereof pursuant to this Agreement
and the amount of cash, if any, into which the number of
shares of Company Common Stock previously represented by
such certificate or certificates surrendered shall have
been converted pursuant to this Agreement. The Exchange
Agent shall accept such certificates upon compliance with
such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices. After the
Effective Time, there shall be no further transfer on the
records of the Company or its transfer agent of
certificates representing shares of Company Common Stock
which have been converted, in whole or in part, pursuant
to this Agreement into the right to receive cash, and if
such certificates are presented to the Company for
transfer, they shall be cancelled against delivery of
cash and, if appropriate, certificates for retained
Company Common Stock. If any certificate for such Company
Common Stock is to be issued in, or if cash is to be
remitted to, a name other than that in which the
certificate for Company Common Stock surrendered for
exchange is registered, it shall be a condition of such
exchange or payment that the certificate so surrendered
shall be properly endorsed, with signature guaranteed, or
otherwise in proper form for transfer and that the person
requesting such exchange or payment shall pay to the
Company or its transfer agent any transfer or other taxes
required by reason of the issuance of certificates for
Company Common Stock pursuant hereto in a name other than
that of, or payment to a person other than, the
registered holder of
the certificate surrendered, or
establish to the satisfaction of the Company or its
transfer agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 2.5(b), each certificate for shares of Company
Common Stock shall be deemed at any time after the
Effective Time to represent only the right to receive
upon such surrender the Merger Consideration as
contemplated by Section 2.1. No interest will be paid or
will accrue on any cash payable as Merger Consideration
or in lieu of any fractional shares of Company Common
Stock.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect
to retained Company Common Stock with a record date after
the Effective Time shall be paid to the holder of any
unsurrendered certificate for shares of Company Common
Stock with respect to the shares of retained Company
Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.5(e) until the surrender of
such certificate in accordance with this Article 2.
Subject to the effect of applicable laws, following
surrender of any such certificate, there shall be paid to
the holder of the certificate representing whole shares
of retained Company Common Stock issued in connection
therewith, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a
fractional share of retained Company Common Stock to
which such holder is entitled pursuant to Section 2.5(e)
and the proportionate amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of
retained Company Common Stock, and (ii) at the
appropriate payment date, the proportionate amount of
dividends or other distributions with a record date after
the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with
respect to such whole shares of retained Company Common
Stock.
(d) No Further Ownership Rights in Company
Common Stock Exchanged. All cash paid or shares of
Company Common Stock retained upon the surrender for
exchange of certificates representing shares of Company
Common Stock in accordance with the terms of this Article
2 (including any cash paid pursuant to Section 2.5(e))
shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such
certificates.
(e) No Fractional Shares. No certificates or
scrip representing fractional shares of retained Company
Common Stock shall be issued pursuant to a Mixed Election
in connection with
the Merger, and such fractional share
interests will not entitle the owner thereof to vote or
to any rights of a stockholder of the Company after the
Merger. Notwithstanding any other provision of this
Agreement, each record holder of shares of Company Common
Stock exchanged pursuant to a Mixed Election in
connection with the Merger who would otherwise have been
entitled to receive a fraction of a share of retained
Company Common Stock (after taking into account all
shares of Company Common Stock delivered by such holder)
shall receive, in lieu thereof, a cash payment (without
interest) equal to an amount equal to the same fraction
of $75,000 as is equal to the fraction of one share of
Company Common Stock such holder would have been entitled
to otherwise retain.
(f) Termination of Exchange Fund. Any portion
of the Merger Consideration deposited with the Exchange
Agent pursuant to this Section 2.5 (the "Exchange Fund")
which remains undistributed to the holders of the
certificates representing shares of Company Common Stock
for six months after the Effective Time shall be
delivered to the Company, upon demand, and any holders of
shares of Company Common Stock prior to the Merger who
have not theretofore complied with this Article 2 shall
thereafter look only to the Company and only as general
creditors thereof for payment of their claims for cash,
if any, retained Company Common Stock, if any, any cash
in lieu of fractional shares of retained Company Common
Stock, or any dividends or distributions with respect to
retained Company Common Stock to which such holders may
be entitled.
(g) No Liability. None of Newco, the Company
or the Exchange Agent shall be liable to any person in
respect of any shares of retained Company Common Stock
(or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property,
escheat or similar law. If any certificates representing
shares of Company Common Stock shall not have been
surrendered prior to one year after the Effective Time
(or immediately prior to such earlier date on which any
cash, if any, any cash in lieu of fractional shares of
retained Company Common Stock, or any dividends or
distributions with respect to retained Company Common
Stock in respect of such certificate would otherwise
escheat to or become the property of any Governmental
Entity (as defined in Section 3.5(b)), any such cash,
dividends or distributions in respect of such certificate
shall, to the extent permitted by applicable law, become
the property of the Company, free and clear of all claims
or interest of any person previously entitled thereto.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to
Newco that, except as set forth in the Section of the
Disclosure Schedule delivered in connection with this
Agreement as of the date hereof (the "Disclosure
Schedule") relating to the correlative Section of this
Article 3:
SECTION 3.1 Organization and Qualification;
Subsidiaries. (a) Each of the Company and each of its
Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite
corporate power and authority and any necessary
governmental approvals to own, lease and operate its
properties and to carry on its business as it is now
being conducted, except where the failure to be so
organized, existing and in good standing or to have such
power, authority and governmental approval would not,
individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect (as defined below).
Each of the Company and each of its Subsidiaries is duly
qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good
standing which would not, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect. When used in connection with the Company
or any of its Subsidiaries, the term "Material Adverse
Effect" means any change or effect that (a) either
individually or in the aggregate with all other changes
or effects, is materially adverse to the business,
condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a
whole or (b) would prevent consummation of, or materially
adversely affect the ability of the parties hereto to
consummate, the transactions contemplated by this
Agreement.
(b) The only direct or indirect Subsidiaries
of the Company are those listed in Section 3.1(b) of the
Disclosure Schedule. Except as set forth in Section
3.1(b) of the Disclosure Schedule, all the outstanding
shares of capital stock of and other equity interests in
each such Subsidiary have been validly issued and are
fully paid and non-assessable and are owned (of record
and beneficially) by the Company, by another Subsidiary
of the Company or by the Company and another such
Subsidiary, free and clear of all pledges, claims,
mortgages, liens, charges, encumbrances and security
interests of any kind
or nature whatsoever (collectively,
"Liens"). Section 3.1(b) sets forth a list of any other
person that owns capital stock of and other equity
interests in any Subsidiary of the Company, and the
amount of such capital stock so owned. Except for the
ownership interests set forth in Section 3.1(b) of the
Disclosure Schedule, the Company does not own, directly
or indirectly, any capital stock or other ownership
interest in any other person.
SECTION 3.2 Certificates of Incorporation and
By-Laws. The Company has heretofore furnished to Newco
complete and correct copies of the certificate of
incorporation and the by-laws of the Company and each of
its Subsidiaries as currently in effect. Such
certificates of incorporation and by-laws are in full
force and effect and no other organizational documents
are applicable to or binding upon the Company or such
Subsidiaries. The Company and its Subsidiaries are not
in violation of any of the provisions of their respective
certificates of incorporation or by-laws.
SECTION 3.3 Capitalization. The authorized
capital stock of the Company consists of 50,000,000
shares of Company Common Stock and 5,000,000 shares of
Preferred Stock, $.10 par value per share (the "Company
Preferred Stock"). As of July 31, 1997, (i) 21,098,785
shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid
and nonassessable and were issued free of preemptive (or
similar) rights, (ii) 21,691 shares of Company Common
Stock were held in the treasury of the Company and (iii)
an aggregate of 512,000 shares of Company Common Stock
were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of
outstanding Options. Other than the shares of Company
Common Stock reserved for issuance as set forth in the
preceding clause (iii), no capital stock or other equity
interests in the Company or any of its Subsidiaries is
issuable upon exercise of the Options. As of the date
hereof, no shares of Company Preferred Stock are, and as
of the Closing Date no shares of Preferred Stock will be,
issued and outstanding. Since July 31, 1997, the
Company has not issued or reserved for issuance (a) any
shares of capital stock or other voting securities of the
Company or any of its Subsidiaries, except as a result of
the exercise of Options outstanding at July 31, 1997 or
(b) any Options, except as described in this Section 3.3.
All shares of Company Common Stock subject to issuance as
aforesaid pursuant to Options, upon issuance on the terms
and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable and free of
preemptive (or similar) rights. To the knowledge of the
Company, other than as provided in the Voting Agreement,
there are no irrevocable
proxies with respect to shares
of capital stock or other equity interests in the Company
or any Subsidiary of the Company. Except as set forth in
Section 3.3 of the Disclosure Schedule, there are no
agreements or arrangements pursuant to which the Company
is or could be required to register shares of Company
Common Stock or other securities under the Securities Act
of 1933, as amended (the "Securities Act"), or other
agreements or arrangements with or among any
securityholders of the Company with respect to securities
of the Company. There are no outstanding bonds,
debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders
of the Company may vote. Except for the Options, there
are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of
its Subsidiaries is a party or by which any of them is
bound obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or
other equity or voting securities of the Company or of
any of its Subsidiaries, or any securities exchangeable
for or convertible into capital stock or other equity or
voting securities of the Company or any of its
Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking, and there are not
outstanding any equity equivalents, interests in the
ownership or earnings of the Company or any of its
Subsidiaries or other similar rights (collectively, with
the Options, "Company Securities") and there are no other
options, calls, warrants or other similar rights,
agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of or
equity or voting interests in the Company or any of its
Subsidiaries to which the Company or any of its
Subsidiaries is a party. Except as set forth in Section
3.3 of the Disclosure Schedule, there are no outstanding
obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company
Securities or any outstanding Company Common Stock or to
provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such
Subsidiary or any other entity. As of the date hereof,
the only outstanding indebtedness for borrowed money of
the Company and its Subsidiaries is set forth in Section
3.3 of the Disclosure Schedule (the "Company Debt").
Except as set forth in Section 3.3 of the Disclosure
Schedule, (i) the loans and other extensions of credit
under the Company Debt are each prepayable on not more
than 30 days notice, without additional cost other than
reimbursement of customary breakage costs, and (ii)
interest payable with respect to each of the loans and
other extensions of credit under the Company Debt is
calculated on the basis of a floating interest rate.
SECTION 3.4 Authority Relative to This
Agreement. The Company has all necessary corporate power
and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated hereby. Assuming the accuracy
of Newco's representations contained in Section 4.7
(without giving effect to the knowledge qualification
thereof), the execution, delivery and performance of this
Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or
to consummate the transactions so contemplated (other
than, with respect to the Merger, the approval of this
Agreement by the holders of a majority of the outstanding
shares of Company Common Stock, 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 the
due authorization, execution and delivery hereof by
Newco, constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in
accordance with its terms. The Board of Directors of the
Company has approved this Agreement, the Voting Agreement
(including the option contemplated thereby) and, to the
extent necessary, the Employment Arrangements and the
transactions contemplated hereby and thereby (including
the Merger) (provided, in the case of the Voting
Agreement and the Employment Arrangements, that such
approval is limited to the forms provided to the Company
at the time of execution hereof without giving effect to
any amendments, modifications or waivers thereunder not
approved by the Company) so as to render inapplicable
hereto and thereto the limitation on business
combinations contained in Section 203 of the DGCL (or any
similar provision). As a result of the foregoing
actions, assuming the accuracy of Newco's representations
contained in Section 4.7 (without giving effect to the
knowledge qualification thereof), the only vote required
to authorize the Merger is the affirmative vote of a
majority of the outstanding shares of Company Common
Stock. To the knowledge of the Company, no state
takeover statute or similar statute or regulation, other
than Section 203 of the DGCL, applies or purports to
apply to this Agreement, the Merger, the Voting
Agreement, the Employment Arrangements, or any of the
other transactions contemplated hereby or thereby. No
provision of the certificate of incorporation, by-laws or
other governing instruments of the
Company or any of its
Subsidiaries would, directly or indirectly, restrict or
impair the ability of Newco or its affiliates to vote, or
otherwise to exercise the rights of a stockholder with
respect to, securities of the Company and its
Subsidiaries that may be acquired or controlled by Newco
or its affiliates or permit any stockholder to acquire
securities of the Company on a basis not available to
Newco in the event that Newco were to acquire securities
of the Company, and neither the Company nor any of its
Subsidiaries has any rights plan, preferred stock or
similar arrangement which have any of the aforementioned
consequences.
SECTION 3.5 No Conflict; Required Filings and
Consents. (a) The execution, delivery and performance of
this Agreement by the Company and the consummation of the
transactions contemplated hereby by the Company do not
and will not: (i) conflict with or violate the
certificate of incorporation or by-laws of the
Company or the equivalent organizational documents
of any of its Significant Subsidiaries; (ii)
assuming that all consents, approvals and
authorizations contemplated by clauses (i) and (ii)
of subsection (b) below have been obtained and all
filings described in such clauses have been made,
conflict with or violate any law, rule, regulation,
order, ordinance, judgment, arbitral award or decree
applicable to the Company or any of its Subsidiaries
or by which they or any of their respective
properties are bound or affected; or (iii) result in
any breach or violation of or constitute a default
(or an event which with notice or lapse of time or
both could become a default) or result in the loss
of a material benefit under, or give rise to any
right of termination, amendment, alteration,
acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries
pursuant to, any loan, credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease,
license, permit, concession, franchise or other
instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of
their respective properties are bound or affected,
except (A) in the case of clauses (ii) and (iii),
for any such conflicts, violations, breaches,
defaults or other occurrences which would not,
individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and (B)
in the case of clause (iii), other than as set forth
on Section 3.5(a) of the Disclosure Schedule.
(b) The execution, delivery and performance of
this Agreement by the Company and the consummation of the
transactions contemplated hereby by the Company do not
and will not require any consent, approval,
authorization, order or permit
of, action by,
registration, declaration or filing with or notice or
notification to, any Federal, state, local or foreign
government or any court, arbitral authority,
administrative agency or commission or other governmental
authority, official or agency, domestic or foreign (a
"Governmental Entity"), except for (i) the applicable
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, the Securities Act
and the rules and regulations promulgated thereunder, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and state securities or "Blue
Sky" laws, (ii) the filing and recordation of appropriate
merger or other documents as required by the DGCL, and
(iii) such consents, approvals, authorizations, orders,
permits, actions, registrations, declarations, filings,
notices or notifications the failure of which to make or
obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 3.6 Compliance. The conduct of the
business of each of the Company and each of its
Subsidiaries complies with all laws, rules, regulations,
orders, ordinances, judgments, arbitral awards and
decrees applicable thereto, except for violations or
failures so to comply, if any, that, individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of
its Subsidiaries is, or has received any notice or has
knowledge that any other party is, in default or
violation of any loan, credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license,
permit, concession, franchise or other instrument or
obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of
its Subsidiaries or its or any of their respective
properties are bound or affected, except for any such
conflicts, defaults or violations which would not,
individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements
and documents required to be filed with the Securities
and Exchange Commission (the "SEC") since October 15,
1996 (collectively, including all exhibits and schedules
thereto and documents incorporated therein by reference,
the "SEC Reports"), each of which has complied in all
material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated
thereunder, or the Exchange Act and the rules and
regulations promulgated thereunder, as applicable, each
as in effect on the date so filed. No SEC Report
contained, when filed, any untrue statement of a material
fact or omitted to
state a material fact required to be
stated or incorporated by reference therein or necessary
in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading. Except to the extent revised or superseded
by a subsequent filing with the SEC (a copy of which has
been provided to Newco prior to the date hereof), none of
the SEC Reports filed prior to the date hereof contains
any untrue statement of a material fact or omits to state
a material fact required to be stated or incorporated by
reference therein or necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the audited and unaudited
consolidated financial statements of the Company
(including any related notes thereto) included in the SEC
Reports, complies as to form in all material respects
with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect
thereto, has been prepared in accordance with generally
accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly presents the
consolidated financial position of the Company and its
Subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in
cash flows for the periods indicated.
(c) Except as and to the extent set forth on
the consolidated balance sheet of the Company and its
Subsidiaries at December 31, 1996, including the notes
thereto, neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or
Events. Since December 31, 1996, except as contemplated
by this Agreement, disclosed in the SEC Reports filed and
publicly available prior to the date of this Agreement or
disclosed in Section 3.8 of the Disclosure Schedule, the
Company and its Subsidiaries have conducted their
businesses only in the ordinary course of business
consistent with past practice and, since such date, there
has not been (i) any condition, event or occurrence
which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect or (ii) any
action which, if it had been taken after the date hereof,
would have required the consent of Newco under Section
5.1 hereof.
SECTION 3.9 Absence of Litigation. There are
no suits, claims, actions, proceedings or investigations
pending
or, to the knowledge of the Company, threatened
against or affecting the Company or any of its
Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, before any Governmental
Entity, that individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect,
and, to the knowledge of the Company, no basis for any
such suit, claim, action, proceeding or investigation
exists. Neither the Company nor any of its Subsidiaries
nor any of their respective properties is or are subject
to any order, writ, judgment, injunction, decree,
determination or award having, or which, insofar as can
be reasonably foreseen, in the future would reasonably be
expected to have a Material Adverse Effect. As of the
date hereof, no officer or director of the Company is a
defendant in any litigation commenced by stockholders of
the Company with respect to the performance of his or her
duties as an officer and/or director of the Company under
any Federal, state, local or foreign law (including
litigation under Federal and state securities laws).
Except as set forth in Section 3.9 of the Disclosure
Schedule, to the knowledge of the Company, there exist no
indemnification agreements with any of the directors and
officers of the Company. Each of the director
indemnification agreements referred to in item A.2. of
Section 3.9 of the Disclosure Schedule is in the form
included as Exhibit 10(l) to the Company's Form 10-K for
the year ended December 31, 1996.
SECTION 3.10 Properties. (a) The Company or
one of its Subsidiaries has (i) good and marketable fee
title to the real property owned in fee by the Company or
any of its Subsidiaries (collectively, the "Owned
Properties") and (ii) good and valid leasehold title or
other occupancy right to the real property leased,
subleased or licensed by the Company or any of its
Subsidiaries (collectively, the "Leased Properties")
(Owned Properties and Leased Properties being sometimes
referred to herein collectively as the "Company
Properties"), in each case free and clear of all options
to purchase or lease (in the case of the Owned
Properties), leases, subleases, rights of first offer,
conditions of limitation, easements, Liens, covenants,
rights-of-way and other restrictions (collectively,
"Title Matters"), except for such Title Matters set forth
in Section 3.10(a) of the Disclosure Schedule, which
Title Matters, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse
Effect. Section 3.10(a) of the Disclosure Schedule sets
forth a complete and accurate list and description of all
Owned Properties and all Leased Properties.
(b) Each agreement under which real property
is leased, subleased or licensed to the Company or one of
its Subsidiaries (collectively, the "Company Leases") is
in full force
and effect in accordance with its
respective terms and the Company or one of its
Subsidiaries is the holder of the lessee's or tenant's
interest thereunder and there exists no default under any
of the Company Leases by the Company or any of its
Subsidiaries and no circumstance exists which, with the
giving of notice, the passage of time or both could
result in such a default, except for such defaults or
other circumstances which, individually or in the
aggregate, would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section
3.10(b) of the Disclosure Schedule, the transfer of the
shares of Company Common Stock or the consummation of any
other part of the transactions contemplated hereby does
not violate the terms of any of the Company Leases.
Except as set forth in Section 3.10(b) of the Disclosure
Schedule, no Company Lease is subject to any pledge,
Lien, sublease, assignment, license or other agreement
granting to any third party any interest in such Company
Lease or any right to the use or occupancy of any Leased
Property. Except as set forth in Section 3.10(b) of the
Disclosure Schedule, true and complete copies of the
Company Leases have previously been delivered to Newco,
including (without limitation) all amendments or
modifications thereof and all side letters or other
instruments affecting the obligations of any party
thereunder. The lessee under each Company Lease is now
in possession of the applicable Leased Property.
(c) Each of the Company and its Subsidiaries
has all permits necessary to own or operate its Owned
Real Property and Leased Real Property as currently
owned, and no such permits will be required, as a result
of the Merger or the other transactions contemplated
hereby, to be issued after the Closing in order to permit
the Company following the Merger to continue to own or
operate such Company Properties, other than any such
permits the absence of which would not reasonably be
expected to have a Material Adverse Effect. Except as
set forth in Section 3.10(c) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has
received, with respect to any Owned Real Property or
Leased Real Property, any written notice of default or
any written notice of noncompliance with respect to
applicable Federal, state, local and foreign laws and
regulations relating to zoning, building, fire, use
restriction or safety or health codes which have not been
remedied in all respects which would reasonably be
expected to have a Material Adverse Effect. There is no
pending or, to the knowledge of the Company, threatened
condemnation or other governmental taking of any of the
Owned Real Property or Leased Real Property. All
buildings, structures, improvements and fixtures located
on, under, over or within the Company Properties, and all
other aspects of each of the Company Properties, (A) are
in good operating condition and repair and are
structurally sound and
free of any material defects; and
(B) are suitable, sufficient and appropriate in all
respects for their current and contemplated uses.
SECTION 3.11 Employee Benefit Plans. (a)
Section 3.11(a) of the Disclosure Schedule contains, to
the knowledge of the Company, a true and complete list of
each "employee benefit plan" (within the meaning of
Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")(including without
limitation multiemployer plans within the meaning of
ERISA Section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by
this Agreement or otherwise), under which any employee or
former employee of the Company or any of its Subsidiaries
has, or could reasonably be expected to have, any present
or future right to benefits or under which the Company or
any Subsidiary of the Company has, or could reasonably be
expected to have, any present or future material
liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred
to as the "Company Plans". Section 3.11(a) of the
Disclosure Schedule also contains a true and complete
description of all severance plans of the Company or any
of its Subsidiaries. No Company Plan is a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA or
is an "employee pension plan" within the meaning of
Section 3(2) of ERISA subject to Title IV of ERISA.
(b) With respect to each Company Plan, the
Company has delivered or made available to Newco a
current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and,
to the extent applicable, (i) any related trust
agreement, annuity contract or other funding instrument;
(ii) the most recent determination letter; (iii) any
summary plan description and other written communications
(or description of any oral communication) by the Company
or any of its Subsidiaries which modify in any
significant respect the benefits provided under the terms
of any Company Plan in a manner not reflected in any of
the documents otherwise described in this subsection (b);
and (iv) for the three most recent years (A) the Form
5500 and attached schedules; (B) audited financial
statements; and (C) actuarial valuation reports.
(c) With respect to all the Company Plans,
except as set forth in the SEC Reports: (i) all Company
Plans are in
compliance with all applicable law,
including the Internal Revenue Code of 1986, as amended
(the "Code"), and ERISA, including in compliance with all
filing and reporting requirements, except as would not
reasonably be expected to have a Material Adverse Effect;
(ii) the aggregate projected benefit obligations of each
pension plan that is subject to Title IV of ERISA (as of
the date of the most recent actuarial valuation prepared
for such Plan) do not exceed the fair market value of the
assets of such pension plan (as of the date of such
valuation), and, to the knowledge of the Company, no
material adverse change has occurred with respect to the
financial condition of such plan since such last
valuation; (iii) each of the Company Plans which is
intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and such determination
has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent
amendment thereto or a failure to amend, except that it
may be necessary to make additional amendments
retroactively to maintain the "qualified" status of such
Company Plans, and the period for making any such
necessary retroactive amendments has not expired; (iv) no
act, omission or transaction (individually or in the
aggregate) has occurred with respect to any Company Plan
that has resulted or could result in any material
liability (direct or indirect) of the Company or any of
its Subsidiaries under Sections 409 or 502(c)(i) or (l)
of ERISA or Chapter 43 of Subtitle (A) of the Code; (v)
there is no pending or, to the knowledge of the Company,
threatened litigation or administrative agency proceeding
relating to any Company Plan (other than benefit claims
in the ordinary course); (vi) the Company has no
obligations under any unfunded deferred compensation
plans; (vii) neither the Company, its Subsidiaries nor
any entity that is treated as a single employer with the
Company or its Subsidiaries under Section 414(b), (c),
(m) or (o) of the Code (an "ERISA Affiliate") has
incurred or reasonably expects to incur any Lien or
liability to the Pension Benefit Guaranty Corporation,
any Pension Plan or otherwise under Sections 3.02 or 6.01
et seq. of Title IV of ERISA (other than the payment of
contributions or premiums, none of which are overdue) or
under Sections 412, 4971 or 4980B of the Code; and (viii)
neither the Company nor any of its Subsidiaries makes any
contributions to or has any obligation to create or
contribute to any multiemployer plan (within the meaning
of Section 3(37) of ERISA) or a multiple employer plan
(within the meaning of Section 413(c) of the Code).
(d) Except as specifically contemplated by
this Agreement or as disclosed in Section 3.11(d) of the
Disclosure Schedule, the consummation of the Merger and
the other transactions contemplated hereby will not (x)
entitle any employee or director of the Company or any of
its Subsidiaries to severance
pay, or (y) accelerate the
time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant
to, any of the Company Plans.
SECTION 3.12 Tax Matters. For purposes of
this Section 3.12 and Section 3.11, any reference to the
Company or its Subsidiaries shall include any corporation
that merged or was liquidated with and into the Company
or any of its Subsidiaries. Except as would not
individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect:
(a) All Tax Returns required to be filed by or
with respect to the Company and its Subsidiaries have
been timely filed. The Company and its Subsidiaries have
(i) timely paid all Taxes that are due, or that have been
asserted in writing by any taxing authority to be due,
from or with respect to it for the periods ending prior
to the date hereof or (ii) provided adequate reserves in
its financial statements for any Taxes that have not been
paid, whether or not shown as being due on any Tax
Returns.
(b) No claim for unpaid Taxes has become a
Lien against the property of the Company or any of its
Subsidiaries or is being asserted against the Company or
any of its Subsidiaries.
(c) The statute of limitations with respect to
the Tax Returns of the Company and its Subsidiaries and
of each affiliated group (within the meaning of the Code)
of which the Company and any of its Subsidiaries are or
have been a member for all periods through the respective
years specified in Section 3.12 of the Disclosure
Schedule has expired. There are no outstanding
agreements, waivers or arrangements extending the
statutory period of limitation applicable to any claim
for, or the period for the collection or assessment of,
Taxes due from or with respect to the Company or any
Subsidiary of the Company for any taxable period, and no
power of attorney granted by or with respect to the
Company or any Subsidiary of the Company relating to
Taxes is currently in force.
(d) No audit or other proceeding by any
Governmental Entity has formally commenced and no
notification has been given to the Company or any
Subsidiary of the Company that such an audit or other
proceeding is pending or threatened with respect to any
Taxes due from or with respect to the Company or any
Subsidiary of the Company or any Tax Return filed by or
with respect to the Company or any Subsidiary of the
Company. No assessment of Tax has been proposed in
writing against the Company or any Subsidiary of the
Company or any of their assets or properties.
(e) As of the Effective Time, neither the
Company nor any of the Subsidiaries shall be a party to,
be bound by or have any obligation under, any Tax sharing
agreement or similar contract or arrangement.
(f) There is no contract or agreement, plan or
arrangement by the Company or any Subsidiary of the
Company covering any person that, individually or
collectively, could give rise to the payment of any
amount that would not be deductible by the Company or its
Subsidiaries by reason of Section 162(m) or Section 280G
of the Code or otherwise, as now in effect or as in
effect as of the Effective Time.
(g) As used herein, "Taxes" shall mean all
taxes of any kind, including, without limitation, those
on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any
Governmental Entity. As used herein, "Tax Return" shall
mean any return, declaration, report, claim for refund or
information return or statement relating to Taxes,
including any schedule or attachment thereto, and
including any amendment thereof.
SECTION 3.13 Environmental Laws. (a) Except
as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect:
(i) the Company and its Subsidiaries hold, and, to the
knowledge of the Company, are in compliance with, all
Environmental Permits, and the Company and its
Subsidiaries are otherwise in compliance with all
applicable Environmental Laws and there are no
circumstances that might prevent or interfere with such
compliance in the future; (ii) none of the Company or any
of its Subsidiaries has received any Environmental Claim,
and the Company is not aware of any threatened
Environmental Claim or of any circumstances, conditions
or events that could reasonably be expected to give rise
to a Environmental Claim, against the Company or any of
its Subsidiaries; (iii) none of the Company or any of its
Subsidiaries has entered into or agreed to any consent
decree, order or agreement under any Environmental Law,
and none of the Company or any of its Subsidiaries is
subject to any judgment, decree, order or other
requirement relating to compliance with
any Environmental
Law or to investigation, cleanup, remediation or removal
of regulated substances under any Environmental Law; (iv)
to the knowledge of the Company, there are no (A)
underground storage tanks, (B) polychlorinated biphenyls,
(C) asbestos or asbestos-containing materials, (D)
urea-formaldehyde insulation, (E) sumps, (F) surface
impoundments, (G) landfills, (H) sewers or septic systems
or (I) other Hazardous Materials present at any facility
owned, leased, operated or otherwise used by the Company
or any of its Subsidiaries that could reasonably be
expected to give rise to a liability of the Company or
any of its Subsidiaries under any Environmental Laws; (v)
to the knowledge of the Company, there are no past
(including, without limitation, with respect to assets or
businesses formerly owned, leased or operated by the
Company or any of its Subsidiaries) or present actions,
activities, events, conditions or circumstances,
including without limitation the release, threatened
release, migration, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials,
that could reasonably be expected to give rise to a
material liability of the Company or any of its
Subsidiaries under any Environmental Laws or any contract
or agreement; (vi) no modification, revocation,
reissuance, alteration, transfer, or amendment of the
Environmental Permits, or any review by, or approval of,
any third party of the Environmental Permits is required
in connection with the execution or delivery of this
Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business
of the Company or its Subsidiaries following such
consummation; (vii) to the knowledge of the Company,
Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to
be released at, on, from or under any of the properties
or facilities currently or formerly owned, leased or
otherwise used by the Company or any of its Subsidiaries,
in violation of, or in a manner or to a location that
could give rise to a material liability under, any
Environmental Laws; and (viii) to the knowledge of the
Company, the Company and its Subsidiaries have not
assumed, contractually or by operation of law, any
liabilities or obligations under any Environmental Laws.
(b) For purposes of this Agreement, the
following terms shall have the following meanings:
"Environmental Claim" means any written or oral
notice, claim, demand, action, suit, complaint,
proceeding or other communication by any person alleging
liability or potential liability (including without
limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of,
relating to, based on or resulting from (i) the presence,
discharge, emission, release or threatened release of any
Hazardous Materials at any location, whether or not
owned, leased or operated by the Company or any of its
Subsidiaries, (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to
obligations or liabilities under any Environmental Laws.
"Environmental Laws" means all applicable
Federal, state, local and foreign statutes, rules,
regulations, ordinances, orders, decrees and common law
relating in any manner to contamination, pollution or
protection of human health or the environment, including
without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste
Disposal Act, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Occupational Safety and
Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act,
all as amended, and similar state, local and foreign
laws.
"Environmental Permits" means all permits,
licenses, registrations and other governmental
authorizations required under Environmental Laws for the
Company and its Subsidiaries, including without
limitation in connection with the operations of the
Company's and its Subsidiaries' facilities and otherwise
to conduct their respective businesses.
"Hazardous Materials" means all hazardous or
toxic substances, wastes, materials or chemicals,
petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other
materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to,
or that could form the basis of liability under, any
Environmental Law.
SECTION 3.14 Intellectual Property. Except as
would not reasonably be expected to have a Material
Adverse Effect: (i) the Company and each of its
Subsidiaries owns, or is licensed or otherwise has the
right to use (in each case, free
and clear of any Liens
of any kind), all Intellectual Property used in or
necessary for the conduct of its business as currently
conducted; (ii) no claims are pending or, to the
knowledge of the Company, threatened, and the Company and
its Subsidiaries have not received any notice or
notification alleging, that the Company or any of its
Subsidiaries is infringing on or otherwise violating the
rights of any person with regard to any Intellectual
Property owned by, licensed to and/or used by the Company
or its Subsidiaries and, to the knowledge of the Company,
there is no basis therefor; (iii) neither the Company nor
any of its subsidiaries has infringed upon or
misappropriated, or is infringing upon or
misappropriating, any U.S. or foreign patents or
copyrights or any U.S., state or foreign trademarks, or
other Intellectual Property rights of any person; (iv) to
the knowledge of the Company, no person is infringing on
or otherwise violating any right of the Company or any of
its Subsidiaries with respect to any Intellectual
Property owned by and/or licensed to the Company or its
Subsidiaries; and (v) the execution and delivery of this
Agreement, compliance with its terms and the consummation
of the transactions contemplated hereby do not and will
not conflict with or result in any violation or default
(with or without notice or lapse of time or both) or give
rise to any right, license or Lien relating to
Intellectual Property, or right of termination,
alteration, amendment, cancellation or acceleration of
any Intellectual Property right or obligation, or the
loss or encumbrance of any Intellectual Property or
benefit related thereto, or result in or require the
creation, imposition or extension of any Lien upon any
Intellectual Property or right. For purposes of this
Agreement, "Intellectual Property" means all intellectual
property or other proprietary rights of every kind,
including, without limitation, all domestic or foreign
patents, patent applications, inventions (whether or not
patentable), processes, products, technologies,
discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks (registered and
unregistered) and trademark applications and
registrations, brand names, certification marks, service
marks and service xxxx applications and registrations,
trade names, trade dress, copyright registrations, design
rights, customer lists, marketing and customer
information, mask works, rights, know-how, licenses,
technical information (whether confidential or
otherwise), software, and all documentation thereof. The
items disclosed on Section 3.14 of the Disclosure
Schedule do not and will not, in any material respect,
limit the ability of the Company and its Subsidiaries to
conduct their business in the ordinary course of business
consistent with past practice, and do not and will not
result in the imposition of significant additional costs.
SECTION 3.15 Labor Matters. Except as
disclosed in Section 3.15 of the Disclosure Schedule, (i)
neither the Company nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding
with a labor union or labor organization; (ii) to the
knowledge of the Company, neither the Company nor any of
its Subsidiaries is the subject of any proceeding
asserting that it or any of its Subsidiaries has
committed an unfair labor practice or seeking to compel
it to bargain with any labor organization as to wages or
conditions of employment; (iii) there is no strike, work
stoppage or other labor dispute involving the Company or
any of its Subsidiaries pending or, to the Company's
knowledge, threatened; (iv) to the knowledge of the
Company, no action, suit, complaint, charge, arbitration,
inquiry, proceeding or investigation by or before any
Governmental Entity brought by or on behalf of any
employee, prospective employee, former employee, retiree,
labor organization or other representative of its
employees is pending or threatened against the Company or
any of its Subsidiaries; (v) to the knowledge of the
Company, no grievance is pending or threatened against
the Company or any of its Subsidiaries; and (vi) neither
the Company nor any of its Subsidiaries is a party to, or
otherwise bound by, any consent decree with, or citation
by, any Governmental Entity relating to employees or
employment practices.
SECTION 3.16 Business Relationships; No
Restrictive Agreements. (a) The relationships of the
Company and its Subsidiaries with its customers,
distributors, licensors, designers and suppliers are
satisfactory in all material respects and the execution
of this Agreement and the consummation of the Merger and
the transactions contemplated hereby will not materially
adversely affect the relationships of the Company and its
Subsidiaries with such customers, distributors,
licensors, designers and suppliers.
(b) The Company and its Subsidiaries are not
parties to or bound by any agreement, contract, policy,
license, document, instrument, arrangement or commitment
that limits the freedom of the Company or any of its
Subsidiaries to compete in any line of business or with
any person or in any geographic area or which would so
limit the freedom of the Company or any of its
Subsidiaries or affiliates after the Effective Time.
SECTION 3.17 Form S-4; Proxy Statement. None
of the information supplied by the Company for inclusion
in (i) the registration statement on Form S-4 to be filed
with the SEC by the Company in connection with the
retention of Company Common Stock following the Merger
(such Form S-4, as amended or supplemented, is herein
referred to as the "Form S-4") will, at
the time the Form
S-4 is filed with the SEC, and at any time it is amended
or supplemented or at the time it becomes effective under
the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading and (ii) the proxy statement to be
sent to the stockholders of the Company in connection
with the Stockholders Meeting (as defined in Section 6.1)
(such proxy statement, as amended or supplemented, is
herein referred to as the "Proxy Statement") will, at the
date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
in order to make the statements therein, in the light of
the circumstances under which they are made, not
misleading, except that no representation is made by the
Company with respect to statements made or incorporated
by reference therein based on information supplied in
writing by Newco specifically for inclusion in the Proxy
Statement. The Form S-4 will, as of its effective date,
and the prospectus contained therein will, as of its
date, comply as to form in all material respects with the
requirements of the Securities Act and the rules and
regulations promulgated thereunder. The Proxy Statement
will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Agreement, the parties agree that statements made and
information in the Form S-4 and the Proxy Statement
relating to the Federal income tax consequences of the
transactions herein contemplated to holders of Company
Common Stock shall be deemed to be supplied by the
Company and not by Newco.
SECTION 3.18 Brokers. No broker, finder or
investment banker other than Xxxxxxxxxxx Xxxxxxx & Co.,
Inc. (the "Company Financial Advisor") is entitled to any
brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf
of the Company. The Company has heretofore furnished to
Newco a complete and correct copy of all agreements
between the Company and the Company Financial Advisor
pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby.
Assuming the amount of net debt reflected in the
Company's financial records as of June 30, 1997, as
provided to the Company Financial Advisor, is the same
amount at the Closing, the aggregate fees payable under
such agreements would be approximately $2.0 million.
Compensation for the Company Financial Advisor's services
in connection with the transactions contemplated by this
Agreement will be calculated on the Closing Date and will
be based on the Aggregate Considera
tion (as such term is
defined in the letter agreement, dated July 8, 1997,
between the Company Financial Advisor and the Company)
paid in such transactions.
SECTION 3.19 Opinion of Company Financial
Advisor. The Company has received the opinion of the
Company Financial Advisor dated the date of this
Agreement, to the effect that the Cash Election Price to
be received in the Merger by the Company's stockholders,
other than the Stockholder, is fair to such stockholders
from a financial point of view.
SECTION 3.20 Board Recommendation. The Board
of Directors of the Company, at a meeting duly called and
held, has by unanimous vote of the disinterested
directors present (which directors constituted a quorum)
(i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, and the Voting
Agreement and the transactions contemplated thereby,
taken together, based on the availability of the Cash
Election Price to any stockholder who so elects, are fair
to and in the best interests of the stockholders of the
Company (other than the Stockholder), and (ii) resolved
to recommend that the holders of the shares of Company
Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco hereby represents and warrants to the
Company that:
SECTION 4.1 Corporate Organization. Newco is
a corporation duly organized, validly existing and in
good standing under the laws of Delaware and has the
requisite corporate power and authority and any necessary
governmental approvals to own, lease and operate its
properties and to carry on its business as it is now
being conducted, except where the failure to be so
organized, existing and in good standing or to have such
power, authority and governmental approvals would not,
individually or in the aggregate, reasonably be expected
to prevent the consummation of the Merger. Newco was
formed on June 23, 1997 solely for the purpose of
engaging in the transactions contemplated hereby. Newco
has not (i) incurred, nor will it incur prior to and
including the Effective Time, directly or indirectly, any
liabilities or obligations, (ii) engaged in any business
activity or transaction, or (iii) entered into any
agreement or arrangement with any person or entity,
except, in
any such case, in connection with its
organization or the negotiation of this Agreement, the
Voting Agreement, the Employment Arrangements, the
financing of the transactions contemplated hereby and the
performance thereof.
SECTION 4.2 Authority Relative to This
Agreement. Newco has all necessary corporate power and
authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Newco and
the consummation by Newco of the transactions
contemplated hereby have been duly and validly authorized
by all necessary corporate action and no other corporate
proceedings on the part of Newco 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 appropriate
merger documents as required by the DGCL). This
Agreement has been duly and validly executed and
delivered by Newco and, assuming due authorization,
execution and delivery by the Company, constitutes a
legal, valid and binding obligation of Newco enforceable
against it in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and
Consents. (a) The execution, delivery and performance
of this Agreement by Newco does not and will not: (i)
conflict with or violate the certificate of incorporation
or by-laws of Newco; (ii) assuming that all consents,
approvals and authorizations contemplated by clauses (i)
and (ii) of subsection (b) below have been obtained and
all filings described in such clauses have been made,
conflict with or violate any law, rule, regulation,
order, ordinance, judgment, arbitral award or decree
applicable to Newco or by which it or any of its
properties are bound or affected; or (iii) result in any
breach or violation of or constitute a default (or an
event which with notice or lapse of time or both could
become a default) or result in the loss of a material
benefit under, or give rise to any right of termination,
amendment, alteration, acceleration or cancellation of,
or result in the creation of a Lien on any of the
properties or assets of Newco pursuant to, any loan,
credit agreement, note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, concession,
franchise or other instrument or obligation to which
Newco is a party or by which Newco or any of its
properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which
would not, individually or in the aggregate, reasonably
be expected to prevent the consummation of the Merger.
(b) The execution, delivery and performance of
this Agreement by Newco and the consummation of the
transactions contemplated hereby by Newco do not and will
not require any consent, approval, authorization, order
or permit of, action by, registration, declaration or
filing with or notice or notification to, any
Governmental Entity, except for (i) the applicable
requirements, if any, of the Exchange Act and the rules
and regulations promulgated thereunder, the Securities
Act and the rules and regulations promulgated thereunder,
the HSR Act, and state securities or "Blue Sky" laws,
(ii) the filing and recordation of appropriate merger or
other documents as required by the DGCL, and (iii) such
consents, approvals, authorizations, orders, permits,
actions, registrations, declarations, filings, notices or
notifications the failure of which to make or obtain
would not, individually or in the aggregate, reasonably
be expected to prevent the consummation of the Merger.
SECTION 4.4 Form S-4; Proxy Statement. None
of the information supplied in writing by Newco
specifically for inclusion in (i) the Form S-4 will, at
the time the Form S-4 is filed with the SEC, and at any
time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading and (ii)
the Proxy Statement will, at the date it is first mailed
to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances
under which they are made, not misleading.
Notwithstanding the foregoing, Newco makes no
representation or warranty with respect to any
information supplied by the Company or any of its
representatives which is contained in or incorporated by
reference in any of the foregoing documents.
SECTION 4.5 Brokers. No broker, finder or
investment banker (other than Xxxxxxx, Xxxxx & Co.) is
entitled to any brokerage, finder's or other fee or
commission in connection with the transactions
contemplated by this Agreement based upon arrangements
made by and on behalf of Newco. A copy of the fee
arrangement has previously been provided to the Company.
Unless the Merger is consummated, the Company shall not
be responsible for the payment of any such fees to
Xxxxxxx, Sachs & Co.
SECTION 4.6 Financing. Attached as Annexes
A-1 to A-3 of the Disclosure Schedule are true and
complete copies of the letters, dated the date hereof,
issued in connection with
the financing of the
transactions contemplated by this Agreement. The terms
and conditions of the letters attached as Annexes A-1 to
A-3 of the Disclosure Schedule are satisfactory to Newco.
As of the date of this Agreement, Newco has been advised
by its independent accountants that such accountants
believe the Merger will be recorded as a recapitalization
for financial reporting purposes.
SECTION 4.7 Newco Not an Interested
Stockholder. As of the date of this Agreement, to the
knowledge of Newco, neither Newco nor any of its
affiliates is an "interested stockholder" as such term is
defined in Section 203 of the DGCL.
SECTION 4.8 Solvency of the Company Following
the Merger. Newco believes that, immediately after the
Effective Time and after giving effect to the Merger and
the transactions contemplated hereby, the Company will
not (i) be insolvent (either because its financial
condition is such that the sum of its debts is greater
than the fair market value of its assets or because the
fair saleable value of its assets is less than the amount
required to pay its probable liability on its existing
debts as they mature), (ii) have unreasonably small
capital with which to engage in its business or (iii)
have incurred debts beyond its ability to pay as they
become due.
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business Pending the
Merger. The Company covenants and agrees that, during the
period from the date hereof to the Effective Time, unless
Newco gives its prior written consent, the businesses of
the Company and its Subsidiaries shall be conducted only
in, and the Company and its Subsidiaries shall not take
any action except in, the ordinary course of business
consistent with past practice and in compliance with
applicable laws; and the Company and its Subsidiaries
shall each use its reasonable best efforts (i) to
preserve substantially intact the business organization
of the Company and its Subsidiaries, (ii) to keep
available the services of the present officers, employees
and consultants of the Company and its Subsidiaries and
(iii) to preserve the present relationships of the
Company and its Subsidiaries with customers,
distributors, licensors, designers and suppliers and
other persons with which the Company or any of its
Subsidiaries has significant business relations. Except
as expressly contemplated by this Agreement, by way of
amplification and not limitation, neither the Company nor
any of its Subsidiaries shall, between the date of this
Agreement and the Effective Time, except as set forth in
Section 5.1 of the Disclosure Schedule,
directly or
indirectly take, or propose or commit to take, any of the
following actions without the prior written consent of
Newco:
(a) amend or otherwise change the certificate
of incorporation or by-laws or equivalent organizational
documents of the Company or any of its Subsidiaries;
(b) issue, deliver, sell, lease, sell and
leaseback, pledge, mortgage, dispose of or encumber or
subject to any Lien, or authorize or commit to the
issuance, delivery, sale, lease, sale/leaseback, pledge,
mortgage, disposition or encumbrance of or to the
subjection to any Lien, (A) any shares of capital stock
of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any
shares of capital stock or any other ownership interest
(including but not limited to stock appreciation rights
or phantom stock) of the Company or any of its
Subsidiaries (except for the issuance and delivery of
shares of Company Common Stock issuable in accordance
with the terms of Options outstanding as of the date
hereof, and upon the terms in effect as of the date
hereof) or (B) any assets of the Company or any of its
Subsidiaries, other than inventory or other assets sold,
leased or disposed of in the ordinary course of business
consistent with past practice;
(c) declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital
stock, other than dividends or distributions by a direct
or indirect wholly owned Subsidiary of the Company to the
Company and/or other direct or indirect wholly owned
Subsidiaries of the Company;
(d) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock, or any other
ownership interest (including but not limited to stock
appreciation rights or phantom stock), of the Company or
any of its Subsidiaries or any options, warrants,
convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other
ownership interest (including but not limited to stock
appreciation rights or phantom stock), other than in
connection with the exercise of Options outstanding on
the date hereof pursuant to Section 8.3 of the Stock
Plan;
(e) (i) other than with respect to borrowings
and repayments in the ordinary course of business under
the
lines of credit listed on Schedule 5.1(e)(i) (which
borrowings shall not in aggregate amount exceed $18
million in U.S. dollars at any one time outstanding and
shall not have interest rate periods extending beyond the
Effective Time), repurchase, repay, incur or cause or
permit to exist any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or enter
into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter
into any arrangement having the economic effect of any of
the foregoing, or make any loans, advances or capital
contributions to, or investments in, any person other
than the Company or a direct or indirect wholly owned
Subsidiary of the Company; (ii) enter into, terminate,
waive, modify or amend any material contract, license or
agreement, other than in the ordinary course of business
consistent with past practice; or (iii) except as set
forth in the Company's capital budget which is set forth
in Section 5.1(e)(iii) of the Disclosure Schedule,
authorize any single expenditure for any capital or
acquisition (including without limitation any acquisition
of any corporation, partnership or other business
enterprise or division thereof by share purchase, merger,
consolidation or otherwise) other than capital
expenditures not to exceed $50,000 individually or
$200,000 in the aggregate;
(f) (i) increase the compensation or fringe
benefits of any of its directors, officers or employees,
except for increases in salary or wages of employees of
the Company or its Subsidiaries, who are not directors or
officers of the Company, in the ordinary course of
business and consistent in all material respects with the
Company's budget, (ii) grant any severance or termination
pay not currently required to be paid under existing
severance plans to, or enter into or modify in any
material or economic respect any employment, consulting
or severance agreement or arrangement with, any present
or former director, officer or other employee of the
Company or any of its Subsidiaries, except for the
granting of severance or termination pay, in the ordinary
course of business consistent with past practice, to
nonexecutive employees who are terminated by the Company
after the date hereof, (iii) establish, adopt, enter into
or amend or terminate any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred
compensation, employment, termination, severance
or other
plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees or
(iv) terminate the existing employment arrangements with
any of the individuals listed in Section 5.1(f) of the
Disclosure Schedule or take any action that would
constitute a breach of any such arrangements or take any
action (other than consummation of the Merger) which
would cause any change-of-control, severance or similar
payment to be payable to any such individual or make any
payment of any bonus or other extraordinary or
termination payment which such individual has agreed to
waive, modify or amend in connection with the Employment
Arrangements;
(g) except as may be required as a result of a
change in law or in generally accepted accounting
principles, change in any material respect any of the
accounting practices or principles used by it;
(h) make any material tax election or settle
or compromise any material Federal, state, local or
foreign Tax liability;
(i) settle or compromise any pending or
threatened suit, action or claim for in excess of
$100,000 per suit, action or claim, and $250,000 in the
aggregate, or which relates to the transactions
contemplated hereby;
(j) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than
this Agreement and the Merger); or
(k) take, or offer or propose to take, or
agree to take in writing or otherwise, any of the actions
described in Sections 5.1(a) through 5.1(j).
ARTICLE 6.
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. The
Company, acting through its Board of Directors, will, as
promptly as practicable following the date of
effectiveness of the Form S-4 and in consultation with
Newco, (i) duly call, give notice of, convene and hold a
meeting of its stockholders for the purpose of
considering and adopting and approving this Agreement and
the transactions contemplated hereby (the "Stockholders
Meeting")
and (ii) (A) include in the Proxy Statement the
unanimous recommendation of the Board of Directors that
the stockholders of the Company vote in favor of the
approval of this Agreement and the transactions
contemplated hereby and the written opinion of the
Company Financial Advisor that the Cash Election Price to
be received by the stockholders of the Company, other
than the Stockholder, pursuant to the Merger, is fair to
such stockholders from a financial point of view, (B)
include along with the Proxy Statement a Form of
Election, and (C) use its best efforts to hold such
meeting and obtain the necessary approval of this
Agreement and the transactions contemplated hereby by its
stockholders, as soon as practicable after the date
hereof.
SECTION 6.2 Form S-4 and Proxy Statement.
Promptly following the date of this Agreement, the
Company shall prepare the Proxy Statement, and the
Company shall prepare and file with the SEC the Form S-4,
in which the Proxy Statement will be included. The
Company shall use its best efforts to have the Form S-4
declared effective under the Securities Act as promptly
as practicable after such filing. The Company shall use
its best efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective
under the Securities Act. The Company shall also take
any action required to be taken under any applicable
state securities or "Blue Sky" laws in connection with
the registration and qualification in connection with the
Merger of capital stock of the Company following the
Merger. The information provided by the Company for use
in the Form S-4, and to be supplied by Newco in writing
specifically for use in the Form S-4, shall, at the time
the Form S-4 becomes effective and on the date of the
Stockholders Meeting referred to above, be true and
correct in all material respects and shall not omit to
state any material fact required to be stated therein or
necessary in order to make such information not
misleading, and the Company and Newco each agree to
correct any information provided by it for use in the
Form S-4 which shall have become false or misleading.
The foregoing notwithstanding, from and after the
Effective Time, the Company will have no obligation to
maintain the registration of the Company Common Stock or
to make any further filings under any federal or state
securities or "Blue Sky" laws with respect to the Company
Common Stock, except as may then be required by law, and,
to the extent not prohibited by applicable law, may
terminate any such prior registration. Newco and the
Company will cooperate with each other in the preparation
of the Proxy Statement and the Form S-4; without limiting
the generality of the foregoing, the Company will
immediately notify Newco of the receipt of any comments
from the SEC, the effectiveness of the Form S-4 and any
request by the SEC for any amendment to the Proxy
Statement or the Form S-4 or for additional information.
All
filings with the SEC, including the Proxy Statement
and the Form S-4 and any amendment thereto, and all
mailings to the Company's stockholders in connection with
the Merger, including the Proxy Statement, shall be
subject to the prior review, comment and approval of
Newco. Newco will furnish to the Company the information
relating to it required by the Exchange Act and the rules
and regulations promulgated thereunder to be set forth in
the Proxy Statement. The Company agrees to use its
reasonable best efforts, after consultation with Newco,
to respond promptly to any comments made by the SEC with
respect to the Proxy Statement (and any preliminary
version thereof filed by it) and the Form S-4.
SECTION 6.3 Access to Information;
Confidentiality. (a) From the date hereof to the
Effective Time, the Company shall, and shall cause its
Subsidiaries, officers, directors, employees, auditors,
environmental auditors, counsel, financial advisors and
other agents to, afford Newco and its representatives and
potential financing sources, reasonable access at all
reasonable times to its officers, employees, agents,
properties, offices, warehouses and other facilities and
to all books, contracts and records, and shall furnish
Newco and such financing sources with all financial,
operating and other data and information as Newco, its
representatives or such financing sources may from time
to time reasonably request. During such period, the
Company shall, and shall cause its Subsidiaries,
officers, employees and representatives to, furnish
promptly to Newco a copy of each report, schedule,
registration statement and other document filed by it
during such period pursuant to the requirements of
Federal or state securities or "Blue Sky" laws.
(b) Each of the Company and Newco agrees with
respect to all confidential information relating to the
other party (the "Disclosing Party") that is or has been
furnished or disclosed to the first party (the "Receiving
Party") on, after or before the date hereof including,
but not limited to, information regarding the Disclosing
Party's organization, personnel, business activities,
customers, policies, assets, finances, costs, sales,
revenues, rights, obligations, liabilities and strategies
("Confidential Information"), that, unless and until the
transactions contemplated by this Agreement shall have
been consummated, (1) such Confidential Information is
confidential and/or proprietary to the Disclosing Party
and entitled to and shall receive treatment as such by
the Receiving Party and (2) the Receiving Party will, and
will require all of its directors, officers, employees,
representatives, stockholders, agents and advisors
(including attorneys, accountants, consultants, bankers
and financial advisors) who have access to such
Confidential Information to, hold in confidence
and not
disclose to others nor use (except in respect of the
transactions contemplated by this Agreement or as
required by law or in a court, administrative, or
regulatory proceeding) any such Confidential Information;
provided, however, that the Receiving Party shall not
have any restrictive obligation with respect to any
Confidential Information which (x) is or becomes publicly
known through no wrongful act or omission of, or
violation of the terms hereof by, the Receiving Party or
(y) becomes known to the Receiving Party from a source
which, to the best of the Receiving Party's knowledge,
has no confidentiality obligation with respect to such
Confidential Information at the time of receipt of such
Confidential Information. The Receiving Party shall
provide Confidential Information only to its directors,
officers, employees, representatives, stockholders,
agents, advisors (including attorneys, accountants,
consultants, bankers and financial advisors) and
potential financing sources who have a need to know such
Confidential Information in connection with the
transactions contemplated by this Agreement.
(c) No investigation pursuant to this Section
6.3 shall affect any representations or warranties of the
parties herein or the conditions to the obligations of
the parties hereto.
SECTION 6.4 No Solicitation. (a) The Company
and its Subsidiaries and their respective officers,
directors, employees, representatives, agents and
advisors (including attorneys, accountants, consultants,
bankers and financial advisors) shall immediately cease
any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any
Acquisition Transaction (as defined below). The Company
agrees that, prior to the Effective Time, it shall not,
and shall not authorize or permit any of its Subsidiaries
or any of its or its Subsidiaries' directors, officers,
employees, agents, representatives or advisors (including
attorneys, accountants, consultants, bankers and
financial advisors), directly or indirectly, to, solicit,
initiate, encourage or facilitate, or furnish or disclose
non-public information in furtherance of, any inquiries
or the making of any proposal with respect to any merger,
liquidation, recapitalization, consolidation or other
business combination involving the Company or its
Subsidiaries or acquisition or exchange of any capital
stock or any material portion of the assets (except for
acquisitions of assets in the ordinary course of business
consistent with past practice) of the Company or its
Subsidiaries,
or any combination of the foregoing (an
"Acquisition Transaction"), or negotiate, explore or
otherwise engage in substantive discussions with any
person (other than Newco) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail
to consummate the Merger or any other transactions
contemplated hereby; provided that the Company may
furnish information to, and negotiate or otherwise engage
in substantive discussions with, any party who delivers a
bona fide written proposal for an Acquisition Transaction
if the Company's Board of Directors determines in good
faith and upon the advice from its outside legal counsel,
that failing to take such action would constitute a
breach of the fiduciary duties of the Company's Board of
Directors and such a proposal is, in the opinion of the
Company's Board of Directors, more favorable to the
Company's stockholders (other than the Stockholder) from
a financial point of view than the transactions
contemplated by this Agreement.
(b) From and after the execution of this
Agreement, the Company shall immediately advise Newco in
writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations or proposals
relating to an Acquisition Transaction, identify the
offeror and furnish to Newco a copy of any such proposal
or inquiry, if it is in writing, or a written summary of
any such proposal relating to an Acquisition Transaction
if it is not in writing. The Company shall promptly
advise Newco of any development relating to such
proposal, including the results of any discussions or
negotiations with respect thereto.
SECTION 6.5 ESOP. The Company shall cooperate
with Newco in taking all steps necessary or appropriate
so that, effective as of the Effective Time, the
Company's Employee Stock Ownership Plan (the "ESOP")
shall be amended so as to (i) eliminate the right of
participants in the ESOP to receive distributions in the
form of employer securities, (ii) terminate the status of
the ESOP as an employee stock ownership plan, (iii)
provide that the Merger Consideration received by the
ESOP in the Merger shall not be reinvested in employer
securities, (iv) freeze benefit accruals under the ESOP,
and (v) vest all participants in the ESOP in their
account balances in the ESOP.
SECTION 6.6 Directors' and Officers'
Indemnification and Insurance. (a) For six years after
the Effective Time, the Company shall indemnify all
present and former directors,
officers, employees and
agents of the Company for acts or omissions occurring
prior to the Effective Time to the fullest extent now
provided in the Company's certificate of incorporation
and by-laws consistent with applicable law, to the extent
such acts or omissions are uninsured (provided, that to
the extent that during any such period insurance does not
fully indemnify any person contemplated to be indemnified
in accordance with the terms of this Section 6.6, the
Company shall indemnify such person in accordance with
such terms), and shall, in connection with defending
against any action for which indemnification is available
hereunder, and subject to Section 6.6(c) hereof,
reimburse and advance expenses to such officers,
directors, employees and agents, from time to time upon
receipt of reasonably sufficient supporting
documentation, for any reasonable costs and expenses
reasonably incurred by such officers, directors,
employees and agents in connection with such defense;
provided that such advancement and reimbursement shall be
conditioned upon such officer's, director's, employee's
or agent's agreement promptly to return such amounts to
the Company if a court of competent jurisdiction shall
ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of
such officer or director in the manner contemplated
hereby is prohibited by applicable law. In addition to
the foregoing, the Company will comply with its
obligations under the indemnification agreements referred
to in item A.2. of Section 3.9 of the Disclosure
Schedule, subject to the terms and provisions thereof.
(b) The Company shall maintain in effect for
six years from the Effective Time policies of directors'
and officers' liability insurance containing terms and
conditions which are not less advantageous than those
policies maintained by the Company at the date hereof,
with respect to matters occurring prior to the Effective
Time, to the extent available, and having the maximum
available coverage under the current policies of
directors' and officers' liability insurance; provided
that (i) the Company following the Merger shall not be
required to spend in excess of a $770,000 annual premium
therefor; provided further that if the Company following
the Merger would be required to spend in excess of a
$770,000 premium per annum to obtain insurance having the
maximum available coverage under the current policies,
the Company will be required to spend $770,000 to
maintain or procure insurance coverage pursuant hereto,
subject to availability of such (or similar) coverage and
(ii) such policies may in the sole discretion of the
Company be one or more "tail" policies for all or any
portion of the full six year period.
(c) In furtherance of and not in limitation of
the preceding paragraphs, Newco agrees that the officers
and directors of the Company who are defendants in all
litigation commenced by stockholders of the Company,
whether before or after the date of this Agreement, with
respect to (x) the performance of their duties at or
prior to the Effective Time as such officers and/or
directors under Federal or state law (including without
limitation litigation under Federal and state securities
laws) or (y) this Agreement, the Voting Agreement and the
transactions contemplated hereby (the "Subject
Litigation") shall be entitled to be represented, at the
reasonable expense of the Company, in the Subject
Litigation by one counsel (and one local counsel in each
jurisdiction in which a case is pending), each of which
such counsel shall be selected by a plurality of such
officer/director defendants, subject to the approval of
the Company, which approval shall not be unreasonably
withheld; provided that neither Newco nor the Company
shall be liable for any settlement effected without its
prior written consent (which consent shall not be
unreasonably withheld) and that a condition to any
further indemnification payments provided in Section
6.6(a) shall be that such officer/director defendant
shall not have settled any Subject Litigation without the
consent of Newco and the Company; and provided further
that neither Newco nor the Company shall have any
obligation hereunder to any officer/director defendant
when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of
such officer/director defendant in the manner
contemplated hereby is prohibited by applicable law.
SECTION 6.7 Notification of Certain Matters.
The Company shall give prompt notice to Newco, and Newco
shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to
be untrue or inaccurate and (ii) any failure of the
Company or Newco, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such
notice.
SECTION 6.8 Further Action; Best Efforts. (a)
Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all action, and to
do or cause to be done, and to assist and cooperate with
the parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the
transactions
contemplated by this Agreement and the Voting Agreement,
including but not limited to (i) cooperation in the
preparation and filing of the Form S-4, the Proxy
Statement, any required filings under the HSR Act and any
amendments to any thereof, (ii) determining whether any
filings are required to be made or consents, approvals,
waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result
in an event of default, termination, amendment,
alteration or acceleration of any agreement or any put
right under any agreement) under any applicable law or
regulation or from any Governmental Entities or third
parties, including parties to loan agreements or other
debt instruments, in connection with the transactions
contemplated by this Agreement, and (iii) promptly making
any such filings, furnishing information required in
connection therewith and timely seeking to obtain any
such consents, approvals, permits or authorizations. The
Company shall not take any action to restrict, limit or
prohibit Newco's ability to exercise all of its rights
and obligations under the Voting Agreement, and the
Company and its Board of Directors has provided and shall
provide and maintain all approvals required under Section
203 of the DGCL in order to permit such exercise;
provided, however, that the Company and its Board of
Directors will not be prohibited from taking any action
required by the Board of Directors' fiduciary duties it
deems reasonably appropriate in response to Newco
attempting to acquire any shares of Company Common Stock
other than those subject to the option under Section 4 of
the Voting Agreement (the "Voting Agreement Option"),
except the Company and the Board of Directors will not
revoke, amend or restrict the approvals under Section 203
of the DGCL referred to above, or attempt to assert that
such approvals are not valid or are inapplicable.
(b) Each of the parties agrees to cooperate
with each other in taking, or causing to be taken, all
actions necessary to delist the shares of Company Common
Stock from The Nasdaq Stock Market Inc.'s (the "NASDAQ")
National Market, provided that such delisting shall not
be effective until after the Effective Time. The parties
also acknowledge that it is Newco's intent that the
shares of retained Company Common Stock following the
Merger will not be quoted on the NASDAQ National Market
or listed on any national securities exchange.
(c) The Company agrees to provide, and will
cause its Subsidiaries and its and their respective
officers, employees and advisors to provide, all
necessary cooperation in connection with the arrangement
of any financing to be consummated contemporaneous with
or at or after the Closing in respect of the transactions
contemplated by this Agreement, including without
limitation, participation in meetings, due diligence
sessions, road shows, the preparation of offering
memoranda, private placement memoranda, prospectuses and
similar documents, the execution and delivery of any
commitment letters, underwriting or placement agreements,
pledge and security documents, other definitive financing
documents, or other requested certificates or documents,
including a certificate of the chief financial officer of
the Company with respect to solvency matters, comfort
letters of accountants and legal opinions as may be
requested by Newco or its sources of financing. The
parties acknowledge that the payment of any fees by the
Company in connection with any commitment letters shall
be subject to the occurrence of the Closing. In
addition, in conjunction with the obtaining of any such
financing, the Company agrees, at the request of Newco,
to call for prepayment or redemption, or to prepay,
redeem and/or renegotiate, as the case may be, any then
existing indebtedness or equipment leases of the Company
and its Subsidiaries; provided that no such prepayment,
redemption or renegotiation shall themselves actually be
made effective until contemporaneous with or after the
Effective Time.
(d) The Company shall cooperate with any
reasonable requests of Newco or the SEC related to the
recording of the Merger as a recapitalization for
financial reporting purposes, including, without
limitation, to assist Newco and its affiliates and
representatives with any presentation to the SEC with
regard to such recording and to include appropriate
disclosure with regard to such recording in all filings
with the SEC and all mailings to stockholders made in
connection with the Merger. In furtherance of the
foregoing, the Company shall provide to Newco, and Newco
shall provide to the Company, for the prior review of
Newco's and the Company's advisors, any description of
the transactions contemplated by this Agreement which is
meant to be disseminated.
(e) (i) Newco hereby agrees to use its
reasonable best efforts, subject to normal conditions, to
arrange the financing described in Annexes A-1 and A-2 of
the Disclosure Schedule in respect of the transactions
contemplated by this Agreement, including using its
reasonable best efforts (A) to assist the Company in the
negotiation of definitive agreements with respect thereto
and (B) to satisfy all conditions applicable to Newco in
such definitive agreements. Newco will keep the Company
informed of the status of its efforts to arrange such
financing, including making reports with respect to
significant developments. In the event Newco is unable
to arrange any portion of such financing in the manner or
from the sources originally contemplated, Newco will use
its reasonable best efforts, subject to normal
conditions, to arrange any such portion from alternative
sources on substantially similar terms to those
contemplated in such Annexes A-1 and A-2.
(ii) Subject to the Company having received
the proceeds of the financing described in Section 7.2(f)
on terms satisfactory to Newco, Newco at the Closing will
be capitalized with an equity contribution of $67.5
million (including contributions of Company Common Stock
by certain employee stockholders valued at the Cash
Election Price per share and including issuances of
restricted stock valued at the purchase price paid by
investors purchasing shares of Newco for cash). Newco
will be under no obligation pursuant to the preceding
sentence unless and until the Company receives the
proceeds of the financing described in Section 7.2(f) on
terms satisfactory to Newco. In addition, Newco will be
under no obligation under any circumstances to be
capitalized with equity of more than $67.5 million
(calculated as described above).
(f) In case at any time after the Effective
Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such
necessary action.
SECTION 6.9 Public Announcements. Prior to
the Effective Time, neither Newco nor the Company will
issue any press release or public statement with respect
to the transactions contemplated by this Agreement,
including the Merger, or the Voting Agreement, without
the other party's prior consent, except as may be
required by applicable law, court process or by
obligations pursuant to its inclusion in the NASDAQ
National Market. In addition to the foregoing, Newco and
the Company will consult with each other before issuing,
and provide each other the opportunity to review and
comment upon, any such press release or other public
statements with respect to such transactions. The
parties agree that the initial press release or releases
to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed
upon prior to the issuance thereof.
SECTION 6.10 Disposition of Litigation. The
Company will not voluntarily cooperate with any third
party which has sought or may hereafter seek to restrain
or prohibit or otherwise oppose the Merger and will
cooperate with Newco to resist any such effort to
restrain or prohibit or otherwise oppose the Merger.
SECTION 6.11 Affiliates. Prior to the Closing
Date, the Company shall deliver to Newco a letter
identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders
of the Company, "affiliates" of the Company for purposes
of Rule 145 under the Securities Act. The Company shall
use its reasonable best efforts to cause each
such person
who makes a Mixed Election to deliver to Newco on or
prior to the Closing Date a written agreement
substantially in the form attached as Annex A hereto.
SECTION 6.12 Stop Transfer Order. The Company
shall notify the Company's transfer agent that there is a
stop transfer order with respect to all of the Subject
Shares (as defined in the Voting Agreement) and that the
Voting Agreement places limits on the voting of the
Subject Shares.
SECTION 6.13 Transfer Taxes. Newco shall pay
when due any and all transfer, documentary, sales, use,
registration and other similar taxes (including without
limitation any applicable stock transfer (except as
provided in Section 2.5(b)) and real property taxes) and
related amounts incurred as a result of the Merger and
the transactions contemplated hereby.
SECTION 6.14 Employee Plans and Benefits. (a)
Subject to applicable law, the Company will honor in
accordance with their terms all existing employment
agreements and employee benefits plans between the
Company or any of its Subsidiaries and any officer,
director or employee of the Company or any of its
Subsidiaries; provided that nothing in this Section
6.14(a) shall prevent the Company from amending or
terminating any such agreements or plans in accordance
with the terms thereof.
(b) Newco agrees that, for at least two years
from the Effective Time, subject to applicable law, the
Company and its Subsidiaries will provide benefits to
their employees as a group (and not necessarily on an
individual-by-individual or group-by-group basis) which
will, in the aggregate, be similar to those currently
provided by the Company and its Subsidiaries to their
employees; provided that the Company and its Subsidiaries
will not be under any obligation to retain any employee
or group of employees.
ARTICLE 7.
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each
Party to Effect the Merger. The respective obligations
of each party to effect the Merger shall be subject to
the satisfaction or waiver at or prior to the Effective
Time of the following conditions:
(a) Company Stockholder Approval. The Company
Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No
temporary restraining order, preliminary or permanent
injunction or other order issued by any court of
competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger
shall be in effect; provided, however, that the parties
hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Form S-4. To the extent required by
applicable law, the Form S-4 shall have become effective
under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order, and
any material "Blue Sky" and other state securities laws
applicable to the registration and qualification of the
retained Company Common Stock following the Merger shall
have been complied with.
SECTION 7.2 Conditions to Obligation of Newco.
The obligation of Newco to effect the Merger is further
subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The
representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality
shall be true and correct and any such representations
and warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in
all material respects, in each case as of the date of
this Agreement and as of the Closing as though made at
and as of the Closing. Newco shall have received a
certificate signed on behalf of the Company by a senior
executive officer of the Company to the effect set forth
in this paragraph.
(b) Performance of Obligations of the Company.
The Company shall have performed the obligations required
to be performed by it under this Agreement at or prior to
the Closing (except for such failures to perform as,
either individually or in the aggregate, have not had or
would not reasonably be expected to have, a Material
Adverse Effect).
(c) Consents, Etc. Newco shall have received
evidence, in form and substance reasonably satisfactory
to
it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental
Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have
been obtained, except where the failure to obtain such
licenses, permits, consents, approvals, authorizations,
qualifications and orders would not, individually or in
the aggregate, reasonably be expected to have a Material
Adverse Effect; provided, however, that in any case, the
consents and amendments set forth in Section 7.2(c) of
the Disclosure Schedule shall have been obtained.
(d) No Material Litigation. There shall not be
pending by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood of success)
(i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other
transactions contemplated by this Agreement or the Voting
Agreement or seeking to obtain from Newco, the Company or
any of their respective Subsidiaries or affiliates any
damages that are material to any such party, (ii) seeking
to prohibit or limit the ownership or operation by Newco,
the Company or any of its Subsidiaries of any material
portion of the business or assets of the Company or any
of its Subsidiaries, (iii) seeking to impose limitations
on the ability of Newco (or any designee of Newco
pursuant to the Voting Agreement) or any stockholder of
Newco or the Company to acquire or hold, or exercise full
rights of ownership of, any shares of Company Common
Stock, including, without limitation, the right to vote
the Company Common Stock on all matters properly
presented to the stockholders of the Company or (iv)
seeking to prohibit Newco or any of its affiliates from
effectively controlling in any material respect the
business or operations of the Company or its
Subsidiaries.
(e) Affiliate Letters. Newco shall have
received the agreements referred to in Section 6.11.
(f) Financing. Newco and the Company shall
have received the proceeds of financing on the terms and
conditions set forth in Annexes A-1 through A-3 of the
Disclosure Schedule or upon terms and conditions which
are, in the reasonable judgement of Newco, substantially
equivalent thereto, and to the extent that any terms and
conditions are not set forth in Annexes A-1 through A-3
of the Disclosure Schedule, on terms and conditions
reasonably satisfactory to Newco.
(g) Recapitalization Accounting. Newco shall
be reasonably satisfied that the Merger shall be recorded
as a recapitalization for financial reporting purposes
(provided that if Newco is advised that the SEC finally
determines that recapitalization treatment will not be
available, Newco will advise the Company within 30 days
of receipt of such final determination whether it intends
to waive such condition and if it advises the Company
that it has determined not to so waive, the Company may
terminate this Agreement pursuant to Section 8.1(c) as if
the date of such advice from Newco was deemed to be
December 31, 1997 for purposes of Section 8.1(c)).
(h) Employees. Newco shall be reasonably
satisfied that the Employment Arrangements are in full
force and effect and that the individuals who are listed
on Schedule 5.1(f) will be employed by the Company
following the Effective Time pursuant to the Employment
Arrangements and such employees will not have been paid
nor have the right to receive any payment from Newco or
the Company of any severance, change-of-control, or
similar payments as a result, in whole or in part, of the
consummation of any of the transactions contemplated
hereby, except as expressly provided in the Employment
Arrangements.
(i) Mixed Consideration Election. Effective
as of the Effective Time, the Stockholder shall have made
and not revoked a Mixed Election with respect to at least
15,024,616 shares of Company Common Stock owned by the
Stockholder immediately prior to the Effective Time.
(j) Tax Indemnification Agreement. The Tax
Indemnification Agreement, dated as of the date hereof,
among the Company, the Estate of Xxxx X. Xxxxxxxxxxx and
Xxxxxxxxx Xxxxxxxxxxx shall be in full force and effect
and enforceable by the Company following the Effective
Time, in accordance with the terms as in effect on the
date hereof and in the form provided to Newco on the date
hereof, or as it may be amended with the consent of
Newco.
SECTION 7.3 Conditions to Obligation of the
Company. The obligation of the Company to effect the
Merger is further subject to the satisfaction or waiver
at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of Newco set forth in this
Agreement that are qualified as to materiality shall be
true and correct and any such representations and
warranties of
Newco set forth in this Agreement that are
not so qualified shall be true and correct in all
material respects, in each case as of the date of this
Agreement and as of the Closing as though made at and as
of the Closing. The Company shall have received a
certificate signed on behalf of Newco by a senior
executive officer of Newco to the effect set forth in
this paragraph.
(b) Performance of Obligations of Newco.
Newco shall have performed the obligations required to be
performed by it under this Agreement at or prior to the
Closing (except for such failures to perform as would
not, either individually or in the aggregate, materially
adversely affect the ability of Newco to consummate the
transactions herein contemplated or to perform its
obligations hereunder).
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may
be terminated and the Merger contemplated hereby may be
abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of
the Company:
(a) by mutual written consent of Newco and the
Company;
(b) by either Newco or the Company if any
court of competent jurisdiction, arbitrator or other
Governmental Entity shall have issued a final order,
decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the
consummation of the Merger or any of the transactions
contemplated by this Agreement or the Voting Agreement,
or otherwise altering the terms of any of the foregoing
in any significant respect, and such order, decree,
ruling or other action is or shall have become final and
nonappealable;
(c) by either Newco or the Company if the
Merger shall not have been consummated on or before
December 31, 1997, provided that the right to terminate
this Agreement under this Section 8.1(c) shall not be
available to the party whose action or failure to act has
been the cause of or resulted in the failure of the
Merger to occur on or before such date where such action
or failure to act constitutes a breach of this Agreement;
(d) by Newco if any required approval of the
stockholders of the Company shall not have been obtained
by reason of the failure to obtain the required vote upon
a vote held at a duly held meeting of stockholders or at
any adjournment thereof; or
(e) by the Company if, prior to receipt of the
Company Stockholder Approval, the Board of Directors of
the Company approves an Acquisition Transaction, on terms
which the Board of Directors of the Company has
determined in good faith (i) to be more favorable to the
Company and its stockholders (other than the Stockholder)
than the transactions contemplated by this Agreement and
(ii) based upon the advice of its outside counsel, that
failing to approve such Acquisition Transaction and
terminate this Agreement would constitute a breach of the
fiduciary duties of the Board of Directors of the Company
under applicable law; provided that the termination
described in this Section 8.1(e) shall not be permissible
unless and until the Company shall have provided Newco
prior written notice at least three business days prior
to such termination that the Board of Directors of the
Company has authorized and intends to effect the
termination of this Agreement pursuant to this Section
8.1(e), the Company shall otherwise be in compliance in
all material respects with its obligations under this
Agreement and on or prior to such termination the Company
shall have paid to Newco the fee described in Section
8.3(a).
SECTION 8.2 Effect of Termination. In the
event of the termination of this Agreement pursuant to
Section 8.1, this Agreement shall, except as provided in
Section 9.1, forthwith become void and there shall be no
liability on the part of any party hereto except as set
forth in Section 8.3 and Section 9.1; provided, however,
that nothing herein shall relieve any party from
liability for any breach hereof.
SECTION 8.3 Fees and Expenses. (a) In the
event that this Agreement is terminated pursuant to
Section 8.1(e) hereof, then the Company shall, prior to
such termination, pay Newco a termination fee of $8
million; provided, however, that if Newco exercises the
Voting Agreement Option, promptly upon receipt by Newco
of the shares subject to the Voting Agreement Option
registered in the name of Newco or its designee, Newco
shall return such termination fee to the Company;
provided further that Newco shall not be required to
return such termination fee or, if already returned, the
Company shall again pay such termination fee to Newco, if
the Company or its Board of
Directors takes any
affirmative action preventing or restricting Newco or its
designee from acquiring shares of Company Common Stock
(including pursuant to the tender offer contemplated by
the Voting Agreement) in addition to the shares acquired
pursuant to the Voting Agreement Option (provided that
recommending not to tender in a tender offer or not
recommending in favor of such tender offer, alone, shall
not be deemed such an affirmative action).
(b) In addition to any other amounts which may
be payable or become payable pursuant to Section 8.3(c),
the Company shall (provided that the Company is then in
material breach of its representations, warranties,
covenants or other obligations under this Agreement),
promptly following termination of this Agreement pursuant
to Section 8.1(c), but in no event later than two
business days following a written request by Newco
therefor, together with related bills or receipts,
reimburse Newco and its affiliates, in an aggregate
amount of up to $3 million, for all reasonable
out-of-pocket expenses and fees (including, without
limitation, fees payable to all banks, investment banking
firms and other financial institutions, and their
respective agents and counsel, and all fees of counsel,
accountants, financial printers, experts and consultants
to Newco and its affiliates), whether incurred prior to,
on or after the date hereof, in connection with the
Merger and the consummation of all transactions
contemplated by this Agreement and the financing thereof;
provided that the Company shall not be required to make
payment pursuant to this Section 8.3(b) if it is
obligated to make the payment required pursuant to
Section 8.3(a).
(c) Except as otherwise specifically provided
herein, each party shall bear its own expenses in
connection with this Agreement and the transactions
contemplated hereby; provided, however, that if the
Merger is consummated, the Company shall pay the expenses
of Xxxxxxx, Xxxxx & Co. referred to in Section 4.5.
SECTION 8.4 Amendment. Subject to the
following sentence, this Agreement may be amended by the
parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval
of the Merger by the stockholders of the Company, no
amendment that by law would require the further approval
by such stockholders may be made without such approval.
This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 8.5 Waiver. At any time prior to the
Effective Time, any party hereto may (a) extend the time
for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to
be bound thereby, but such extension or waiver or failure
to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE 9.
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations,
Warranties and Agreements. The representations,
warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination
of this Agreement pursuant to Section 8.1, as the case
may be, except that the agreements set forth in Articles
1 and 2, Sections 6.5 and 6.6 and Articles 8 and 9 shall
survive the Effective Time and those set forth in Section
6.3(b) and Section 6.8(a) (as it relates to the Voting
Agreement) and Articles 8 and 9 shall survive termination
of this Agreement.
SECTION 9.2 Notices. All notices, requests,
claims, demands and other communications hereunder shall
be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person,
by telecopy or by registered or certified mail (postage
prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other
address for a party as shall be specified by like
notice):
if to Newco:
Confetti Acquisition, Inc.
c/o GS Capital Partners II, L.P.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
if to the Company:
Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn.: Corporate Secretary
Telecopier No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxx
Telecopier No.: (000) 000-0000
SECTION 9.3 Certain Definitions. For purposes
of this Agreement, the term:
(a) "affiliate" of a person means a person that
directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "control" (including the terms "controlled
by" and "under common control with") means the
possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction
of the management policies of a person, whether through
the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
(c) "generally accepted accounting principles"
shall mean the generally accepted accounting principles
set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as
may be approved by a significant segment of the
accounting profession in the United States, in each case
applied on a basis consistent
with the manner in which
the audited financial statements for the fiscal year of
the Company ended December 31, 1996 were prepared;
(d) "person" means an individual, corporation,
partnership, joint venture, association, trust,
unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(e) "Significant Subsidiary" has the meaning
set forth in Section 1-02 of Regulation S-X promulgated
by the SEC;
(f) "Subsidiary" or "Subsidiaries" of any
person means any other person in which such first person
(either alone or through or together with any other
Subsidiary of such person), owns, directly or indirectly,
50% or more of the stock or other equity interests or has
the right, through ownership of equity, contractually or
otherwise, to elect at least half of its Board of
Directors or other governing body; and
(g) "transactions contemplated hereby,"
"transactions contemplated by this Agreement" and other
similar references shall include the Merger and all other
actions and transactions contemplated by this Agreement,
the Voting Agreement and the Employment Arrangements.
SECTION 9.4 Severability. If any term or
other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the
fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment.
This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement
shall not be assigned by operation of law or otherwise,
except that Newco may assign all or any of its rights and
obligations hereunder to any direct or indirect
wholly
owned subsidiary or subsidiaries of Newco, provided that
no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not
perform such obligations.
SECTION 9.6 Parties in Interest. This
Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and, with respect to the
provisions of Sections 6.6 and 8.3, shall inure to the
benefit of the persons or entities benefitting from the
provisions thereof who are intended to be third-party
beneficiaries thereof. Except as provided in the
preceding sentence, nothing in this Agreement, express or
implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.7 Governing Law. This Agreement
shall be governed by, and construed in accordance with,
the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles
of conflicts of laws thereof, except to the extent the
laws of the State of Delaware are required to be
applicable under applicable choice of law principles.
SECTION 9.8 Headings. The descriptive
headings contained in this Agreement are included for
convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may
be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, Newco and the Company have
caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
CONFETTI ACQUISITION, INC.
By: /s/ Xxxxxxx X. X'Xxxxx
Title: Chairman of the Board
and President
AMSCAN HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
Title: President
ANNEX A
Form of Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of common
stock, par value $.10 per share ("Company Stock"), of
Amscan Holdings, Inc., a Delaware corporation (the
"Company"), is entitled to retain and receive in
connection with the merger (the "Merger") of the Company
with Confetti Acquisition, Inc., a Delaware corporation,
securities (collectively, the "Securities") of the
Company. The undersigned acknowledges that the
undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933 (the "Act"), although
nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate
under the Act, the undersigned's ability to sell, assign
or transfer the Securities retained by the undersigned
pursuant to the Merger may be restricted unless such
transaction is registered under the Act or an exemption
from such registration is available. The undersigned
understands that such exemptions are limited and the
undersigned has obtained advice of counsel as to the
nature and conditions of such exemptions, including
information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated
under the Act.
The undersigned hereby represents to and
covenants with the Company that the undersigned will not
sell, assign or transfer any of the Securities retained
by the undersigned pursuant to the Merger except (i)
pursuant to an effective registration statement under the
Act, (ii) in conformity with the volume and other
limitations of Rule 145 or (iii) in a transaction which,
in the opinion of independent counsel reasonably
satisfactory to the Company or as described in a
"no-action" or interpretive letter from the Staff of the
Securities and Exchange Commission (the "SEC"), is not
required to be registered under the Act.
In the event of a sale or other disposition by
the undersigned of Securities pursuant to Rule 145, the
undersigned will supply the Company with evidence of
compliance with such Rule, in the form of a letter in the
form of Annex I hereto. The undersigned understands that
the Company may instruct its
transfer agent to withhold the transfer
of any Securities disposed of by the undersigned, but
that upon receipt of such evidence of compliance the
transfer agent shall effectuate the transfer of the
Securities sold as indicated in the letter.
The undersigned acknowledges and agrees that
appropriate legends will be placed on certificates
representing Securities retained by the undersigned in
the Merger or held by a transferee thereof, which legends
will be removed by delivery of substitute certificates
upon receipt of an opinion in form and substance
reasonably satisfactory to the Company from independent
counsel reasonably satisfactory to the Company to the
effect that such legends are no longer required for
purposes of the Act.
The undersigned acknowledges that (i) the
undersigned has carefully read this letter and
understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other
disposition of Securities and (ii) the receipt by Newco
of this letter is an inducement and a condition to
Newco's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO ANNEX A
[Name] [Date]
On __________________ the undersigned sold the
securities ("Securities") of Amscan Holdings, Inc. (the
"Company") described below in the space provided for that
purpose (the "Securities"). The Securities were retained
by the undersigned in connection with the merger of
Confetti Acquisition, Inc., a Delaware corporation, with
and into the Company.
Based upon the most recent report or statement
filed by the Company with the Securities and Exchange
Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act").
The undersigned hereby represents that the
Securities were sold in "brokers' transactions" within
the meaning of Section 4(4) of the Act or in transactions
directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended. The undersigned further represents that the
undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that
the undersigned has not made any payment in connection
with the offer or sale of the Securities to any person
other than to the broker who executed the order in
respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
AMSCAN HOLDINGS, INC.
ARTICLE 1.
The name of the corporation (which is
hereinafter referred to as the "Corporation") is:
AMSCAN HOLDINGS, INC.
ARTICLE 2.
The address of the Corporation's registered
office in the State of Delaware is The Corporation Trust
Center, 0000 Xxxxxx Xxxxxx in the City of Wilmington,
County of New Castle. The name of the Corporation's
registered agent at such address is The Corporation Trust
Company.
ARTICLE 3.
The purpose of the Corporation shall be to
engage in any lawful act or activity for which
corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the
"DGCL").
ARTICLE 4.
Section 4.1 The total number of shares of
stock which the Corporation is authorized to issue is
50,000,000
shares of Common Stock, having a par value of
$0.10 per share.
Section 4.2 Except as otherwise provided by
law, the Common Stock shall have the exclusive right to
vote for the election of directors and for all other
purposes. Each share of Common Stock shall have one
vote, and the Common Stock shall vote together as a
single class.
ARTICLE 5.
The business and affairs of the Corporation
shall be managed by or under the direction of the Board
of Directors of the Corporation (the "Board"), and unless
and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors
of the Corporation need not be by written ballot.
ARTICLE 6.
In furtherance and not in limitation of the
powers conferred by law, the Board is expressly
authorized and empowered to make, alter and repeal the
Bylaws of the Corporation by a majority vote at any
regular or special meeting of the Board or by written
consent, subject to the power of the stockholders of the
Corporation to alter or repeal any Bylaws made by the
Board.
ARTICLE 7.
The Corporation reserves the right at any time
from time to time to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation,
and any other provisions authorized by the laws of the
State of Delaware at the time in force may be added or
inserted, in the manner now or hereafter prescribed by
law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors
or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right
reserved in this Article.
ARTICLE 8.
Section 8.1 Elimination of Certain Liability
of Directors. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the
DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
If the DGCL is amended to authorize corporate
action further eliminating or limiting the personal
liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the
fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of the foregoing
paragraph shall not adversely affect any right or
protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Section 8.2 Indemnification and Insurance.
(a) Right to Indemnification. Each person who
was or is made a party or is threatened to be made a
party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of
the fact that he or she, or a person of whom he or she is
the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent
of another corporation or of a partnership, joint
venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis
of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by
the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to
provide broader indemnification rights than said law
permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, amounts
paid or to be paid in settlement, and excise taxes or
penalties arising under the Employee Retirement Income
Security Act of 1974) reasonably incurred or suffered by
such person in connection therewith and such
indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors
and administrators; provided, however, that, except as
provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof)
was authorized by the Board. The right to
indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any
such proceeding in advance
of its final disposition;
provided, however, that, if the DGCL requires, the
payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer
(and not in any other capacity in which service was or is
rendered by such person while a director or officer,
including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if
it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, by action of
the Board, provide indemnification to employees and
agents of the Corporation with the same scope and effect
as the foregoing indemnification of directors and
officers.
(b) Right of Claimant to Bring Suit. If a
claim under paragraph (a) of this Section is not paid in
full by the Corporation within thirty days after a
written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards
of conduct which make it permissible under the DGCL for
the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the
Corporation (including its Board, independent legal
counsel, or its stockholders) to have made a
determination prior to the commencement of such action
that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including its Board,
independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of
conduct.
(c) Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final
disposition conferred in this Section shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute,
provision of the
Certificate of Incorporation, Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust
or other enterprise against any such expense, liability
or loss, whether or not the Corporation would have the
power to indemnify such person against such expense,
liability or loss under the DGCL.
* * *
