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EXHIBIT 99.(c)(1)
AGREEMENT AND
PLAN OF MERGER
AMONG
XXXXXXXX CORPORATION,
HC ACQUISITION CORP.
AND
ERO, INC.
dated as of April 10, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
THE OFFER
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Payment for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Representations and Warranties of Parent and Sub . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of the Proxy Statement; Company Stockholders Meeting; Merger without a Company
Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.3 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.4 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.6 Indemnification; Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . 42
6.7 Commercially Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.8 Conduct of Business of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.10 Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.11 Continuation of Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . 47
7.2 Conditions to Obligation of Parent and Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . 51
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership . . . . . . . . . . . . . . 53
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 10, 1997
(the "Agreement"), is made and entered into by and among Xxxxxxxx Corporation,
a Delaware corporation ("Parent"), HC Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), and ERO, Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have unanimously approved the acquisition of the Company by Parent,
by means of the merger (the "Merger") of Sub with and into the Company, upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company
each desire that Sub commence a cash tender offer to purchase all of the
outstanding shares of common stock, par value $0.01 per share, of the Company
("Shares" or "Company Common Stock") upon the terms and subject to the
conditions set forth in this Agreement and the Offer Documents (as defined in
Section 1.2), and the Board of Directors of the Company has unanimously
approved such Offer (as defined in Section 1.1) and agreed to recommend to the
stockholders of the Company that they accept the Offer and tender their Company
Common Stock pursuant thereto; and
WHEREAS, Parent and Sub are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless,
contemporaneously with the execution and delivery hereof, certain beneficial
and record holders of the Company Common Stock enter into agreements
(collectively, the "Stockholders Agreement") providing for certain matters with
respect to their Shares (including the tender of their Shares and certain other
actions relating to the Offer) and the other transactions contemplated by this
Agreement, and, in order to induce Parent and Sub to enter into this Agreement,
the Company has approved the execution and delivery by Parent and such
stockholders of the Stockholders Agreement, and such stockholders have agreed
to execute and deliver the Stockholders Agreement; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the
consummation thereof;
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NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer. (a) Provided that none of the events set
forth in Exhibit A hereto shall have occurred and be continuing, as promptly as
practicable (but in any event not later than five business days after the
public announcement of the execution and delivery of this Agreement), Sub shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), an offer to purchase (the "Offer") all
outstanding shares of the Company Common Stock at a price of $11.25 per share,
net to the seller in cash (the "Offer Consideration"). The obligation of
Parent and Sub to commence the Offer, consummate the Offer, accept for payment
and to pay for shares of Company Common Stock validly tendered in the Offer and
not withdrawn shall be subject only to those conditions set forth in Exhibit A
hereto.
(b) Parent and Sub expressly reserve the right to amend or
modify the terms of the Offer, except that, without the prior written consent
of the Company, Sub shall not (and Parent shall not cause Sub to): (i) decrease
the Offer Consideration, change the form of the Offer Consideration or decrease
the number of Shares sought pursuant to the Offer, (ii) amend or waive the
condition that there shall be validly tendered and not withdrawn prior to the
time the Offer expires a number of shares of Company Common Stock which
constitutes a majority of the Shares outstanding on a fully-diluted basis on
the date of purchase ("on a fully-diluted basis" having the following meaning,
as of any date: the number of shares of Company Common Stock outstanding,
together with Shares which the Company may be required, now or in the future,
to issue pursuant to options, warrants or other rights or obligations
outstanding at that date), (iii) extend the expiration date of the Offer
(except that Sub may extend the expiration date of the Offer (a) as required by
any rule, regulation or interpretation of the United States Securities and
Exchange Commission (the "SEC"), (b) for such periods as Sub may reasonably
deem necessary (but not to a date later than the 60th calendar day after the
date of commencement) in the event that any condition to the Offer is not
satisfied, or (c) for one or more times for an aggregate period of up to 15
days (not to exceed 60 calendar days from the date of commencement) for any
reason other than those specified in the immediately preceding
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clause (a) or clause (b)), or (iv) change any condition or impose additional
conditions to the Offer or amend any term of the Offer in any manner adverse to
holders of shares of Company Common Stock; provided, however, that, except as
set forth above, Sub may waive any other condition to the Offer in its sole
discretion; and provided further, that the Offer (i) may be extended in
connection with an increase in the consideration to be paid pursuant to the
Offer so as to comply with applicable rules and regulations of the SEC, and
(ii) will, for one time only, be automatically extended for a period which ends
on the 15th business day from the date the Company shall have received an
Acquisition Proposal (as hereinafter defined) in the event the Company shall
receive such Acquisition Proposal less than ten business days prior to the
expiration of the Offer. Assuming the prior satisfaction or waiver of the
conditions to the Offer, Sub shall accept for payment, and pay for, in
accordance with the terms of the Offer, all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration date thereof.
1.2 Offer Documents. As soon as practicable on the date
of commencement of the Offer, Parent and Sub shall file or cause to be filed
with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D- 1")
with respect to the Offer which shall contain the offer to purchase, related
letter of transmittal and other ancillary Offer documents and instruments
pursuant to which the Offer will be made (collectively with any supplements or
amendments thereto, the "Offer Documents"). The Offer Documents (i) shall
contain (or shall be amended in a timely manner to contain) all information
which is required to be included therein in accordance with the Exchange Act
and the rules and regulations thereunder and any other applicable law and (ii)
shall conform in all material respects with the requirements of the Exchange
Act and any other applicable law. Notwithstanding the foregoing, no agreement
or representation hereby is made or shall be made by Parent or Sub with respect
to information supplied by the Company expressly for inclusion in, or with
respect to Company information derived from the Company's public SEC filings
that is included or incorporated by reference in, the Offer Documents. Parent,
Sub and the Company each agree promptly to correct any information provided by
them for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect and Sub further agrees to
take all lawful action necessary to cause the Offer Documents as so corrected
to be filed promptly with the SEC and to be disseminated to holders of Company
Common Stock, in each case as and to the extent required by applicable law. In
conducting the Offer, Parent and Sub shall comply in all material respects with
the Exchange Act and any other applicable law. The
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Company and its counsel shall be given reasonable opportunity to review and
comment on the Offer Documents and any amendments or supplements thereto prior
to the filing thereof with the SEC. To the extent practicable, the Company and
its counsel shall also be given reasonable opportunity to review and comment on
correspondence with the SEC concerning the Offer Documents prior to the
delivery thereof to the SEC.
1.3 Company Actions. The Company hereby consents to the
Offer and the Merger and represents that (a) its Board of Directors (at a
meeting duly called and held) has unanimously (i) determined that each of this
Agreement, the Offer and the Merger are fair to and in the best interests of
the stockholders of the Company, (ii) approved the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Offer and the Merger, and such
approval constitutes approval of the foregoing for purposes of Section 203 of
the Delaware General Corporation Law, as amended (the "DGCL"), and for purposes
of Article Nine of the Company's Amended and Restated Certificate of
Incorporation, (iii) resolved to recommend (x) acceptance of the Offer, (y)
approval and adoption of this Agreement (if required) and (z) approval of the
Merger, by the holders of Company Common Stock, and (b) Xxxx Xxxxxx Xxxxxxxx
Inc. (the "Financial Advisor") has delivered to the Board of Directors of the
Company its written opinion that, as of such date and based upon and subject to
the matters set forth therein, the Offer Consideration to be received by the
holders of Company Common Stock (other than Parent, Sub and any other
Subsidiary of Parent) in the Offer is fair, from a financial point of view, to
such holders. The Company acknowledges and agrees that the Board of Directors
of the Company may not withdraw, modify or amend its approval or recommendation
of the Offer, this Agreement, the Stockholders Agreement or the Merger except
in accordance with Section 5.1(e)(ii). The Company hereby consents to the
inclusion in the Offer Documents of the recommendation referred to in this
Section 1.3. The Company hereby agrees to file with the SEC, simultaneously
with the filing by Parent and Sub of the Schedule 14D-1 (or promptly after such
filing), a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with all amendments and supplements thereto, the "Schedule 14D-9") containing
such recommendations of the Board of Directors of the Company in favor of the
Offer and the Merger and otherwise complying with Rule 14d-9 under the Exchange
Act. The Schedule 14D-9 shall comply in all material respects with the
Exchange Act and any other applicable law and shall contain (or shall be
amended in a timely manner to contain) all information that is required to be
included therein in accordance with the Exchange Act and the rules and
regulations promulgated thereunder
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and any other applicable law. Notwithstanding the foregoing, no agreement or
representation hereby is made or shall be made by the Company with respect to
Parent, Sub or any other Subsidiary of Parent. The Company, Parent and Sub
each agree promptly to correct any information provided by them for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
lawful action necessary to cause the Schedule 14D-9 as so corrected to be
promptly filed with the SEC and disseminated to the holders of Company Common
Stock, in each case as and to the extent required by applicable law. Parent,
Sub and their counsel shall be given an opportunity to review and comment on
the Schedule 14D-9 and any amendments thereto prior to the filing thereof with
the SEC. To the extent practicable, Parent, Sub and their counsel shall also
be given reasonable opportunity to review and comment on correspondence with
the SEC concerning the Schedule 14D-9 prior to the delivery thereof to the SEC.
In connection with the Offer, the Company shall promptly furnish, or cause its
transfer agent to furnish, Parent with mailing labels, security position
listings and all available listings or computer files containing the names and
addresses of the record holders of the Company Common Stock as of the latest
practicable date and shall furnish, or cause its transfer agent to furnish,
Parent with such information and assistance (including updated lists of
stockholders, mailing labels and lists of security positions) as Parent or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Company Common Stock. Subject to the requirements of
applicable law, and except for such actions as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer and
the Merger, Parent and Sub and each of their affiliates, associates, partners,
employees, agents and advisors shall hold in confidence the information
contained in such labels and lists, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated
for any reason, shall deliver promptly to the Company all copies of such
information then in their possession or control.
1.4 Directors. (a) Upon the purchase pursuant to the
Offer by Sub of such number of shares of Company Common Stock which represents
a majority of the outstanding shares of Company Common Stock (on a fully
diluted basis), and from time to time thereafter, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number (but in
no event more than one less than the total number of directors on the Board of
Directors of the Company) as will give Parent, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Board of Directors of
the Company equal to
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the product of (x) the number of directors on the Board of Directors of the
Company (giving effect to any increase in the number of directors pursuant to
this Section 1.4) and (y) the percentage that such number of Shares so
purchased bears to the aggregate number of Shares outstanding (such number
being, the "Board Percentage"), and the Company shall, upon request by Parent
and subject to applicable law, promptly satisfy the Board Percentage by (i)
increasing the size of the Board of Directors of the Company or (ii) using its
best efforts to secure the resignations of such number of directors as is
necessary to enable Parent's designees to be elected to the Board of Directors
of the Company and shall cause Parent's designees promptly to be so elected,
provided that no such action shall be taken which would result in there being,
prior to the consummation of the Merger, less than two directors of the Company
that are not affiliated with Parent. At the request of Parent, the Company
shall take, at the Company's expense, all lawful action necessary to effect any
such election, including, without limitation, mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, unless such information has previously been provided to
the Company's stockholders in the Schedule 14D-9. Parent will supply to the
Company in writing and be solely responsible for any information with respect
to itself and its nominees, directors and affiliates required by Section 14(f)
of the Exchange Act and Rule 14f-1 thereunder.
(b) Following the election or appointment of Parent's
designees pursuant to this Section 1.4 and prior to the Effective Time of the
Merger, any amendment or termination of this Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights thereunder shall require the concurrence of a
majority of directors of the Company then in office who are Continuing
Directors. The term "Continuing Director" shall mean (i) each member of the
board of directors on the date hereof who voted to approve this Agreement and
(ii) any successor to any Continuing Director that was recommended to succeed
such Continuing Director by a majority of the Continuing Directors then on the
board of directors.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time. At the
Effective Time, the separate corporate
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existence of Sub shall cease, and the Company shall continue as the surviving
corporation and a direct wholly owned subsidiary of Parent (Sub and the Company
are sometimes hereinafter referred to as "Constituent Corporations" and, as the
context requires, the Company is sometimes hereinafter referred to as the
"Surviving Corporation"), and shall continue under the name "ERO, Inc.".
2.2 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 VII, the closing of the Merger (the "Closing")
shall take place at 10:00 a.m., New York time, on the second business day after
satisfaction and/or waiver of all of the conditions set forth in Article VII
(the "Closing Date"), at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or place is agreed
to in writing by the parties hereto.
2.3 Effective Time of the Merger. Subject to the
provisions of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware, as provided in the DGCL,
as soon as practicable on or after the Closing Date. The Merger shall become
effective upon such filing or at such time thereafter as is provided in the
Certificate of Merger as the Company and Sub shall agree (the "Effective
Time").
2.4 Effects of the Merger. (a) The Merger shall have the
effects as set forth in the applicable provisions of the DGCL.
(b) The directors of Sub and the officers of the Company
immediately prior to the Effective Time shall, from and after the Effective
Time, be the initial directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company shall
be amended and restated in its entirety as set forth on Exhibit B hereto, and,
from and after the Effective Time, such amended and restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
XXXX.
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(x) Xxx Xxxxxx of the Company shall be amended and
restated in their entirety as set forth on Exhibit C hereto and, from and after
the Effective Time, such amended and restated Bylaws shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by applicable law,
the Certificate of Incorporation or the Bylaws.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of shares
of Company Common Stock or any holder of shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock
of Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock and all other shares of capital stock of the
Company that are owned by the Company and all shares of Company Common Stock
and other shares of capital stock of the Company owned by Parent or Sub shall
be canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor.
3.2 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any of the shares thereof:
(a)(i) Subject to the other provisions of this Section 3.2,
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (excluding shares owned, directly or indirectly, by the
Company or by Parent, Sub or any other Subsidiary of Parent and Dissenting
Shares (as defined in Section 3.6)) shall be converted into the right to
receive the per share amount actually paid in the Offer, payable to the holder
thereof in cash, without any interest thereon (the amount so paid in the Offer,
in cash, is herein referred to as the "Merger Consideration"), upon surrender
and exchange of the Certificate (as defined in Section 3.3) representing such
share of Company Common Stock. As used in this Agreement, the word
"Subsidiary", with respect to any party,
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means any corporation, partnership, joint venture or other organization,
whether incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such party is a general partner; (ii) voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation, partnership, joint venture or other organization
is held by such party or by any one or more of its Subsidiaries, or by such
party and any one or more of its Subsidiaries; or (iii) at least 25% of the
equity, other securities or other interests is, directly or indirectly, owned
or controlled by such party or by any one or more of its Subsidiaries, or by
such party and any one or more of its Subsidiaries.
(ii) All such shares of Company Common
Stock, when converted as provided in Section 3.2(a)(i), no longer shall be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each Certificate previously evidencing such Shares shall thereafter
represent only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to the Company
Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 3.3,
shall only represent the right to receive for their Shares, the Merger
Consideration, without any interest thereon.
3.3 Payment for Shares. (a) Paying Agent. Prior to
the Effective Time, Parent shall appoint a United States bank or trust company
reasonably acceptable to the Company to act as paying agent (the "Paying
Agent") for the payment of the Merger Consideration, and Parent shall cause the
Surviving Corporation to deposit with the Paying Agent in a separate fund
established for the benefit of the holders of shares of Company Common Stock,
for payment in accordance with this Article III, through the Paying Agent (the
"Payment Fund"), immediately available funds in amounts necessary to make the
payments pursuant to Section 3.2(a)(i) and this Section 3.3 to holders (other
than the Company or Parent, Sub or any other Subsidiary of Parent, or holders
of Dissenting Shares). The Paying Agent shall, pursuant to irrevocable
instructions, pay the Merger Consideration out of the Payment Fund.
If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of shares of Company Common
Stock shall be entitled under this Section 3.3, Parent shall take all steps
necessary to enable or cause the Surviving Corporation to deposit in trust
additional cash with
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the Paying Agent sufficient to make all payments required under this Agreement,
and Parent and the Surviving Corporation shall in any event be liable for
payment thereof. The Payment Fund shall not be used for any purpose except as
expressly provided in this Agreement.
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Paying
Agent to mail to each holder of record (other than the Company or Parent, Sub
or any other Subsidiary of Parent) of a Certificate or Certificates which,
immediately prior to the Effective Time, evidenced outstanding shares of
Company Common Stock (the "Certificates"), (i) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and shall be in such form and have such other
provisions as the Surviving Corporation reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in respect thereof cash in an amount equal to the product of (x) the number of
shares of Company Common Stock represented by such Certificate and (y) the
Merger Consideration, and the Certificate so surrendered shall forthwith be
canceled. No interest shall be paid or accrued on the Merger Consideration
payable upon the surrender of any Certificate. If payment is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the surrendered Certificate or established to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.3(b), each
Certificate (other than Certificates representing Shares owned by the Company
or Parent, Sub or any other Subsidiary of Parent) shall be deemed at any time
after the Effective Time to represent for all purposes only the right to
receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of
the Payment Fund which remains undistributed to the holders of Company Common
Stock for 270 days after the Effective
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Time shall be delivered to the Surviving Corporation, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article III and the instructions set forth in the letter of transmittal mailed
to such holder after the Effective Time shall thereafter look only to the
Surviving Corporation for payment of the Merger Consideration to which they are
entitled. All interest accrued in respect of the Payment Fund shall inure to
the benefit of and be paid to the Surviving Corporation.
(d) No Liability. None of Parent, the Company or the
Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any cash from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3.4 Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. On or after the Effective Time, any
certificates presented to the Paying Agent or Parent for any reason, except
notation thereon that a stockholder has elected to exercise his rights to
appraisal pursuant to the DGCL, shall be converted into the Merger
Consideration as provided in this Article III.
3.5 Stock Option Plans. At the Effective Time, each
holder of a then outstanding option to purchase Shares under any of the
Company's 1988 Key Employee Stock Option Plan, 1992 Key Employee Stock Option
Plan and 1992 Directors' Stock Option Plan (collectively, the "Stock Option
Plans"), or otherwise set forth on Schedule 4.1(b), whether or not then
exercisable or vested (collectively, the "Options"), shall, in cancellation and
settlement thereof, receive for each Share subject to such Option an amount
(subject to any applicable withholding tax) in cash equal to the difference
between the amount per share actually paid in the Offer and the per Share
exercise price of such Option to the extent such difference is a positive
number (such amount being hereinafter referred to as, the "Option
Consideration"); provided, however, that with respect to any person subject to
Section 16(a) of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. Upon receipt of the Option
Consideration, the Option shall be canceled. The surrender of an Option to the
Company in exchange for the Option Consideration shall be deemed a release of
any and all rights the holder had or may have had in respect of such Option.
Prior to the expiration of the Offer, the Company shall use its reasonable
efforts to obtain all
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necessary consents or releases from holders of Options under the Stock Option
Plans and take all such other lawful action as may be reasonably necessary to
give effect to the transactions contemplated by this Section 3.5. The Stock
Option Plans shall terminate as of the Effective Time, and the provisions in
any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the Company or any
Subsidiary thereof shall be canceled as of the Effective Time. Prior to the
expiration of the Offer, the Company shall use its reasonable efforts to take
all action necessary (including causing the Board of Directors of the Company
to take such actions as are allowed by the Stock Option Plans) to (i) ensure
that, following the Effective Time, no participant in the Stock Option Plans or
any other plans, programs or arrangements shall have any right thereunder to
acquire equity securities of the Company, the Surviving Corporation or any
Subsidiary thereof and (ii) terminate all such plans, programs and
arrangements.
3.6 Dissenting Shares. Notwithstanding any other
provisions of this Agreement to the contrary, shares of Company Common Stock
that are outstanding immediately prior to the Effective Time and which are held
by stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly appraisal for such
shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled
to receive payment of the appraised value of such shares of Company Common
Stock held by them in accordance with the provisions of such Section 262 of the
DGCL, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or otherwise lost
their rights to appraisal of such shares of Company Common Stock under such
Section 262 of the DGCL shall thereupon be deemed to have been converted into
and to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration upon surrender
in the manner provided in Section 3.3, of the Certificate or Certificates that,
immediately prior to the Effective Time, evidenced such shares of Company
Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
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(a) Organization, Standing and Power. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified to
do business as a foreign corporation and in good standing to conduct business
in each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify could not
reasonably be expected to (i) have a Material Adverse Effect (as defined below)
with respect to the Company or (ii) materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement. The
Company has heretofore made available to Parent complete and correct copies of
its and its Subsidiaries' respective Certificates of Incorporation and Bylaws.
All Subsidiaries of the Company and their respective jurisdictions of
incorporation or organization are identified on Schedule 4.1(a). As used in
this Agreement: a "Material Adverse Effect" shall mean, with respect to any
party, any events, changes or effects which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of such party and its
Subsidiaries, taken as a whole; provided, however, that the matters disclosed
on Exhibit D hereto shall not be considered in determining whether one or more
events, changes or effects could reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of the Company consists of 50,000,000 Shares and
9,947,700 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"). As of the date hereof: (i) 10,274,300 Shares are issued and
outstanding; (ii) no shares of Preferred Stock are issued and outstanding; and
(iii) 1,458,000 Shares are reserved for issuance pursuant to Options
outstanding under the Stock Option Plans. Except for the issuance of Shares
pursuant to the exercise of outstanding Options, there are no employment,
executive termination or similar agreements providing for the issuance of
Shares. As of the date hereof, 120,000 Shares are held by the Company and no
Shares are held by Subsidiaries of the Company. No bonds, debentures, notes or
other instruments or evidence of indebtedness having the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company stockholders may vote
("Company Voting Debt") were issued or outstanding. All outstanding Shares are
validly issued, fully paid and
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nonassessable and are not subject to preemptive or other similar rights.
Except as set forth on Schedule 4.1(b), all outstanding shares of capital stock
of the Subsidiaries of the Company are owned by the Company or a direct or
indirect Subsidiary of the Company, free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except as set forth in this
Section 4.1(b), there are outstanding: (i) no shares of capital stock, Company
Voting Debt or other voting securities of the Company; (ii) no securities of
the Company or any Subsidiary of the Company convertible into, or exchangeable
or exercisable for, shares of capital stock, Company Voting Debt or other
voting securities of the Company or any Subsidiary of the Company; and (iii) no
options, warrants, calls, rights (including preemptive rights), commitments or
agreements to which the Company or any Subsidiary of the Company is a party or
by which it is bound, in any case obligating the Company or any Subsidiary of
the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to
be issued, delivered, sold, purchased, redeemed or acquired, additional shares
of capital stock or any Company Voting Debt or other voting securities of the
Company or of any Subsidiary of the Company, or obligating the Company or any
Subsidiary of the Company to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. Except as set forth on Schedule
4.1(b), since December 31, 1996, the Company has not (i) granted any options,
warrants or rights to purchase shares of Company Common Stock or (ii) amended
or repriced any Option or any of the Stock Option Plans. Set forth on Schedule
4.1(b) is a list of all outstanding options, warrants and rights to purchase
shares of Company Common Stock and the exercise prices relating thereto.
Except as disclosed in the Company SEC Documents (as defined below), there are
not as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting of
any shares of the capital stock of the Company which will limit in any way the
solicitation of proxies by or on behalf of the Company from, or the casting of
votes by, the stockholders of the Company with respect to the Merger. There
are no restrictions on the Company to vote the stock of any of its
Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power
and authority to enter into this Agreement and, subject to the Company
Stockholder Approval (as defined in Section 4.1(c)(iii)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
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subject, if required with respect to consummation of the Merger, to the Company
Stockholder Approval. This Agreement has been duly executed and delivered by
the Company and, subject, if required with respect to consummation of the
Merger, to the Company Stockholder Approval, and assuming that this Agreement
constitutes the valid and binding agreement of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable in accordance with its
terms and conditions except that the enforcement hereof may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(ii) Except as set forth on Schedule 4.1(c)(ii),
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company will not conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration (including pursuant to any put right) of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets or property, or right of first refusal
with respect to any asset or property (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss, creation or right of
first refusal, a "Violation"), pursuant to, (A) any provision of the
Certificate of Incorporation or Bylaws of the Company or any of its
Subsidiaries or (B) except as to which requisite waivers or consents have been
obtained and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (iii) of this Section 4.1(c)
are duly and timely obtained or made and, if required, the Company Stockholder
Approval has been obtained, result in any Violation of (1) any loan or credit
agreement, note, mortgage, deed of trust, indenture, lease, Benefit Plan (as
defined in Section 4.1(i)), Company Permit (as defined in Section 4.1(f)), or
any other agreement, obligation, instrument, concession, franchise, or license
or (2) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or their respective
properties or assets (collectively, "Laws"), except in the case of clause (1)
and (2) for any Violations that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. The
Board of Directors of the Company has taken all actions necessary under the
Company's Amended and Restated Certificate of Incorporation, including
approving the transactions contemplated by this Agreement, to ensure that
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Section 1 of Article Nine of the Company's Amended and Restated Certificate of
Incorporation does not, and will not, apply to the transactions contemplated in
this Agreement. The Board of Directors of the Company has taken all actions
necessary under the DGCL, including approving the transactions contemplated by
this Agreement and the Stockholders Agreement, to ensure that Section 203 of
the DGCL does not, and will not, apply to the transactions contemplated in this
Agreement or the Stockholders Agreement.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to, or permit from any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for: (A) the
filing of a pre-merger notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the expiration or termination of the applicable waiting period
thereunder; (B) the filing with the SEC of (x) a proxy statement (if required
by applicable law) in definitive form relating to a meeting of the holders of
Company Common Stock to approve the Merger (such proxy statement as amended or
supplemented from time to time being hereinafter referred to as the "Proxy
Statement"), (y) the Schedule 14D-9 in connection with the Offer, and (z) such
reports under and such other compliance with the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby; (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company
does business; (D) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws; (E) such filings and
approvals as may be required by any foreign pre-merger notification,
securities, corporate or other law, rule or regulation (including the
Investment Canada Act); (F) such filings in connection with any state or local
tax which is attributable to the beneficial ownership of the Company's or its
Subsidiaries' real property, if any (collectively, the "Gains and Transfer
Taxes"); (G) such other filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the Merger or the
transactions contemplated by this Agreement; (H) the approval of this Agreement
and the Merger by the holders of a majority of the
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outstanding Shares ("Company Stockholder Approval") and (I) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings, notices or permits the failure of which to be obtained or made could
not reasonably be expected to have a Material Adverse Effect on the Company.
(d) SEC Documents. The Company has made available to
Parent a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the SEC
since January 1, 1995 and prior to the date of this Agreement (the "Company SEC
Documents"), which are all the documents (other than preliminary material) that
the Company was required to file with the SEC since such date. As of their
respective dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as disclosed
on Schedule 4.1(d), the financial statements of the Company included in the
Company SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, which will not be material,
either individually or in the aggregate) the consolidated financial position of
the Company and its consolidated Subsidiaries as of their respective dates and
the consolidated results of operations and the consolidated cash flows of the
Company and its consolidated Subsidiaries for the periods presented therein.
(e) Information Supplied. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) any of the Offer Documents will, at the time
the Offer Documents are first published, sent or given to holders of Company
Common Stock, and at any time they are amended or supplemented, 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, in light of
the circumstances under which they are made,
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not misleading, and (ii) the Proxy Statement will, on the date it is first
mailed to the holders of the Company Common Stock or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the expiration of the Offer or the
Effective Time, any event with respect to the Company or any of its
Subsidiaries, or with respect to other information supplied by the Company
specifically for inclusion in the Offer Documents or the Proxy Statement, shall
occur which is required to be described in an amendment of, or a supplement to,
the Offer Documents or the Proxy Statement, as the case may be, such event
shall be so described, and such amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders of the
Company. The Proxy Statement, insofar as it relates to the Company or its
Subsidiaries or other information supplied by the Company specifically for
inclusion therein will comply as to form, in all material respects, with the
provisions of the Exchange Act or the rules and regulations thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to (i) the information supplied or to be supplied by Parent or Sub
for inclusion in the Offer Documents or the Proxy Statement or (ii) except as
provided in the immediately following sentence, any projections,
forward-looking statements or similar information provided to Parent or Sub
that is not of a historical nature. The budget prepared by the Company and
attached to Schedule 4.1(e) hereto was prepared in good faith based upon
reasonable assumptions.
(f) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits"), except where
the failure to hold any such Company Permits could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. The Company and its Subsidiaries are in compliance with the terms of
the Company Permits, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. A list of the material Company Permits is set
forth on Schedule 4.1(f). Except as disclosed in Schedule 4.1(f), the
businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity except
for any such violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company. As of
the date of this Agreement, no investigation or
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review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company, has been
threatened which could reasonably be expected to have a Material Adverse Effect
on the Company.
(g) Litigation. Except as set forth on Schedule 4.1(g),
there is no suit, action or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary of the Company
("Company Litigation"), nor is there any material judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against the
Company or any Subsidiary of the Company ("Company Order"). In addition,
except as expressly set forth on Schedule 4.1(g) as having such effect, none of
the claims and judgments pending, or to the knowledge of the Company,
threatened pursuant to all Company Litigation and Company Orders, could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(h) Taxes. Except as set forth on Schedule 4.1(h) hereto:
(i) All Tax Returns required to be filed by or
with respect to the Company and each of its Subsidiaries have been duly
and timely filed (taking into account all valid extensions of filing
dates), except where the failure to file such Tax Returns would not
have a Material Adverse Effect on the Company, and all such Tax Returns
are true, correct and complete in all material respects. The Company
and each of its Subsidiaries has duly and timely paid (or there has
been paid on its behalf) all Taxes that are due, except to the extent
that the failure to pay such Taxes would not have a Material Adverse
Effect the Company and except for Taxes being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in the Company's audited financial statements for the year
ended December 31, 1996 in accordance with generally accepted
accounting principles. With respect to any period for which Taxes are
not yet due with respect to the Company or any Subsidiary, the Company
and each of its Subsidiaries has made due and sufficient current
accruals for such Taxes in accordance with GAAP in the most recent
financial statements contained in the Company SEC Documents. The
Company and each of its Subsidiaries has made (or there has been made
on its behalf) all required estimated Tax payments sufficient to avoid
any material underpayment penalties. The Company and each of its
Subsidiaries has withheld and paid all material Taxes required by all
applicable laws to be withheld or paid in
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connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(ii) 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,
material Taxes due from or with respect to the Company or any of its
Subsidiaries for any taxable period. No audit or other proceeding by
any court, governmental or regulatory authority, or similar person is
pending or, to the knowledge of the Company, threatened in regard to
any material Taxes due from or with respect to the Company or any of
the Subsidiaries or any material Tax Return filed by or with respect to
the Company or any Subsidiary other than normal and routine audits by
nonfederal governmental authorities. Neither the Company nor any
Subsidiary of the Company has received notice that any assessment of
Taxes is proposed against the Company or any of its Subsidiaries or any
of their assets which, if ultimately paid by the Company or any
Subsidiary of the Company would have a Material Adverse Effect on the
Company.
(iii) No consent to the application of Section
341(f)(2) of the Code (or any predecessor provision) has been made or
filed by or with respect to the Company or any of its Subsidiaries or
any of their assets. None of the Company or any of its Subsidiaries
has agreed to make any adjustment pursuant to Section 481(a) of the
Code (or any predecessor provision) by reason of any change in any
accounting method, and there is no application pending with any taxing
authority requesting permission for any changes in any accounting
method of the Company or any of its Subsidiaries which, in each
respective case, will or would reasonably cause the Company or any of
is Subsidiaries to include any material adjustment in taxable income
for any taxable period (or portion thereof) ending after the Closing
Date.
(iv) None of the Company or any of its
Subsidiaries is a party to, is bound by, or has any obligation under,
any Tax sharing agreement, Tax allocation agreement or similar contract
other than any agreement to which the Company and its Subsidiaries are
the sole parties.
(v) There is no contract, agreement, plan or
arrangement 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 any of its Subsidiaries by reason of
Section 280G of the Code.
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(vi) The term "Code" shall mean the Internal
Revenue Code of 1986, as amended. The term "Taxes" shall mean all
taxes, charges, fees, levies, or other similar assessments or
liabilities, including without limitation (a) income, gross receipts,
ad valorem, premium, excise, real property, personal property, sales,
use, transfer, withholding, employment, payroll, and franchise taxes
imposed by the United States of America, or by any state, local, or
foreign government, or any subdivision, agency, or other similar person
of the United States or any such government; and (b) any interest,
fines, penalties, assessments, or additions to taxes resulting from,
attributable to, or incurred in connection with any Tax or any contest,
dispute, or refund thereof. The term "Tax Returns" shall mean any
report, return, or statement required to be supplied to a taxing
authority in connection with Taxes.
(i) Pension And Benefit Plans; ERISA.
(i) Schedule 4.1(i)(i) sets forth a complete and
correct list of:
(A) all "employee benefit plans", as defined in
Section 3(3) of ERISA, maintained by the Company or
any of its Subsidiaries to which Company or any of its
Subsidiaries has any obligation or liability,
contingent or otherwise ("Benefit Plans"); and
(B) all employment or consulting agreements, and
all bonus or other incentive compensation, deferred
compensation, salary continuation, disability, stock
award, stock option, stock purchase or other material
employee benefit policies or arrangements which the
Company or any of its Subsidiaries maintains or to
which the Company or any of its Subsidiaries has any
obligation or liability (contingent or otherwise) (the
"Employee Arrangements").
(ii) With respect to each Benefit Plan and
Employee Arrangement, a complete and correct copy of each of the
following documents (if applicable) has been made available to
Purchaser: (i) the most recent plan and related trust documents, and
all amendments thereto; (ii) the most recent summary plan description,
and all related summaries of material modifications thereto; (iii) the
most recent Form 5500 (including schedules and attachments); (iv) the
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most recent IRS determination letter; and (v) the most recent actuarial
reports.
(iii) To the Company's knowledge, the Company and
its Subsidiaries do not currently have and have not during the
preceding six years had any obligation or liability (contingent or
otherwise) under Title IV of ERISA.
(iv) The Benefit Plans and their related trusts
intended to qualify under Sections 401(a) and 501(a) of the Code,
respectively, are qualified under such sections.
(v) All contributions or other payments required
to have been made by the Company or any of its Subsidiaries to or under
any Benefit Plan or Employee Arrangement by applicable law or the terms
of such Benefit Plan or Employee Arrangement (or any agreement relating
thereto) have been timely and properly made or are properly accrued on
the Company's audited financial statements for the year ended December
31, 1996 in accordance with generally accepted accounting principles.
(vi) The Benefit Plans and Employee Arrangements
have been maintained and administered in all material respects in
accordance with their terms and applicable laws.
(vii) Except as disclosed in Schedule 4.1(i)(vii),
there are no pending or, to the best knowledge of the Company,
threatened actions, claims or proceedings against or relating to any
Benefit Plan or Employee Arrangement other than routine benefit claims
by persons entitled to benefits thereunder and other than actions,
claims or proceedings which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the
Company.
(viii) Except as disclosed in Schedule
4.1(i)(viii), the Company and its Subsidiaries do not maintain or have
an obligation to contribute to retiree life or retiree health plans
which provide for continuing benefits or coverage for current or former
officers, directors or employees of the Company or any of its
Subsidiaries except (i) as may be required under Part 6 of Title I of
ERISA) and at the sole expense of the participant or the participant's
beneficiary or (ii) a medical expense reimbursement account plan
pursuant to Section 125 of the Code.
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(j) Absence of Certain Changes or Events. Except as set
forth on Exhibit D or Schedule 4.1(j) or as contemplated by this Agreement,
since December 31, 1996, the business of the Company and its Subsidiaries has
been carried on only in the ordinary and usual course and no event or events
has or have occurred that (either individually or in the aggregate) has had, or
reasonably could be expected to have, a Material Adverse Effect on the Company.
(k) No Undisclosed Material Liabilities. Except as
specifically and individually set forth on Schedule 4.1(k) or the other
schedules hereto (specific reference to which shall be made on Schedule
4.1(k)), there are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, that are material to the Company and its Subsidiaries considered as
a whole other than: (i) liabilities reflected on the Company's audited
financial statements (together with the related notes thereto) filed with the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (as
filed with the SEC); and (ii) liabilities under this Agreement.
(l) Opinion of Financial Advisor. The Company has
received the opinion of the Financial Advisor dated April 10, 1997, to the
effect that, as of the date thereof, the Offer Consideration to be received by
the holders of Company Common Stock in the Offer and the Merger Consideration
to be received by the holders of Company Common Stock in the Merger is fair
from a financial point of view to such holders, a signed, true and complete
copy of which opinion shall be delivered to Parent, and such opinion has not
been withdrawn or modified. True and complete copies of all agreements and
understandings between the Company or any of its affiliates and the Financial
Advisor relating to the transactions contemplated by this Agreement are
attached hereto as Schedule 4.1(l).
(m) Vote Required. In the event that Section 253 of the
DGCL is inapplicable and unavailable to effectuate the Merger, the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock is the only vote of the holders of any class or series of the Company's
capital stock necessary (under applicable law or otherwise) to approve the
Merger and this Agreement and the transactions contemplated hereby.
(n) Labor Matters. Except to the extent as such could not
reasonably be expected to have a Material Adverse Effect on the Company or as
set forth on Schedule 4.1(n):
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(i) Neither the Company nor any of its
Subsidiaries is a party to any labor or collective bargaining
agreement, and no employees of Company or any of its Subsidiaries are
represented by any labor organization. Within the preceding three
years, there have been no representation or certification proceedings,
or petitions seeking a representation proceeding, pending or, to the
knowledge of the Company, threatened to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. Within the preceding three years, to the knowledge of
Company, there have been no organizing activities involving Company or
any of its Subsidiaries with respect to any group of employees of
Company or any of its Subsidiaries.
(ii) There are no strikes, work stoppages,
slowdowns, lockouts, material arbitrations or material grievances or
other material labor disputes pending or, to the knowledge of the
Company, threatened against or involving Company or any of its
Subsidiaries. There are no unfair labor practice charges, grievances
or complaints pending or, to the knowledge of Company, threatened by or
on behalf of any employee or group of employees of Company or any of
its Subsidiaries.
(iii) There are no complaints, charges or claims
against Company or any of its Subsidiaries pending or, to the knowledge
of Company, threatened to be brought or filed with any governmental
authority, arbitrator or court based on, arising out of, in connection
with, or otherwise relating to the employment or termination of
employment of any individual by Company or any of its Subsidiaries.
(iv) Each of the Company and its Subsidiaries is
in material compliance with all laws, regulations and orders relating
to the employment of labor, including all such laws, regulations and
orders relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and
any similar tax.
(v) Since July 31, 1996, there has been no "mass
layoff" or "plant closing" (as defined by the Worker Adjustment
Retraining and Notification Act of 1988, as amended ("WARN Act") with
respect to the Company or any of its Subsidiaries.
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(o) Intangible Property. Each of the Company and its
Subsidiaries owns or has a right to use each trademark, trade name, patent,
service xxxx, brand xxxx, brand name, computer program, database, industrial
design and copyright owned or used in connection with the operation of its
businesses, including any registrations thereof and pending applications
therefor, and each license or other contract relating thereto (collectively,
the "Company Intangible Property"), free and clear of any and all liens, claims
or encumbrances, except where the failure to own or have a right to use such
property could not reasonably be expected to have a Material Adverse Effect on
the Company. To the Company's knowledge, Schedule 4.1(o) hereto sets forth a
complete list of the Company Intangible Property. Except to the extent that
such could not reasonably be expected to have a Material Adverse Effect on the
Company, the use of the Company Intangible Property by the Company or its
Subsidiaries does not conflict with, infringe upon, violate or interfere with
or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark,
trade name, patent, service xxxx, brand xxxx, brand name, computer program,
database, industrial design, copyright or any pending application therefor of
any other person.
(p) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means
any and all losses, liabilities, obligations, damages, fines,
penalties, judgments, actions, claims, costs and expenses
(including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants
and the reasonable costs of investigation and feasibility
studies and the reasonable costs to clean up, remove, treat,
or in any other way address any Hazardous Materials) arising
with respect to any violation of or liability arising pursuant
to or under any Environmental Law.
(B) "Environmental Law" means any applicable law
regulating or prohibiting Releases of Hazardous Materials into
any part of the natural environment, or pertaining to the
protection of natural resources, the environment and public
and employee health and safety from Hazardous Materials
including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42
U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act
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(49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean
Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air
Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 7401 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section
136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.) ("OSHA") and the regulations
promulgated pursuant thereto, and any such applicable state
or local statutes, including, without limitation, the
Industrial Site Recovery Act ("IRSA"), and the regulations
promulgated pursuant thereto, as such laws have been and may
be amended or supplemented through the Closing Date;
(C) "Hazardous Material" means any substance,
material or waste which is regulated with respect to its toxic
or otherwise hazardous character by any public or governmental
authority in the jurisdictions in which the applicable party
or its Subsidiaries conducts business, or the United States,
including, without limitation, any material or substance which
is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of Environmental Law and
shall also include, without limitation, petroleum, petroleum
products, asbestos, polychlorinated biphenyls and radioactive
materials;
(D) "Release" means any release, spill, effluent,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching, or migration into the
environment; and
(E) "Remedial Action" means all actions,
including, without limitation, any capital expenditures,
required by a governmental entity or required under any
Environmental Law, or voluntarily undertaken to (I) clean up,
remove, treat, or in any other way ameliorate or address any
Hazardous Materials or other substance in the environment;
(II) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not
endanger or threaten to endanger the public health or welfare
or the environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining
or relating to a Release; or
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(IV) bring the applicable party into compliance with any
Environmental Law.
(ii) Except as set forth on Schedule
4.1(p) hereto: (A) The operations of the Company and its
Subsidiaries have been and, as of the Closing Date, will be,
in compliance in all respects with all Environmental Laws
except for any such noncompliance which could not reasonably
be expected to result in a Material Adverse Effect on the
Company;
(B) The Company and its Subsidiaries have
obtained and will, as of the Closing Date, maintain all
permits required under applicable Environmental Laws for the
continued operations of their respective businesses, except
such permits the lack of which would not materially impair the
ability of the Company and its Subsidiaries to continue
operations;
(C) The Company and its Subsidiaries are not
subject to any outstanding material written orders from, or
material written agreements with, any Governmental Entity or
other person respecting (A) violations or liability pursuant
to Environmental Laws, (B) Remedial Action or (C) any Release
or threatened Release of a Hazardous Material;
(D) The Company and its Subsidiaries have not
received any written communication alleging, with respect to
any such party, the material violation of or material
liability under any Environmental Law, which violation or
liability is outstanding;
(E) Neither the Company nor any of its
Subsidiaries has any contingent liability in connection with
the Release of any Hazardous Material into the environment
(whether on-site or off- site) which would be reasonably
likely to result in the Company and its Subsidiaries incurring
Environmental Costs and Liabilities which could reasonably be
expected to result in a Material Adverse Effect on the
Company;
(F) The operations of the Company or its
Subsidiaries do not involve the transportation, treatment,
storage or disposal of hazardous waste, as defined and
regulated under permit requirements set forth in 40 C.F.R.
Parts 260-270 (in effect as of the date of this Agreement) or
any state equivalent;
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(G) To the knowledge of the Company, there is not
now nor has there been in the past, on or in any property of
the Company or its Subsidiaries any of the following: (A) any
underground storage tanks or surface impoundments containing
Hazardous Materials, (B) any asbestos-containing materials, or
(C) any polychlorinated biphenyls in regulated quantities; and
(H) No judicial or administrative proceedings or
governmental investigations are pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries alleging the violation of or seeking to impose
liability pursuant to any Environmental Law, except for any
such proceedings or investigations that could not reasonably
be expected to result in a Material Adverse Effect on the
Company.
(iii) This Section 4.1(p) sets forth the
sole and exclusive representations and warranties of the
Company relating to Environmental Matters, including, without
limitation, any matters arising under Environmental Laws.
(q) Real Property.
(i) Schedule 4.1(q)(i) sets forth all of the real
property owned in fee by the Company and its Subsidiaries. Each of the
Company and its Subsidiaries has good and marketable title to each
parcel of real property owned by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests, except (1) those
described in the Company SEC Documents, (2) those reflected or reserved
against in the audited balance sheet of the Company dated as of
December 31, 1996, and (3) to the extent that such could not reasonably
be expected to have a Material Adverse Effect on the Company, (A) taxes
and general and special assessments not in default and payable without
penalty and interest, (B) mechanics and similar statutory liens arising
or incurred in the ordinary course of business for amounts that are not
delinquent, (C) any zoning, building, and land use regulation imposed
by any Governmental Entity, and (D) any covenant, restriction, or
easement expressly set forth in the title documents governing such real
property filed with the appropriate Governmental Entity.
(ii) Schedule 4.1(q)(ii) sets forth each lease,
sublease or other agreement (collectively, the "Real Property Leases")
under which the Company or any of its
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Subsidiaries uses or occupies or has the right to use or occupy, now or
in the future, any real property. Each Real Property Lease is valid,
binding and in full force and effect, all rent and other sums and
charges payable by the Company and its Subsidiaries as tenants
thereunder are current, no termination event or condition or uncured
default of a material nature on the part of the Company or any
Subsidiary of the Company exists under any Real Property Lease. Each
of the Company and its Subsidiaries has a good and valid leasehold
interest in each parcel of real property leased by it free and clear of
all mortgages, pledges, liens, encumbrances and security interests,
except (i) those disclosed in the Company's SEC Documents, (ii) those
reflected or reserved against in the balance sheet of the Company dated
as of December 31, 1996, (iii) taxes and general and special
assessments not in default and payable without penalty and interest and
(iv) those which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
(r) Board Recommendation. As of the date hereof, the
Board of Directors of the Company, at a meeting duly called and held, has by
the vote of those directors present (who constituted 100% of the directors then
in office) (i) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, taken together, are fair to and in
the best interests of the stockholders of the Company and has approved the
same, 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 (if required), and accept the Offer and tender their
shares of Company Common Stock pursuant thereto.
(s) Material Contracts. The Company has made available to
Parent (i) true and complete copies of all written contracts, agreements,
commitments, arrangements, leases (including with respect to personal
property), policies and other instruments to which it or any of its
Subsidiaries is a party or by which it or any such Subsidiary is bound which
(A) require payments to be made in excess of $250,000 per year for goods and/or
services, (B) require payments to be made in excess of $100,000 with respect to
any licenses granted to the Company or any of its Subsidiaries, or (C) do not
by their terms expire and are not subject to termination within 60 days from
the date of the execution and delivery thereof (collectively, "Material
Contracts"), and (ii) a written description of each Material Contract of which
the Company is aware that has not been reduced to writing; provided, however,
that blanket purchase orders or similar arrangements shall not be considered
Material Contracts
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for purposes of this Agreement. Each of the Material Contracts is listed on
Schedule 4.1(s). Neither the Company nor any of its Subsidiaries is, or has
received any written notice that any other party is, in default in any respect
under any such Material Contract, except for those defaults which could not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company; and, to the Company's
knowledge, there has not occurred any event or events that with the lapse of
time or the giving of notice or both would constitute such a material default,
except for those defaults which could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company.
(t) Related Party Transactions. Except as set forth on
Schedule 4.1(t) or as disclosed in the Company SEC Documents, no director,
officer, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its Subsidiaries (i) has
borrowed any monies from or has outstanding any indebtedness or other similar
obligations to the Company or any of its Subsidiaries, or (ii) is otherwise a
party to any contract, arrangement or understanding with the Company or any of
its Subsidiaries.
(u) Indebtedness. Except as set forth on Schedule 4.1(u)
hereto or in the Company's audited financial statements as of December 31,
1996, on the date hereof neither the Company nor any of its Subsidiaries has
any outstanding indebtedness for borrowed money or representing the deferred
purchase price of property or services or similar liabilities or obligations,
including any guarantee in respect thereof ("Indebtedness"), or is a party to
any agreement, arrangement or understanding providing for the creation,
incurrence or assumption thereof.
(v) Liens. Neither the Company nor any of its
Subsidiaries has granted, created, or suffered to exist with respect to any of
its assets, any mortgage, pledge, charge, hypothecation, collateral assignment,
lien (statutory or otherwise), encumbrance or security agreement of any kind or
nature whatsoever, except (1) those described in the Company SEC Documents, (2)
those reflected or reserved against in the audited balance sheet of the Company
dated as of December 31, 1996, and (3) to the extent that such could not
reasonably be expected to have a Material Adverse Effect on the Company, (A)
taxes and general and special assessments not in default and payable without
penalty and interest, (B) mechanics and similar statutory liens arising or
incurred in the ordinary course of business for amounts that are not
delinquent, (C) any zoning, building, and
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land use regulation imposed by any Governmental Entity, and (D) any covenant,
restriction, or easement expressly set forth in the title documents governing
real property of the Company or any of its Subsidiaries and filed with the
appropriate Governmental Entity.
(w) Customers and Suppliers. Schedule 4.1(w) sets forth
(a) a list of the ten largest customers of the Company and its Subsidiaries
based on sales during the fiscal year ended December 31, 1996, showing the
approximate total sales to each such customer during such fiscal year and (b) a
list of the ten largest suppliers of the Company and its Subsidiaries based on
purchases during the fiscal year ended December 31, 1996, showing the
approximate total purchases from each such supplier during such fiscal year.
Except as described on Schedule 4.1(w), to the Company's knowledge there has
not been any adverse change in the business relationship of the Company or any
Subsidiary of the Company with any customer or supplier named in Schedule
4.1(w) which could reasonably be expected to have a Material Adverse Change on
the Company.
4.2 Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted, and is duly qualified to do business as a
foreign corporation and in good standing to conduct business in each
jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify could not have
a Material Adverse Effect with respect to Parent. Parent and Sub have
heretofore made available to the Company complete and correct copies of their
respective Certificates of Incorporation and Bylaws.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has
been duly executed and delivered by each of Parent and Sub and
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assuming this Agreement constitutes the valid and binding agreement of
the Company, constitutes a valid and binding obligation of Parent and
Sub enforceable in accordance with its terms and conditions except that
the enforcement hereof may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of
Parent and Sub will not result in any Violation pursuant to any
provision of the respective Articles or Certificates of Incorporation
or Bylaws of Parent or Sub or, except as to which requisite waivers or
consents have been obtained and assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in
paragraph (iii) of this Section 4.2(b) are duly and timely obtained or
made, and, if required, the Company Stockholder Approval has been
obtained, result in any Violation of any loan or credit agreement,
note, mortgage, indenture, lease, or other agreement, obligation,
instrument, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Sub
or their respective properties or assets, which could have a Material
Adverse Effect with respect to Parent.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to, or permit
from any Governmental Entity, is required by or with respect to Parent
or Sub in connection with the execution and delivery of this Agreement
by each of Parent and Sub or the consummation by each of Parent or Sub
of the transactions contemplated hereby, except for: (A) filings under
the HSR Act; (B) the filing with the SEC of (x) the Schedule 14D-1 in
connection with the commencement and consummation of the Offer and (y)
such reports under and such other compliance with the Exchange Act and
the rules and regulations thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby; (C) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware; (D) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws; (E) such
filings and approvals as may be required by any foreign pre-merger
notification, securities, corporate or other law,
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rule or regulation; (F) such filings in connection with any Gains and
Transfer Taxes; and (G) such other such filings and consents as may be
required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval
necessitated by the Merger or the transactions contemplated by this
Agreement.
(c) Information Supplied. None of the information
supplied or to be supplied by Parent or Sub for inclusion or incorporation by
reference in (i) the Schedule 14D-9 will, at the time the Schedule 14D-9 is
filed with the SEC, and at any time it is amended or supplemented, 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, in light of
the circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. If, at any time prior to the Effective Time, any
event with respect to Parent or Sub, or with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9 or the Proxy Statement, shall
occur which is required to be described in an amendment of, or a supplement to,
any of such documents, such event shall be so described to the Company.
(d) Board Recommendation. The Board of Directors of the
Parent, at a meeting duly called and held, has by the vote of those directors
present determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, taken together, are fair to and in
the best interests of Parent and has approved the same.
(e) Financing. Parent and Sub have delivered to the
Company a true and complete copy of (i) a letter of commitment obtained by
Parent from Credit Suisse First Boston to provide debt financing for the
transactions contemplated hereby pursuant to a senior credit facility; (ii) a
letter of commitment obtained by Parent from Credit Suisse First Boston with
respect to senior subordinated debt financing for the transactions contemplated
hereby pursuant to the sale by Parent of senior subordinated notes; (iii) a
letter of commitment obtained by Xxxxxxxx Holdings, Inc., the sole stockholder
of Parent ("Holdings"), from Credit Suisse First Boston with respect to senior
debt financing for the transactions contemplated hereby pursuant to the sale by
Holdings of senior notes; and (iv) from Xxxxx Muse Equity Fund
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II, L.P. to provide certain equity financing pursuant to the sale by Holdings
of shares of its common stock (collectively, the "Financing Commitments").
Executed copies of the Financing Commitments are attached hereto as Exhibit
4.2(e). Assuming that the financing contemplated by the Financing Commitments
is consummated in accordance with the terms thereof, the funds to be borrowed
and/or provided thereunder by Parent and Holdings will provide sufficient funds
to pay the Offer Consideration, the Merger Consideration and all related fees
and expenses. As of the date of this Agreement, Parent is not aware of any
facts or circumstances that create a reasonable basis for Parent to believe
that Parent and Holdings will not be able to obtain financing in accordance
with the terms of the Financing Commitments. Parent agrees to promptly notify
the Company if the statements in the immediately preceding sentence are no
longer true and correct. Parent and Sub agree with the Company that they will
not waive, release, modify, rescind, terminate or otherwise amend any of the
material terms or conditions in the commitment letters referred to in this
Section 4.2(e), without the prior written consent of the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the
date of this Agreement and continuing until the Effective Time, the Company
agrees as to the Company and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Parent shall
otherwise consent in writing):
(a) Ordinary Course. Each of the Company and its
Subsidiaries shall carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and shall use
all reasonable efforts to preserve intact its present business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it.
(b) Dividends; Changes in Stock. The Company shall not,
nor shall it permit any of its Subsidiaries to: (i) declare or pay any
dividends on or make other distributions in respect of any of its capital
stock; (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock; or (iii) repurchase
or otherwise acquire, or permit any Subsidiary to purchase or
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otherwise acquire, any shares of its capital stock, except (A) as contemplated
by Section 3.5 of this Agreement and (B) as required by the terms of its
securities outstanding or any employee benefit plan in effect on the date
hereof.
(c) Issuance of Securities. The Company shall not, nor
shall it permit any of its Subsidiaries to, (i) grant any options, warrants or
rights, to purchase shares of Company Common Stock, (ii) except as contemplated
by Section 3.5 of this Agreement, amend the terms of or reprice any Option or
amend the terms of any of the Stock Option Plans, or (iii) issue, deliver or
sell, or authorize or propose to issue, deliver or sell, any shares of its
capital stock of any class or series, any Company Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Company Voting Debt or convertible securities, other than the issuance
of Shares upon the exercise of Options or Warrants that are outstanding on the
date hereof.
(d) Governing Documents. The Company shall not amend or
propose to amend its Certificate of Incorporation or Bylaws.
(e) No Solicitation. From and after the date hereof until
the termination of this Agreement, neither the Company or any of its
Subsidiaries, nor any of their respective officers, directors, representatives,
agents or affiliates (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries)
(such officers, directors, employees, representatives, agents, affiliates,
investment bankers, attorneys and accountants being referred to herein,
collectively, as "Representatives"), will, and the Company will use its
reasonable best efforts to cause the employees of the Company and its
Subsidiaries not to, directly or indirectly, initiate, solicit or encourage
(including by way of furnishing information or assistance), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or for the
purpose of obtaining an Acquisition Proposal, or agree to or endorse any
Acquisition Proposal, and neither the Company nor any of its Subsidiaries will
authorize or permit any of its Representatives to take any such action, and the
Company shall notify Parent orally (within one business day) and in writing (as
promptly as practicable) of all of the relevant details relating to, and all
material aspects of, all inquiries and proposals which it or any of its
Subsidiaries or any of their respective Representatives may receive relating to
any of such matters and, if such inquiry
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or proposal is in writing, the Company shall deliver to Parent a copy of such
inquiry or proposal as promptly as practicable; provided, however, that nothing
contained in this Section 5.1(e) shall prohibit the Board of Directors of the
Company from:
(i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited written, bona fide Acquisition Proposal (provided that such
person or entity has the necessary funds or commitments to provide the
funds to effect such Acquisition Proposal; provided further, however,
that the Company shall have two business days from the date it receives
such Acquisition Proposal to determine whether such person or entity
has such funds or commitments) if, and only to the extent that, (A) the
Board of Directors of the Company, after consultation with and based
upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith
that such action is advisable for the Board of Directors of the Company
to comply with its fiduciary duties to stockholders under applicable
law, (B) prior to taking such action, the Company (x) provides
reasonable prior notice to Parent to the effect that it is taking such
action and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form, and (C) the
Company shall , to the extent consistent with the Board of Directors
fiduciary duties to stockholders under applicable law, promptly and
continuously advise Parent as to all of the relevant details relating
to, and all material aspects, of any such discussions or negotiations;
(ii) failing to make or reaffirm, withdrawing,
adversely modifying or taking a public position materially inconsistent
with its recommendation referred to in Section 4.1(r) (which may
include making any statement required by Rule 14e-2 under the Exchange
Act) if there exists an Acquisition Proposal and the Board of Directors
of the Company, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is
advisable for the Board of Directors of the Company to comply with its
fiduciary duties to holders of Shares under applicable law; or
(iii) making a "stop-look-and-listen" communication
with respect to an Acquisition Proposal, the Offer or this Agreement of
the nature contemplated in, and otherwise in compliance with, Rule
14d-9 under the Exchange Act as a result of receiving an Acquisition
Proposal.
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For purposes of this Agreement, "Acquisition Proposal" shall mean any of the
following (other than the transactions among the Company, Parent and Sub
contemplated hereunder) involving the Company or any of its Subsidiaries: (i)
any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets
(computed based on the fair market value of such assets as determined by the
Board of Directors of the Company in good faith) of the Company and its
Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(f) No Acquisitions. The Company shall not, nor shall it
permit any of its Subsidiaries to: (i) merge or consolidate with, or acquire
any equity interest in, any corporation, partnership, association or other
business organization, or enter into an agreement with respect thereto or (ii)
acquire or agree to acquire any assets of any corporation, partnership,
association or other business organization or division thereof, except for the
purchase of inventory and supplies in the ordinary course of business or the
acquisition by the Company or any Subsidiary of equity interests in any
customer or supplier of the Company in satisfaction of outstanding claims
against such party in bankruptcy proceedings consistent with past practice.
(g) No Dispositions. Other than sales of inventory or
sales or returns of obselete or surplus equipment in the ordinary course of
business consistent with past practice, the Company shall not, nor shall it
permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose
of, or agree to sell, lease (whether such lease is an operating or capital
lease), encumber or otherwise dispose of, any of its assets (including, without
limitation, any capital stock or other ownership interest of any Subsidiary of
the Company).
(h) Governmental Filings. The Company shall promptly
provide Parent (or its counsel) with copies of all filings made by the Company
with the SEC or any other state or federal Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. The Company shall not authorize,
recommend, propose or announce an intention to adopt a
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plan of complete or partial liquidation or dissolution of the Company or any of
its Subsidiaries.
(j) Other Actions.
(i) Except as expressly permitted by the terms of
this Agreement, the Company will not knowingly or intentionally take or
agree or commit to take, nor will it permit any of its Subsidiaries to
take or agree or commit to take, any action that is reasonably likely
to result in any of the Company's representations or warranties
hereunder being untrue in any material respect or in any of the
Company's covenants hereunder or any of the conditions to the Merger
not being satisfied in all material respects.
(ii) Parent will not knowingly or intentionally
take or agree or commit to take, nor will it permit Holdings or any of
the Subsidiaries of Parent to take or agree or commit to take, any
action to prohibit or prevent the financing sources of Parent and
Holdings from providing the debt and equity financing contemplated by
the Financing Commitments.
(k) Certain Employee Matters. The Company and its
Subsidiaries shall not (without the prior written consent of Parent): (i)
grant any increases in the compensation of any of its directors, officers or
key employees; (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated to be paid prior to the
Effective Time by any of the existing Benefit Plans or Employee Arrangements as
in effect on the date hereof to any such director, officer or key employee,
whether past or present; (iii) enter into any new, or materially amend any
existing, employment or severance or termination agreement with any such
director, officer or key employee; or (iv) except as may be required to comply
with applicable law, become obligated under any new Benefit Plan or Employee
Arrangement, which was not in existence on the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder.
(l) Indebtedness; Agreements.
(i) Except for indebtedness incurred by the
Company from time to time for working capital purposes in the ordinary
course of business under that certain Second Amended and Restated
Credit Agreement, dated as of December 14, 1995 among the Company, the
financial institutions party
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thereto and the First National Bank of Chicago, as agent (the "Company
Credit Agreement"), indebtedness incurred to fund capital expenditures
permitted under Section 5.1(n) of this Agreement and entering into
leases for personal property in the ordinary course of business
consistent with past practice, the Company shall not, nor shall the
Company permit any of its Subsidiaries to, without the prior written
consent of Parent (which shall not be unreasonably withheld), assume or
incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of others or enter into
any lease (whether such lease is an operating or capital lease) or
create any mortgages, liens, security interests or other encumbrances
on the property of the Company or any of its Subsidiaries in connection
with any indebtedness thereof, or enter into any "keep well" or other
agreement or arrangement to maintain the financial condition of another
person.
(ii) Without the prior written consent of Parent
(which shall not be unreasonably withheld), the Company shall not, nor
shall the Company permit any of its Subsidiaries to, (A) enter into any
contracts involving aggregate annual payments not in excess of
$250,000, except for license agreements entered into in the ordinary
course of the Company's business consistent with past practice, or (b)
modify, rescind, terminate, waive, release or otherwise amend in any
material respect any of the terms or provisions of any Material
Contract in any manner that is material and adverse to the Company or
the respective Subsidiary of the Company party thereto.
(m) Accounting. The Company shall not take any action,
other than in the ordinary course of business, consistent with past practice or
as required by the SEC or by law, with respect to accounting policies,
procedures and practices.
(n) Capital Expenditures. Except for the capital
expenditures set forth on Schedule 5.1(n), the Company and its Subsidiaries
shall not incur any capital expenditures in excess of $100,000.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of the Proxy Statement; Company
Stockholders Meeting; Merger without a Company Stockholders Meeting.
(a) The Company and Parent will, as soon as practicable
following the acceptance for payment of and payment for shares of the Company
Common Stock by Sub in the Offer, prepare and file the Proxy Statement with the
SEC. The Company will use all commercially reasonable efforts to respond to
all SEC comments with respect to the Proxy Statement and to cause the Proxy
Statement to be mailed to the Company's stockholders at the earliest
practicable date.
(b) The Company will, as soon as practicable following the
acceptance for payment of and payment for shares of the Company Common Stock by
Sub in the Offer, duly call, give notice of, convene and hold a meeting of the
Company's stockholders for the purpose of approving this Agreement and the
transactions contemplated hereby. At such stockholders meeting, Parent shall
cause all of the shares of Company Common Stock then owned by Parent and Sub to
be voted in favor of the Merger.
(c) Notwithstanding the foregoing clauses (a) and (b), in
the event that Parent and Sub shall acquire at least 90% of the outstanding
shares of Company Common Stock in the Offer, the parties hereto agree, at the
request of Sub, to take all necessary and appropriate action to cause the
Merger to become effective, as soon as practicable after the expiration of the
Offer, without a meeting of stockholders of the Company, in accordance with
Section 253 of the DGCL.
(d) Sub shall promptly submit this Agreement and the
transactions contemplated hereby for approval and adoption by Parent, as its
sole stockholder, by written consent.
6.2 Access to Information. Upon reasonable notice, each
of the Company or Parent, as the case may be, shall (and shall cause each of
its Subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of the other party (including, in the case of Parent
and Sub, potential financing sources and their employees, accountants, counsel
and other representatives), access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other party, (a) a
copy
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of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to SEC requirements and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. The Confidentiality Agreement, dated as of
December 10, 1996, between Parent and the Company (the "Confidentiality
Agreement") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
6.3 [Intentionally Omitted].
6.4 Fees and Expenses. (a) Except as otherwise
provided in this Section 6.4 and except with respect to claims for damages
incurred as a result of the breach of this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense.
(b) The Company agrees to pay Parent or Parent's designee
a fee in immediately available funds equal to $3,000,000 upon the termination
of this Agreement under Section 8.1(d) or Section 8.1(e), if any of the events
set forth in either clause (i) or clause (ii) below occurs (each, a "Trigger
Event"):
(i) the Board of Directors of the Company shall have (A)
withdrawn or adversely modified, or taken a public position materially
inconsistent with, its approval or recommendation of the Offer, the
Merger, this Agreement or the Stockholders Agreement, or (B) failed to
reaffirm its approval or recommendation of the Offer, the Merger and
this Agreement under the circumstances set forth in Section 8.1(e);
provided that a Company action permitted by Section 5.1(e)(iii) hereof
shall not, by itself, constitute a Trigger Event; or
(ii) an Acquisition Proposal has been recommended or
accepted by the Company or the Company shall have entered into an
agreement (other than a confidentiality agreement as contemplated by
Section 5.1(e)) with respect to an Acquisition Proposal.
(c) Parent agrees to pay to the Company a fee in
immediately available funds equal to $3,000,000 upon the termination of this
Agreement under Section 8.1(f) in the event that the Offer expires or is
withdrawn, abandoned or terminated if the sole reason for such expiration,
withdrawal, abandonment or termination is the failure of the condition
described in item (iii) on Exhibit A hereto.
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(d) Any amounts due under this Section 6.4 that are not
paid when due shall bear interest at the prime rate from the date due through
and including the date paid.
6.5 Brokers or Finders. (a) The Company represents, as
to itself, its Subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finders fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except the Financial Advisor, whose fees and expenses will be paid by the
Company in accordance with the Company's agreements with such firm (copies of
which have been delivered by the Company to Parent prior to the date of this
Agreement).
(b) Parent represents, as to itself, its Subsidiaries and
its affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finders fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for Hicks, Muse, Xxxx & Xxxxx
Incorporated, whose fees and expenses will be paid by Parent in accordance with
the Parent's agreements with such firm (copies of which have been made
available to the Company prior to the date of this Agreement).
6.6 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer, director, employee or agent of the Company or any
of its Subsidiaries(the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of or in
connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out
of the fact that such person is or was a director, officer, employee or agent
of the Company or any of its Subsidiaries whether pertaining to any matter
existing or occurring at or prior to the Effective Time or any acts or
omissions occurring or existing at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case
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to the full extent a corporation is permitted under the DGCL to indemnify its
own directors or officers as the case may be (and the Company and the
Surviving Corporation, as the case may be, shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by law). Without limiting the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time), (i) the Indemnified Parties may retain the Company's regularly engaged
independent legal counsel or counsel satisfactory to them and reasonably
satisfactory to the Company (or them and reasonably satisfactory to the
Surviving Corporation after the Effective Time) and the Company (or after the
Effective Time, the Surviving Corporation) shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; and (ii) the Company (or after the Effective Time, the
Surviving Corporation) will use all reasonable best efforts to assist in the
vigorous defense of any such matter, provided that neither the Company nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent which consent shall not unreasonably be withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.6, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Company (or after the Effective Time, the Surviving Corporation)
(but the failure so to notify shall not relieve a party from any liability
which it may have under this Section 6.6 except to the extent such failure
materially prejudices such party's position with respect to such claims), and
shall deliver to the Company (or after the Effective Time, the Surviving
Corporation) the undertaking contemplated by Section 145(e) of the DGCL. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties in which case such additional counsel as
may be required (as shall be reasonably determined by the Indemnified Parties
and the Company or the Surviving Corporation, as the case may be) may be
retained by the Indemnified Parties at the cost and expense of the Company (or
Surviving Corporation). The Company and Sub agree that the foregoing rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified
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Liabilities asserted or made within such period shall continue until the
disposition of such Indemnified Liabilities. Furthermore, the provisions with
respect to indemnification set forth in the certificate of incorporation of the
Surviving Corporation shall not be amended for a period of six years following
the Effective Time if such amendment would materially and adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, employees or agents of the Company in respect of
actions or omissions occurring at or prior to the Effective Time.
(b) Parent and Sub hereby unconditionally waive and release
the Indemnified Parties from and agrees to indemnify, defend and hold harmless
the Indemnified Parties from and against any and all claims, demands, causes of
action, liabilities, costs or expenses, whether arising under contract,
statute, common law or otherwise, with respect to environmental matters
(including without limitation any of the foregoing arising under CERCLA or any
other Environmental Laws).
(c) For a period of six years after the Effective Time,
the Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before and acts or
omissions occurring or existing at or prior to the Effective Time including the
transactions contemplated by this Agreement, provided that Parent shall not be
required to pay an annual premium for such insurance in excess of 200% of the
last annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount. The last
annual premium paid by the Company was $85,000.
(d) The provisions of this Section 6.6 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his personal representatives and shall be binding on all successors
and assigns of Sub, the Company and the Surviving Corporation.
6.7 Commercially Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable, under
applicable laws and regulations or otherwise, to consummate and make effective
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the transactions contemplated by this Agreement and the Stockholders Agreement,
subject, as applicable, to the Company Stockholder Approval, including
cooperating fully with the other party, including by provision of information
and making of all necessary filings in connection with, among other things,
approvals under the HSR Act. The Company will use its reasonable efforts to
assist Parent, at Parent's expense, in obtaining any consent from third parties
necessary to allow the Company to continue operating its business as presently
conducted as a result of the consummation of the transactions contemplated
hereby. In case at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
the proper officers and directors of each party to this Agreement shall take
all such necessary action. Without limiting the generality of the foregoing,
the Company agrees to cooperate with Parent's and Sub's efforts to secure the
financing contemplated by the Financing Commitments, such cooperation to
include providing such information to Parent's and Sub's financing sources as
Parent or Sub may reasonably request and making available to such financing
sources senior officers and such other employees of the Company as Parent and
Sub may reasonably request to assist in the preparation of one or more offering
documents and other appropriate marketing materials and to otherwise
participate in such marketing and sales efforts relating to the Financing
Commitments as Parent and Sub may reasonably request upon reasonable notice and
consistent with such officers' and employees' other business responsibilities
to the Company; provided, that the Company shall incur no liability hereunder
as a result of any participation by any officer or employee in such financing
efforts.
6.8 Conduct of Business of Sub. During the period of time
from the date of this Agreement to the Effective Time, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
6.9 Publicity. The parties will consult with each other
and will mutually agree upon any press release or public announcement
pertaining to the Offer and the Merger and shall not issue any such press
release or make any such public announcement prior to such consultation and
agreement, except as may be required by applicable law, in which case the party
proposing to issue such press release or make such public announcement shall
use reasonable efforts to consult in good faith with the other party before
issuing any such press release or making any such public announcement.
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6.10 Withholding Rights. Sub and the Surviving
Corporation, as applicable, shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Sub or the Surviving
Corporation, as applicable, is required to deduct and withhold with respect to
the making of such payment under the Code or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Sub or the
Surviving Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by Sub
or the Surviving Corporation, as applicable.
6.11 Continuation of Employee Benefits. Until at least
December 31, 1997, Parent shall maintain or cause to be maintained employee
benefits and programs for retirees, directors, officers and employees of the
Company and its Subsidiaries that are no less favorable in the aggregate than
those set forth on Schedule 4.1(i) taking into account that the Company will be
a private company without stock options and the like; provided, however, that
Parent shall not be obligated to continue (i) the Company's Nonqualified
Deferred Compensation Plan and the Company agrees that it shall cause such plan
to be terminated prior to the consummation of the Offer or (ii) any individual
employment agreement. On or after January 1, 1998, the retirees, directors,
officers and employees of the Company and its Subsidiaries shall be eligible
for employee benefits, plans and programs (including but not limited to
incentive compensation, deferred compensation, pension, life insurance,
medical, profit sharing (including 401(k)), severance salary continuation and
fringe benefits) which are no less favorable in the aggregate than those
generally available to similarly situated retirees, directors, officers and
employees of the Parent and its significant Subsidiaries. For purposes of
eligibility to participate in and vesting in all benefits provided to retirees,
directors, officers and employees, the retirees, directors, officers and
employees of the Company and its Subsidiaries will be credited with their years
of service with prior employers to the extent service with prior employers is
taken into account under plans of the Company. Upon termination of any medical
plan of the Company, individuals who were directors, officers or employees of
the Company or its Subsidiaries at the Effective Time shall become eligible to
participate in the medical plan of Parent, provided that no condition that was
eligible for coverage under any medical plan of the Company at the time of such
termination shall be excluded from coverage under the medical plan of Parent as
a pre-existing condition. Amounts paid before the Effective Time by retirees,
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directors, officers and employees of the Company under any medical plans of the
Company shall after the Effective Time be taken into account in applying
deductible and out-of-pocket limits applicable under the medical plan of Parent
provided as of the Effective Time to the same extent as if such amounts had
been paid under such medical plan of Parent.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the affirmative vote of the holders of
a majority of the outstanding Shares entitled to vote thereon if such vote is
required by applicable law; provided that the Parent and Sub shall vote all
Shares purchased pursuant to the Offer or the Stockholders Agreement in favor
of the Merger.
(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, and no restrictive order or other requirements shall
have been placed on the Company, Parent, Sub or the Surviving Corporation in
connection therewith.
(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 (an
"Injunction") preventing the consummation of the Merger shall be in effect;
provided, however, that prior to invoking this condition, each party shall use
all commercially reasonable efforts to have any such decree, ruling, injunction
or order vacated.
(d) Statutes. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or
governmental agency or authority which prohibits the consummation of the
Merger.
(e) Payment for Shares. Sub shall have accepted for
payment and paid for the shares of Company Common Stock tendered in the Offer
such that, after such acceptance and payment, Parent and its affiliates shall
own, at consummation of the Offer, a majority of the outstanding shares of the
Company Common Stock on
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a fully diluted basis; provided that this condition shall be deemed to have
been satisfied if Sub fails to accept for payment and pay for Shares pursuant
to the Offer in violation of the terms and conditions of the Offer.
7.2 Conditions to Obligation of Parent and Sub. The
obligations of Parent and Sub to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions, any or all
of which may be waived in whole or in part by Parent and Sub:
(a) Financing. Holdings and Parent shall have received
the debt and equity financing for the transactions contemplated hereby on terms
substantially as outlined in the Financing Commitments.
(b) Dissenting Shares. No more than ten percent (10%) of
the shares of Company Common Stock outstanding immediately prior to the
Effective Time shall be Dissenting Shares.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company or by Parent:
(a) by mutual written consent of the Company and Parent,
or by mutual action of their respective Boards of Directors;
(b) by either the Company or Parent (i) if any permanent
injunction or other order of a court or other competent authority preventing
the consummation of the Offer or the Merger shall have become final and non-
appealable, or (ii) so long as such party is not then in material breach of its
obligations hereunder, if there has been a breach of any representation,
warranty, covenant or agreement (determined without giving effect to any
"Material Adverse Effect", "materiality" or similar qualifications contained
therein) on the part of the other set forth in this Agreement which breach
(other than a breach of any covenant or agreement set forth in Article I,
Section 4.2(e) or Section 5.1(e)) has not been cured within ten calendar days
following receipt by the breaching party of notice of such breach, unless such
breach could not, individually or in the aggregate with other breaches, be
reasonably expected to (A) have
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a Material Adverse Effect on the Company or (B) materially adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby;
(c) by either the Company or Parent, so long as such party
is not then in material breach of its obligations hereunder, if the Merger
shall not have been consummated on or before the 135th calendar day following
the consummation of the Offer; provided, that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date;
(d) by Parent in the event that a Trigger Event has
occurred under Section 6.4(b) prior to the consummation of the Offer;
(e) by Parent in the event an Acquisition Proposal has
been made to the Company prior to the expiration of the Offer and the Company
shall fail to publicly reaffirm its approval or recommendation of the Offer,
the Merger, this Agreement and the Stockholders Agreement on or before the
earlier to occur of (i) the tenth business day following the date on which such
Acquisition Proposal shall have been made or (ii) the third business day prior
to the latest possible expiration date of the Offer hereunder;
(f) by either the Company or Parent, if the Offer
terminates, is withdrawn, abandoned or expires by reason of the failure to
satisfy any condition set forth in Exhibit A hereto;
(g) by the Company, if the Offer shall have expired or
shall have been withdrawn, abandoned or terminated without any shares of
Company Common Stock being purchased by Sub thereunder on or prior to the 60th
calendar day after the date of commencement of the Offer pursuant to Section
1.2 hereof;
(h) by the Company, if (i) the Board of Directors of the
Company shall take any of the actions permitted by Section 5.1(e)(ii) of this
Agreement and (ii) the Company shall have paid a termination fee to Parent or
Parent's designee in the amount of $3,000,000; provided, however, that if the
excess of (A) the sum of (1) the average balance of the Company's cash on hand
for the ten day period preceding the date the Company seeks to terminate this
Agreement under this paragraph (h) plus (2) the average available capacity
under the Company Credit Agreement (as defined in Section 5.1(l)) over the ten
day period preceding the date the Company wishes to terminate this Agreement
under this
49
53
paragraph (h) over (B) $2,000,000 (such excess being referred to hereinafter as
the "Available Cash"), is less than $3,000,000, then in lieu of having paid the
$3,000,000 termination fee, the Company shall have (x) paid the entire amount
of the Available Cash to Parent or Parent's designee and (y) delivered to
Parent a written commitment by the Company (in a form satisfactory to Parent),
unconditionally guaranteed by a financially responsible and reputable entity
(as determined by Parent in its sole discretion), acknowledging the Company's
obligation to pay the difference between the $3,000,000 termination fee and the
amount of Available Cash paid by the Company to Parent or Parent's designee in
connection with the termination of this Agreement (together with interest at
the prime rate accruing from the date on which payment of the termination fee
contemplated by this paragraph (h) would have been due and payable) on the
earlier of (i) such date as the Company shall have additional Available Cash
sufficient to pay such difference, (ii) the closing of the tender offer
relating to the Acquisition Proposal with respect to which the Company
terminated this Agreement (the "Competing Offer"), (iii) the expiration of the
Competing Offer, or (iv) the date which is 60 calendar days after the date on
which the Offer was commenced; or
(i) by the Company if Sub shall not have commenced the
Offer within 10 business days after the execution and delivery of this
Agreement by Parent and Sub.
8.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or shareholders except (i) with respect to this
Section 8.2, the second sentence of Section 6.2, and Section 6.4, and (ii) that
no such termination shall relieve any party from liability for a material
breach hereof. In addition, in the event that this Agreement is validly
terminated, Parent and Sub agree that, immediately following such termination
(and, in the event Parent is entitled to be paid a fee in connection with such
termination pursuant to Section 6.4(b) or Section 8.1(h) hereof, immediately
following receipt by Parent of such fee) Parent and Sub shall terminate the
Offer and not purchase any Shares pursuant to the Offer or otherwise, and
Parent further agrees that following such termination, it shall continue to be
bound by all of the terms and conditions contained in the Confidentiality
Agreement dated December 10, 1996 between Parent and the Company.
50
54
8.3 Amendment. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Parent,
Sub and the Company at any time prior to the Effective Date with respect to any
of the terms contained herein; provided, however, that, after the consummation
of the Offer, no term or condition contained in this Agreement shall be amended
or modified in any manner adverse to the holders of the Company Common Stock
(including, without limitation, by reducing the amount of or changing the form
of the Merger Consideration).
8.4 Extension; Waiver. Subject to Section 1.4(b), at any
time prior to the Effective Time, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein; provided, however, that, after the consummation of
the Offer, no term or condition contained in this Agreement shall be amended,
modified or waived in any manner adverse to the holders of the Company Common
Stock. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
acceptance for payment of, and the payment for the Shares by Sub in the Offer
or the expiration of the Offer. None of the covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the covenants and agreements contained
in Article III, Section 6.6 and Section 6.11 hereof and any other covenant or
agreement that contemplates performance after the Effective Date. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreement shall apply to
all information and material delivered by any party hereunder.
51
55
9.2 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder:
(a) if to Parent or Sub, to:
Xxxxxxxx Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with copies to:
Hicks, Muse, Xxxx & Xxxxx Incorporated
1325 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
52
56
(b) if to the Company, to:
ERO, Inc.
000 Xxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxx
Attn: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: H. Xxxx xxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
9.3 Interpretation. When a reference is made in this
Agreement to Articles or Sections, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
9.4 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement (together with the Confidentiality Agreement, the
Stockholders Agreement and any other documents and instruments referred to
herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof and, except as provided in Section 6.6, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
53
57
9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder (i)
to any newly-formed direct wholly-owned Subsidiary of Parent or Sub or (ii) in
the form of a collateral assignment to any institutional lender who provides
funds to Purchaser for the consummation of the transactions contemplated
hereby. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
[Remainder of page intentionally left blank]
54
58
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT:
------
XXXXXXXX CORPORATION
By: /s/ XXXXXX X. XXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------------------
Title: Vice President
---------------------------------------
SUB:
---
HC ACQUISITION CORP.
By: /s/ XXXXXX X. XXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------------------
Title: Vice President
---------------------------------------
COMPANY:
-------
ERO, INC.
By: /s/ X. X. Xxxx
------------------------------------------
Name: X. X. Xxxx
----------------------------------------
Title: Chairman, CEO & President
---------------------------------------
59
EXHIBIT A
The capitalized terms used in this Exhibit A shall have the
respective meanings given to such terms in the Agreement and Plan of Merger,
dated as of April 10, 1997 (the "Merger Agreement"), by and among Xxxxxxxx
Corporation, a Delaware corporation ("Parent"), HC Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Sub"), and ERO,
Inc., a Delaware corporation (the "Company"), to which this Exhibit A is
attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares tendered,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Shares tendered, and may amend or terminate
the Offer (whether or not any Shares have theretofore been purchased or paid
for), if (i) there have not been validly tendered and not withdrawn prior to
the time the Offer shall otherwise expire a number of Shares which constitutes
a majority of the Shares outstanding on a fully-diluted basis on the date of
purchase ("on a fully-diluted basis" having the following meaning, as of any
date: the number of Shares outstanding, together with Shares the Company may
be required, now or in the future, to issue pursuant to options, warrants, or
other obligations outstanding at that date); (ii) any applicable waiting
periods under the HSR Act shall not have expired or been terminated prior to
the expiration of the Offer; (iii) the debt financing sources for Parent and
Holdings shall not have provided the applicable debt financing to Parent and
Holdings pursuant to the Financing Commitments; or (iv) at any time on or after
the date of the Merger Agreement and before acceptance for payment of, or
payment for, such Shares any of the following events shall have occurred:
(A) there shall be pending, as of the expiration of the Offer
or at any time thereafter, any litigation that seeks to (1) challenge
the acquisition by Parent, Sub or any of their respective affiliates or
Subsidiaries of Shares pursuant to the Offer or restrain, prohibit or
delay the making or consummation of the Offer or the Merger, (2) make
the purchase of or payment for some or all of the Shares pursuant to
the Offer or the Merger illegal, (3) impose
A-1
60
limitations on the ability of Parent, Sub, or any of their respective
affiliates or Subsidiaries effectively to acquire or hold, or to
require Parent, Sub, the Company or any of their respective affiliates
or Subsidiaries to dispose of or hold separate, any material portion of
their assets or business, (4) impose material limitations on the
ability of Parent, Sub, the Company or any of their respective
affiliates or Subsidiaries to continue to conduct, own or operate, as
heretofore conducted, owned or operated, all or any material portion of
their businesses or assets; (5) impose or result in material
limitations on the ability of Parent, Sub or any of their respective
affiliates or Subsidiaries to exercise full rights of ownership of the
Shares purchased by them, including, without limitation, the right to
vote the Shares purchased by them on all matters properly presented to
the stockholders of the Company; or (6) prohibit or restrict in a
material manner the financing of the Offer;
(B) there shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger, any Law, or
there shall have been issued any decree, order or injunction, that
results in any of the consequences referred to in subsection (A) above;
(C) except as set forth on Exhibit D or Schedule 4.1(j) to
the Merger Agreement, any event or events shall have occurred that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on the Company;
(D) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States for a period in excess of 48 hours, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, (3) the commencement of a war, armed hostilities or
other international or national calamity, directly or indirectly
involving the United States, (4) any limitations (whether or not
mandatory) imposed by any governmental authority on the nature or
extension of credit or further extension of credit by banks or other
lending institutions, or (5) in the case of clauses (3) and (4) of this
paragraph (D), a material acceleration or worsening thereof;
A-2
61
(E) the representations and warranties of the Company
contained in the Merger Agreement (without giving effect to any
"Material Adverse Effect", "materiality" or similar qualifications
contained therein) shall not be true and correct in all respects as of
the date of consummation of the Offer as though made on and as of such
date except (1) for changes specifically permitted by the Merger
Agreement, (2) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as
of such date, and (3) for breaches or inaccuracies which, individually
or in the aggregate, could not reasonably be expected to (a) have a
Material Adverse Effect on the Company or (b) materially adversely
affect the ability of the parties hereto to consummate the transactions
contemplated hereby;
(F) the obligations of the Company contained in the Merger
Agreement (without giving effect to any "Material Adverse Effect",
"materiality" or similar qualifications contained therein) to be
performed at or prior to the consummation of the Offer shall not have
been performed or complied with in all respects by the Company prior to
the consummation of the Offer except for failures to perform or comply
which, individually or in the aggregate, could not reasonably be
expected to (a) have a Material Adverse Effect on the Company or (b)
materially adversely affect the ability of the parties hereto to
consummate the transactions contemplated hereby;
(G) the Merger Agreement shall have been terminated in
accordance with its terms;
(H) prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board shall have
withdrawn or materially modified or changed (including by amendment of
the Schedule 14D-9) in a manner adverse to Sub its recommendation of
the Offer, the Merger Agreement or the Merger; or
(I) it shall have been publicly disclosed or Parent or Sub
shall have otherwise learned that any person, entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act, other than Parent or
its affiliates or Subsidiaries, or any group of which any of such
persons or entities is a member, or any party to the Stockholders
Agreement, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than
20% of any class or series of capital stock of the Company (including,
without limitation, the Shares), through the
A-3
62
acquisition of stock, the formation of a group or otherwise, or shall
have been granted an option, right or warrant (conditional or
otherwise) to acquire beneficial ownership of more than 20% of any
class or series of capital stock of the Company (including, without
limitation, the Shares).
The foregoing conditions are for the sole benefit of Sub and
its affiliates and may be asserted by Sub regardless of the circumstances
(including, without limitation, any action or inaction by Sub or any of its
affiliates) giving rise to any such condition or may be waived by Sub, in whole
or in part, from time to time in its sole discretion, except as otherwise
provided in the Agreement. The failure by Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right and may be asserted at any time and
from time to time. Any determination by Sub concerning any of the events
described herein shall be final and binding.
A-4
63
GLOSSARY OF DEFINED TERMS
Term: Page:
---- ----
Agreement 1
Acquisition Proposal 37
Benefit Plans 21
Board Percentage 6
CERCLA 26
Certificate of Merger 7
Certificates 10
Closing 7
Closing Date 7
Code 21, 45
Company 1
Company Common Stock 1
Company Intangible Property 25
Company Litigation 19
Company Order 19
Company Permits 18
Company SEC Documents 17
Company Stockholder Approval 16
Company Voting Debt 13
Confidentiality Agreement 40
Constituent Corporations 7
Continuing Directors 6
DGCL 4
Dissenting Shares 12
Effective Time 7
Employee Arrangements 21
Environmental Costs and Liabilities 25
Environmental Law 25
Exchange Act 2
Financial Advisor 4
Financing Commitments 34
GAAP 17
Gains and Transfer Taxes 16
Governmental Entity 16
Hazardous Material 26
HSR Act 16
Indebtedness 30
Indemnified Liabilities 42
Indemnified Parties 42
Injunction 46
IRSA 26
Laws 15
Material Adverse Effect 13
Material Xxxxxxxxx 00
Xxxxxx 0
X-0
00
XXXX: PAGE:
---- ----
Merger Consideration 8
Offer 2
Offer Consideration 2
Offer Documents 3
On a fully-diluted basis 2
Option Consideration 11
Options 11
OSHA 26
Parent 1
Paying Agent 9
Payment Fund 9
Preferred Stock 13
Proxy Statement 16
Real Property Leases 28
Release 26
Remedial Action 26
Representatives 35
Schedule 14D-1 3
Schedule 14D-9 4
SEC 2
Securities Act 17
Shares 1
Stock Option Plans 11
Stockholders Agreement 1
Sub 1
Subsidiary 8
Surviving Corporation 7
Tax Returns 21
Taxes 21
Trigger Event 41
Violation 15
WARN Act 00
X-0
00
EXHIBIT D
Amav returns in the first quarter of 1997.
Impact close-outs in the first quarter of 1997.
Estimated first quarter results on the following schedule.
The Company's business is highly cyclical in nature with substantially all of
the Company's net income produced in the third and fourth quarters.
66
(ERO, INC. LETTERHEAD)
CONFIDENTIAL
March 27, 1997
TO: ERO, Inc. Board of Directors;
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxx
Xxx X. Xxxxxxxx X. X. Xxxx
FROM: Xxxx X. Xxxxxxx
RE: FIRST QUARTER FLASH REPORT
Gentlemen:
Our preliminary look at the first quarter results indicates the following:
Forecast Budget Prior Year
-------- ------ ----------
- Sales $19.6 $21.6 $18.9
- Margins 6.5 7.2 5.6
% 33.1% 33.3% 29.8%
- Operating Expenses 8.0 8.8 7.6
- EBIT (1.5) (1.6) (1.9)
- Net Income (2.1) (2.1) (2.2)
- EPS $(.20) $(.20) $(.21)
Analyst EPS Estimate $(.20)
67
ERO, INC.
Page 2
First Quarter Flash Report
SALES: ERO Industries - will outperform budget and prior year on strong
Slumber Shoppe sales. Water Sports in line with expectations.
AMAV - sales decline driven by: on-time holiday season
deliveries have eliminated traditional carryover of backlog into
first quarter; $1 million special arts and crafts promo for
Walmart in 1996 not repeated; and first quarter returns of bulk
toys higher than anticipated.
PRISS PRINTS - strong performance continues with sales expected
to outperform budget and prior year. February revenues of $1.9
million, largest month ever.
IMPACT - should surpass last year but fall short of budget this
quarter. Strong order position for second quarter.
MARGINS: Manufacturing and purchase price variances at Hazelhurst have
generated $450,000 in favorable variances vs. a budget of
$150,000 unfavorable variances.
OPERATING Up from last year but under budget as a result of sales
EXPENSES: shortfall. ERO Industries and AMAV posting significant savings
to budget.
NET INCOME: $(.20) per share - loss will be on line with analyst estimate.
68
ERO, INC. 3/27/97
1997 PROJECTION 5:24 PM
INCOME STATEMENTS
(Dollars in thousands)
QUARTER ENDED MARCH 31,
-----------------------
1997 1997 1996
PROJECTED BUDGET ACTUAL
--------- ------ ------
SALES - SLUMBER SHOPPE $3,131 $2,400 $1,199
SALES - WATER SPORTS 5,920 5,900 5,374
SALES - OTHER (INCLUDES INTERNATIONAL) 220 338 303
SALES - AMAV INDUSTRIES, INC. 5,721 7,500 6,435
SALES - IMPACT, INC. 614 1,517 487
SALES - PRISS PRINTS, INC. 3,744 3,569 2,947
SALES - ERO CANADA, INC. 229 332 138
------------------------------------
NET SALES 19,579 21,556 18,883
COST OF SALES 13,098 14,359 13,284
------------------------------------
GROSS PROFIT 6,481 7,196 5,619
33.10% 33.38% 29.76%
S, G, & A EXPENSE 6,000 8,845 7,552
------------------------------------
OPERATING EARNINGS (1,519) (1,649) (1,933)
-7.78% -7.65% -10.24%
INTEREST EXPENSE 2,000 1,875 1,846
------------------------------------
INCOME BEFORE TAXES (3,519) (3,524) (3,779)
INCOME TAX PROVISION (1,442) (1,444) (1,551)
------------------------------------
NET INCOME ($2,077) ($2,080) ($2,228)
====================================
NET INCOME PER SHARE ($0.20) ($0.20) ($0.21)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (IN THOUSANDS) 10,650 10,500 10,364
ANALYST ESTIMATE ($0.20)
69
ERO, INC. 3/27/97
1997 PROJECTION 5:27 PM
INCOME STATEMENTS
(Dollars in thousands)
ACTUAL PROJECTION
----------------------------------------------------
JANUARY FEBRUARY MARCH TOTAL
1997 1997 1997 1997
---------------------------------------------------------------------
SALES - SLUMBER SHOPPE $686 $395 $1,550 $3,131
SALES - WATER SPORTS 2,100 1,745 2,075 5,920
SALES - OTHER (43) 143 120 220
SALES - AMAV INDUSTRIES, INC. 2,518 1,703 1,500 5,721
SALES - IMPACT, INC. 238 176 200 614
SALES - PRISS PRINTS, INC. 581 1,863 1,300 3,744
SALES - ERO CANADA, INC. 49 60 100 229
---------------------------------------------------------------------
TOTAL SALES 6,129 6,605 6,845 19,579
COST OF SALES @ STANDARD 4,327 4,589 4,640 13,556
---------------------------------------------------------------------
GROSS PROFIT @ STANDARD 1,802 2,016 2,205 6,023
29.4% 30.5% 32.2% 30.8%
VARIANCES (51) (280) (127) (458)
---------------------------------------------------------------------
NET GROSS PROFIT 1,853 2,296 2,331 6,481
30.2% 34.8% 34.1% 33.1%
ROYALTIES AND GUARANTEES 312 479 504 1,295
---------------------------------------------------------------------
TOTAL CONTRIBUTION TO PROFIT 1,541 1,817 1,828 5,186
---------------------------------------------------------------------
25.1% 27.5% 26.7% 26.5%
COMMISSIONS 86 153 150 389
SALES AND MARKETING EXPENSE 1,075 1,160 1,061 3,296
GENERAL & ADMINISTRATIVE 889 786 813 2,488
ALLOCATED G&A - - - -
---------------------------------------------------------------------
TOTAL S, G & A EXPENSE 2,050 2,099 2,025 6,174
---------------------------------------------------------------------
OPERATING EARNINGS (509) (282) (197) (987)
-8.3% -4.3% -2.9%
PURCHASE ACCOUNTING 190 190 190 570
INTEREST EXPENSE (INCOME) 721 628 651 2,000
MISCELLANEOUS EXPENSE (INCOME) (19) (22) 3 (38)
---------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES (1,401) (1,078) (1,041) (3,519)
INCOME TAX PROVISION (BENEFIT) (575) (441) (426) (1,442)
---------------------------------------------------------------------
NET INCOME (LOSS) ($826) ($637) ($615) ($2,077)
=====================================================================
NET INCOME (LOSS) PER SHARE ($0.08) ($0.06) ($0.06) ($0.20)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (IN THOUSANDS) 10,316 10,316 10,650 10,650
70
ERO Industries, Inc. 27-Mar-97
1997 Projection 05:27 PM
Profit & Loss Statements
(Dollars In Thousands)
ACTUAL PROJECTION
-----------------------------
Jan Feb Mar Total
--------------------------------------
Slumber $737 $930 $1,565 $3,232
Water Sports 2,132 1,896 2,180 6,208
Other (126) (43) - (169)
--------------------------------------
Total Net Sales 2,743 2,783 3,745 9,271
--------------------------------------
Slumber 269 181 569 1,019
Water Sports 519 527 582 1,628
Other (144) (56) - (200)
--------------------------------------
Total GM 644 652 1,151 2,447
--------------------------------------
Slumber 36.5% 19.5% 35.4% 38.0%
Water Sports 24.3% 27.8% 26.7% 24.8%
Other 114.3% 130.2% 100.0% 100.0%
--------------------------------------
Total GM % 23.5% 23.4% 30.7% 34.2%
--------------------------------------
Variances (Fav)/Unfav 7 (276) (117) (386)
--------------------------------------
Net Gross Profit 637 928 1,268 2,833
--------------------------------------
23.2% 33.3% 33.9% 30.6%
Royalties & Guarantees 180 217 284 681
--------------------------------------
6.6% 7.8% 7.6% 7.3%
Net Contribution 457 711 985 2,153
--------------------------------------
Commissions 51 84 110 245
Sales & Marketing 330 392 392 1,114
G&A Allocation 225 225 225 675
--------------------------------------
Total G&A 606 701 727 2,034
--------------------------------------
% 22.1% 26.2% 19.4% 21.9%
Operating Income (149) 10 256 119
--------------------------------------
% -5.4% 0.4% 6.9% 1.3%
Interest Expense 246 213 185 644
Purchase Accounting 70 70 70 210
Misc. Expense/(Income) 8 12 - 20
--------------------------------------
Income Before Taxes (473) (285) 3 (755)
Income Taxes (194) (117) 1 (310)
--------------------------------------
Net Income ($279) ($158) $2 ($445)
======================================
Earnings per Share ($0.03) ($0.02) $0.00 ($0.04)
71
AMAV Industries, Inc. 27-Mar-97
Profit & Loss Statements 05:24 PM
1997 Projection
(Dollars in Thousands)
ACTUAL PROJECTION
-------------------------------
Jan Feb Mar Total
---------------------------------------
Total Net Sales $2,518 $1,703 $1,500 $5,721
Total GM 777 541 396 1,714
---------------------------------------
Total GM % 30.9% 31.8% 26.4% 30.0%
Variances (Fav)/Unfav - - - -
---------------------------------------
Net Gross Profit 777 541 396 1,714
30.9% 31.8% 26.4% 30.0%
Royalties & Guarantees - - - -
---------------------------------------
Net Contribution 777 541 398 1,714
30.9% 31.8% 26.4% 30.0%
Commissions 19 18 11 48
Sales & Marketing 248 233 233 714
G&A 349 340 340 1,029
G&A Allocation 75 75 75 225
---------------------------------------
Total G&A 691 666 659 2,016
---------------------------------------
% 27.4% 39.1% 43.9% 35.2%
Operating Income 86 (125) (263) (302)
---------------------------------------
% 3.4% -7.3% -17.5% -5.3%
Interest Expense 475 415 486 1,356
Purchase Accounting 94 94 94 282
Misc. Expense/(Income) (23) (38) - (61)
---------------------------------------
Income Before Taxes (480) (596) (823) (1,879)
Income Taxes (189) (244) (337) (770)
---------------------------------------
Net Income ($271) ($352) ($486) ($1,109)
=======================================
Earnings per Share ($0.03) ($0.03) ($0.05) ($0.11)
72
Impact, Inc. 27-Mar-97
Profit & Loss Statements 05:27 PM
1997 Projection
(Dollars in Thousands)
ACTUAL PROJECTION
-------------------------------
Jan Feb Mar Total
---------------------------------------
Total Net Sales $238 $176 $200 $614
Total GM 87 (26) 50 111
---------------------------------------
Total GM % 36.6% -14.8% 25.0% 18.1%
Variances (Fav)/Unfav 43 19 48 110
---------------------------------------
Net Gross Profit 44 (45) 2 1
18.5% -25.6% 1.0% 0.2%
Royalties & Guarantees 54 44 24 122
---------------------------------------
Net Contribution (10) (89) (22) (121)
-4.2% -50.6% -11.2% -19.5%
Commissions 5 2 2 9
Sales & Marketing 307 262 265 834
G&A 0 0 0 -
G&A Allocation 29 29 29 87
---------------------------------------
Total G&A 341 293 296 930
---------------------------------------
% 143.3% 166.5% 148.1% 151.5%
Operating Income (351) (382) (319) (1,052)
---------------------------------------
% -147.5% -217.0% -159.5% -171.3%
Interest Expense - - - -
Purchase Accounting 21 21 21 63
Misc. Expense/(Income) 1 2 2 5
---------------------------------------
Income Before Taxes (373) (405) (342) (1,120)
Income Taxes (153) (166) (140) (459)
---------------------------------------
Net Income ($220) ($239) ($202) ($661)
=======================================
Earnings per Share ($0.02) ($0.02) ($0.02) ($0.06)
73
Priss Prints, Inc. 27-Mar-97
Profit & Loss Statements 05:27 PM
1997 Projection
(Dollars In Thousands)
ACTUAL PROJECTION
-----------------------------
Jan Feb Mar Total
--------------------------------------
Total Net Sales $711 $1,898 $1,300 $3,909
Total GM 335 851 567 1,753
--------------------------------------
Total GM % 47.1% 44.8% 43.7% 44.9%
Variances (Fav)/Unfav (103) (34) (63) (200)
--------------------------------------
Net Gross Profit 438 885 630 1,953
61.6% 45.5% 48.5% 50.0%
Royalties & Guarantees 86 216 183 485
--------------------------------------
Net Contribution 352 669 447 1,468
49.5% 35.2% 34.4% 37.6%
Commissions 19 55 25 99
Sales & Marketing 169 254 153 576
G&A 0 0 0 0
G&A Allocation 25 25 25 75
--------------------------------------
Total G&A 213 334 203 750
--------------------------------------
% 63.6% 39.2% 35.8% 42.8%
Operating Income 139 335 244 718
--------------------------------------
% 41.5% 39.4% 43.0% 41.0%
Interest Expense - - - 0
Purchase Accounting 5 5 5 15
Misc. Expense/(Income) (1) 1 1 1
--------------------------------------
Income Before Taxes 135 329 238 702
Income Taxes 55 135 98 288
--------------------------------------
Net Income $80 $194 $140 $414
======================================
Earnings per Share $0.01 $0.02 $0.01 $0.04
