EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated as of May 5, 1997, by and among Xxxxxxx Sports Inc., a
Delaware corporation ("Parent"), Cheer Acquisition Corp., a Tennessee
corporation and a wholly owned subsidiary of Parent (the "Purchaser"), and
Varsity Spirit Corporation, a Tennessee corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the
Purchaser and the Company has approved, and deems it advisable and in the best
interests of its respective stockholders to consummate, the acquisition of the
Company by Parent upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) As promptly as practicable (but in no event later than
five business days after the public announcement of the execution hereof), the
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (the
"Offer") for all of the outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of the Company at a price of $18.90 per Share, net to the
seller in cash (such price, or any such higher price per Share as may be paid in
the Offer, being referred to herein as the "Offer Price"), subject to there
being validly tendered and not withdrawn prior to the expiration of the Offer,
that number of Shares which represents at least a majority of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto, and shall consummate the Offer in
accordance with
its terms ("fully diluted basis" means issued and outstanding Shares and Shares
subject to issuance under outstanding employee stock options). The obligations
of the Purchaser to accept for payment and to pay for any Shares validly
tendered on or prior to the expiration of the Offer and not withdrawn shall be
subject only to the Minimum Condition and the other conditions set forth in
Annex A hereto. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement, the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Purchaser shall not amend or waive the Minimum Condition and shall not decrease
the Offer Price or decrease the number of Shares sought, or amend any other
condition of the Offer in any manner adverse to the holders of the Shares
without the written consent of the Company; provided, however, that,
notwithstanding the satisfaction of the conditions of the Offer on the initial
scheduled expiration date of the Offer (the "Initial Expiration Date"), which
shall be 20 business days after the date the Offer is commenced, the Purchaser
shall have the right, in its sole discretion, during the fifteen business days
following the Initial Expiration Date, to extend the expiration date from time
to time until not later than fifteen business days after the Initial Expiration
Date. The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
tendered as soon as it is legally permitted to do so under applicable law;
provided, however, that if, immediately prior to the initial expiration date of
the Offer (as it may be extended pursuant to the preceding sentence or
otherwise), the Shares tendered and not withdrawn pursuant to the Offer equal
less than 90% of the outstanding Shares but more than 80% of the outstanding
Shares, the Purchaser may extend the Offer for a period not to exceed seven
business days, notwithstanding that all conditions to the Offer are satisfied as
of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-l") and any statement to be
filed
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with the Tennessee Department of Commerce and Insurance under the Tennessee
Investor Protection Act. The Schedule 14D-1 will include disclosure sufficient
to satisfy the requirements of Rule 13e-3 under the Exchange Act. The Schedule
14D-1 will include, as exhibits, the Offer to Purchase and a form of letter of
transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information furnished by the Company to Parent or the Purchaser, in writing,
expressly for inclusion in the Offer Documents. The Company shall furnish to
Parent and the Purchaser all information concerning the Company and its
affiliates required to be set forth in the Offer Documents including all
information required to satisfy the disclosure requirements of a Transaction
Statement on Schedule 13E-3. The information supplied by the Company to Parent
or the Purchaser, in writing, expressly for inclusion in the Offer Documents and
by Parent or the Purchaser to the Company, in writing, expressly for inclusion
in the Schedule 14D-9 (as hereinafter defined) will not, at the time so
provided, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) Each of Parent and the Purchaser will take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, will promptly
correct any information provided by it for use in the Offer Documents if and to
the extent that it shall have become false or misleading in any material respect
and the Purchaser will take all steps necessary to cause the Offer Documents as
so cor-
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rected to be filed with the SEC and to be disseminated to holders of the Shares,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given the opportunity to review the
Schedule 14D-1 (including, without limitation, all documents filed therewith as
exhibits) before it is filed with the SEC. In addition, Parent and the Purchaser
will provide the Company and its counsel in writing with any comments, whether
written or oral, Parent, the Purchaser or their counsel may receive from time to
time from the SEC or its staff with respect to the Offer Documents promptly
after the receipt of such comments.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that the disinterested members of its Board of Directors, at a
meeting duly called and held, have (i) unanimously determined that the terms of
the Offer and the Merger (as defined in Section 1.4) are fair to and in the best
interests of the shareholders of the Company, (ii) approved this Agreement and
the transactions contemplated hereby, including the Offer, the Merger and the
Shareholders Agreement ("Shareholders Agreement"), dated the date of this
Agreement, among Parent, the Purchaser and certain shareholders of the Company
(collectively, the "Transactions"), and such approval constitutes approval of
the Offer, this Agreement and the other Transactions, including the Merger and
the Shareholders Agreement, for purposes of Section 00-000-000 of the Tennessee
Business Combination Act, as amended (the "Business Combination Act"), such that
Section 00-000-000 of the Business Combination Act will not apply to the
transactions contemplated by this Agreement, and (iii) resolved to recommend
that the shareholders of the Company accept the Offer, tender their Shares
thereunder to the Purchaser and approve and adopt this Agreement and the
Merger; provided, that such recommendation may be withdrawn, modified or amended
if, in the opinion of the Board of Directors, only after receipt of advice from
outside legal counsel, failure to withdraw, modify or amend such recommendation
would reasonably be expected to result in the Board of Directors violating its
fiduciary duties to the Company's shareholders under applicable law and the
Company pays the fees and expenses required by Section 8.1 hereof. The Company
represents that the actions set forth in this Section 1.2(a) and all
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other actions it has taken in connection therewith are sufficient to render the
relevant provisions of such Section 00-000-000 of the Business Combination Act
inapplicable to the Offer, the Merger and the Shareholders Agreement.
(b) Concurrently with the commencement of the Offer, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the provisions of Section 5.4(b), contain the recommendation referred to in
clause (iii) of Section 1.2(a) hereof. The Company will also file with the SEC a
Transaction Statement on Schedule 13E-3 (together with all amendments and
supplements thereto and including the exhibits thereto, the "Schedule 13E-3").
The Schedule 14D-9 and Schedule 13E-3 will comply in all material respects with
the provisions of applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information furnished by Parent or the Purchaser for inclusion
in the Schedule 14D-9 or Schedule 13E-3. The Company further agrees to take all
steps necessary to cause the Schedule 14D-9 and Schedule 13E-3 to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. Each of the Company,
on the one hand, and Parent and the Purchaser, on the other hand, agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
and Schedule 13E-3 if and to the extent that it shall have become false and
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 and Schedule 13E-3 as so corrected
to be filed with the SEC and to be disseminated to holders of the Shares, in
each case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given the opportunity to review the Schedule
14D-9 and Schedule 13E-3 before it is filed with the SEC. In addition, the
Company agrees to provide
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Parent, the Purchaser and their counsel with any comments, whether written or
oral, that the Company or its counsel may receive from time to time from the SEC
or its staff with respect to the Schedule 14D-9 and Schedule 13E-3 promptly
after the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing, or computer file containing the
names and addresses of all recordholders of the Shares as of a recent date, and
shall furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance, and cause its
representatives and advisors to provide such assistance, as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares
by Parent or any of its subsidiaries which represents at least a majority of the
outstanding Shares (on a fully diluted basis, as defined in Section 1.1(a)),
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as is equal to
the product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the number of Shares so accepted for payment bears to the total
number of Shares then outstanding. In furtherance thereof, the Company shall,
upon request of the Purchaser, use its best reasonable efforts promptly
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either to increase the size of its Board of Directors or secure the resignations
of such number of its incumbent directors, or both, as is necessary to enable
Parent's designees to be so elected to the Company's Board, and shall take all
actions available to the Company to cause Parent's designees to be so elected.
At such time, the Company shall, if requested by Parent, also cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company's Board of Directors of (i) each
committee of the Company's Board of Directors, (ii) each board of directors (or
similar body) of each Subsidiary (as defined in Section 3.1) of the Company and
(iii) each committee (or similar body) of each such board.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated
thereunder in order to fulfill its obligations under Section 1.3(a), including
mailing to stockholders together with Schedule 14D-9 the information required by
such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees
to be elected to the Company's Board of Directors. Parent or the Purchaser will
supply the Company and be solely responsible for any information with respect to
either of them and their nominees, officers, directors and affiliates required
by such Section 14(f) and Rule 14f-1. The provisions of this Section 1.3 are in
addition to and shall not limit any rights which the Purchaser, Parent or any of
their affiliates may have as a holder or beneficial owner of Shares as a matter
of law with respect to the election of directors or otherwise.
(c) In the event that Parent's designees are elected to the
Company's Board of Directors, until the Effective Time (as defined below), the
Company's Board shall have at least two directors who are directors on the date
hereof (the "Independent Directors"), provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there be only one remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate two persons to fill such vacancies who shall not be stockholders,
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affiliates or associates of Parent or the Purchaser and such persons shall be
deemed to be Independent Directors for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event that
Parent's designees are elected to the Company's Board, after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors shall be required to
(a) amend or terminate this Agreement by the Company, (b) exercise or waive any
of the Company's rights, benefits or remedies hereunder, or (c) take any other
action by the Company's Board under or in connection with this Agreement.
Section 1.4 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Company and the Purchaser shall
consummate a merger (the "Merger") pursuant to which (a) the Purchaser shall be
merged with and into the Company and the separate corporate existence of the
Purchaser shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Tennessee, and (c) the separate corporate existence of the Company with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth in this Section 1.4. Pursuant to
the Merger, (x) the Company's Amended and Restated Charter ("Charter") shall be
amended in its entirety to read as the Charter of the Purchaser, in effect
immediately prior to the Effective Time, except that Article FIRST thereof shall
promptly be amended to read as follows: "FIRST: The name of the corporation is
Varsity Spirit Corporation." and, as so amended, shall be the Charter of the
Surviving Corporation until thereafter amended as provided by law and such
Charter, and (y) the By-Laws of the Purchaser (the "By-laws"), as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, by such Charter or by
such By-laws. The Merger shall have the effects specified in the Tennessee
Business Corporation Act ("TBCA").
Section 1.5 Effective Time. Parent, the Purchaser and the
Company will cause an Articles of Merger to be executed and filed on the Closing
Date (as
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defined in Section 1.6) (or on such other date as Parent and the Company may
agree) with the Secretary of State of Tennessee (the "Secretary of State") as
provided in the TBCA. The Merger shall become effective on the date on which the
Articles of Merger is duly filed with the Secretary of State or such time as is
agreed upon by the parties and specified in the Articles of Merger, and such
time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the corporate offices of Parent, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving
Corporation. The directors of the Purchaser and the officers of the Company at
the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Charter and the By-laws.
Section 1.8 Shareholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Special Meeting") as promptly
as practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use its best
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efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy or
information statement and cause a definitive proxy or information
statement, including any amendment or supplement thereto (the "Proxy
Statement") to be mailed to its shareholders, provided that no
amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel and (y) to
obtain the necessary approvals of the Merger and this Agreement by its
shareholders; and
(iii) include in the Proxy Statement the
recommendation of the Board that shareholders of the Company vote in
favor of the approval of the Merger and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the approval and adoption of this
Agreement.
Section 1.9 Merger Without Meeting of Shareholders.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser and
any other Subsidiaries of Parent shall acquire in the aggregate at least 90% of
the outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties hereto shall, at the request of Parent
and subject to Article VI hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Company, in accordance
with Section 00-00-000 of the TBCA.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or holders of common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) The Purchaser Common Stock. Each issued and outstanding
share of the Purchaser Common Stock shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
Shares that are owned by the Company as treasury stock and any Shares owned by
Parent, the Purchaser or any other wholly owned Subsidiary of Parent shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share and
Shares, if any, subject to outstanding options then outstanding not theretofore
cancelled as provided in Section 2.4 hereof (other than Shares to be cancelled
in accordance with Section 2.1(b) and any Shares which are held by stockholders
exercising dissenters' rights pursuant to Chapter 23 of the TBCA ("Dissenting
Shareholders")) shall be converted into the right to receive the Offer Price,
payable to the holder thereof, without interest (the "Merger Consideration"),
upon surrender of the certificate formerly representing such Share in the manner
provided in Section 2.2. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest, or the right, if any, to receive payment from the
Surviving Corporation of the "fair value" of such Shares as determined in
accordance with Chapter 23 of the TBCA.
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Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
the Shares in connection with the Merger (the "Paying Agent") to receive in
trust the funds to which holders of the Shares shall become entitled pursuant to
Section 2.1(c). Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were converted
pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably 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 or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each Share formerly represented by such Certificate
and the Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration 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 shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any
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time after the Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in the Shares.
At the Effective Time, the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of transfers of the Shares
on the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificate for Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by Parent, the posting by such
Person of a bond in customary amount as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate $18.90 per Share
pursuant to Section 2.2(b) upon due surrender of and deliverable in
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respect of the Shares represented by such Certificate pursuant to this
Agreement.
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder
shall be entitled to be paid the fair value of such holder's Shares, as provided
in Chapter 23 of the TBCA, the Company shall give Parent notice thereof and
Parent shall have the right to participate in all negotiations and proceedings
with respect to any such demands. Neither the Company nor the Surviving
Corporation shall, except with the prior written consent of Parent, voluntarily
make any payment with respect to, or settle or offer to settle, any such demand
for payment. If any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the Shares held by such
Dissenting Shareholder shall thereupon be treated as though such Shares had been
converted into the Merger Consideration pursuant to Section 2.1.
Section 2.4 Company Plans.
(a) On the expiration date of the Offer, immediately prior to
the acceptance for payment of Shares pursuant to the Offer, each outstanding
employee stock option to purchase Shares (a "Company Option") granted under the
1991 Stock Option Plan and the 1989 Non-qualified Stock Option Plan
(collectively, "Option Plans"), shall be surrendered to the Company and shall be
forthwith cancelled and the Company shall pay to each holder of a Company
Option, by check, an amount equal to (i) the product of the number of the Shares
which are issuable upon exercise of such Company Option, multiplied by the Offer
Price, less (ii) the aggregate exercise price of such Company Option. Prior to
the Closing, the Company shall use its best efforts to take all actions
(including, without limitation, soliciting any necessary consents from the
holders of the Company Options) required to effect the matters set forth in this
Section 2.4, including the surrender, cancellation and payment in consideration
for the Company Options described in this Section 2.4(a). The Company shall
withhold all income or other taxes as required under applicable law prior to
distribution of the cash amount received under this Section 2.4(a) to the
holders of Company Options.
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(b) Except as may be otherwise agreed to by Parent or the
Purchaser and the Company, the Company's 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 of its Subsidiaries shall be deleted as of
the Effective Time and no holder of Company Options or any participant in the
Option Plans or any other plans, programs or arrangements shall have any rights
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the schedule attached to this Agreement
setting forth exceptions to the Company's representations and warranties set
forth herein (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and the Purchaser as set forth below. The Company Disclosure
Schedule will be arranged in sections corresponding to sections of this
Agreement to be modified by such disclosure schedule.
Section 3.1 Organization. (a) Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not, individually or in the aggregate, have a
Company Material Adverse Effect (as defined below). As used in this Agreement,
the term "Subsidiary" shall mean all corporations or other entities in which the
Company or the Parent, as the case may be, owns, directly or indirectly, a
majority of the issued and outstanding capital stock or similar interests or has
the right to elect a majority of the members of the Board of Directors or
similar governing body. As used in this Agreement, "Company Material
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Adverse Effect" shall mean any event, change or effect that has, or is
reasonably likely to have, a material adverse effect (A) on the condition
(financial or otherwise), business, assets, liabilities, results of operations
or cash flows of the Company and its Subsidiaries, taken as a whole or (B) on
the ability of the Company to perform its obligations under this Agreement or to
consummate the transactions contemplated by this Agreement.
(b) The Company and each of its Subsidiaries is duly qualified
or licensed to do business and in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Company Material Adverse Effect. Except
as set forth in Section 3.1 of the Company Disclosure Schedule, the Company does
not own (i) any equity interest in any corporation or other entity or (ii)
marketable securities where the Company's equity interest in any entity exceeds
five percent of the outstanding equity of such entity on the date hereof.
Section 3.2 Capitalization. (a) The authorized capital stock
of the Company consists of 10,000,000 Shares and 5,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). As of the date hereof,
(i) 4,563,183 Shares are issued and outstanding, (ii) 176,072 Shares are issued
and held in the treasury of the Company, (iii) no shares of Preferred Stock are
issued and outstanding, and (iv) 870,000 Shares are reserved for issuance to
employees pursuant to the Option Plans, of which 127,098 Shares have been issued
pursuant to option exercises and 570,464 Shares are subject to outstanding,
unexercised options. Section 3.2(a) of the Company Disclosure Schedule sets
forth a true and complete list of the holders of Company Options, including such
person's name, the number of options (vested, unvested and total) held by such
person and the exercise price for each such option. Since the date hereof, the
Company has not issued or granted additional options under the Options Plans.
All the outstanding shares of the Company's capital stock are, and all Shares
which may be issued pursuant to the exercise of outstanding Company Options will
be, when issued in accordance with the respective terms thereof, duly
authorized, validly is-
16
sued, fully paid and non-assessable. Except as disclosed in Section 3.2 of the
Company Disclosure Schedule, there are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) ("Voting Debt") of the Company or any of its Subsidiaries issued
and outstanding. Except as set forth above, except as described in Section 3.2
of the Company Disclosure Schedule and except for the transactions contemplated
by this Agreement, as of the date hereof, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding (ii) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests,
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment and (iii) except as set forth in Section 3.2(a) of the
Company Disclosure Schedule, there are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Shares, or the capital stock of the Company, or any Subsidiary or
affiliate of the Company or to provide funds to make any investment (in the form
of a loan, capital contribution or otherwise) in any Subsidiary or any other
entity other than loans to Subsidiaries in the ordinary course of business.
(b) All of the outstanding shares of capital stock of each of
the Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, claims or encumbrances of whatever nature
("Encumbrances").
(c) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of
17
the capital stock of the Company or any of the Subsidiaries.
Section 3.3 Authorization; Validity of Agreement; Company
Action. The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by it of the Transactions, have been duly authorized by its Board of Directors
and, except for obtaining the approval of its shareholders as contemplated by
Section 1.8 hereof, no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the Transactions. This Agreement has
been duly executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery hereof by Parent and the Purchaser, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except for
the filings set forth in Section 3.4 of the Company Disclosure Schedule and the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the laws of any
foreign jurisdictions, state securities or blue sky laws, and the TBCA, none of
the execution, delivery or performance of this Agreement by the Company, the
consummation by the Company of the Transactions or compliance by the Company
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the Charter, the By-laws or similar organizational documents
of the Company or any of its Subsidiaries, (ii) require any filing with, or
permit, authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiar-
18
ies is a party or by which any of them or any of their properties or assets may
be bound (the "Company Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or defaults which would
not, individually or in the aggregate, have a Company Material Adverse Effect.
The Company has not adopted a provision of its Charter or By-laws that would
make the Company subject to the provisions of the Tennessee Control Share
Acquisition Act (T.C.A. Section 00-000-000 et seq.) or the Tennessee Authorized
Corporation Protection Act (T.C.A. Section 00-000-000 et seq.), and neither this
Agreement nor the transactions contemplated hereby, including the Offer, the
Merger and the Shareholders Agreement, are regulated by the foregoing statutes.
Section 3.4 of the Company Disclosure Schedule sets forth a list of all third
party consents and approvals required to be obtained in connection with this
Agreement under the Company Agreements prior to the consummation of the
transactions contemplated by this Agreement, except such third party consents
and approvals the failure of which to obtain would not have a Company Material
Adverse Effect.
Section 3.5 SEC Reports and Financial Statements. The Company
has timely filed with the SEC, and has heretofore made available to Parent, true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1994 under the Exchange
Act or the Securities Act of 1933, as amended (the "Securities Act") (as such
documents have been amended since the time of their filing, collectively, the
"Company SEC Documents"). As of their respective dates or, if amended, as of the
date of the last such amendment, the Company SEC Documents, including, without
limitation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. None of
19
the Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC. The financial statements of the Company included in the
Company SEC Documents (the "Financial Statements") have been prepared from, and
are in accordance with, the books and records of the Company and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the period involved (except in the case of unaudited statements, as
permitted by Form 10-Q under the Exchange Act and as may be otherwise indicated
in the notes thereto) and fairly present (subject, in the case of unaudited
statements, to normal recurring year-end adjustments and any other adjustments
described therein) the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its consolidated Subsidiaries as of the times and for the
periods referred to therein.
Section 3.6 Absence of Certain Changes. Except as disclosed in
Section 3.6 of the Company Disclosure Schedule or in the Company SEC Documents
filed prior to the date hereof, since December 31, 1996, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course and there has not occurred any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, individually or in the aggregate, a Company Material
Adverse Effect and the Company has not taken any action which would have been
prohibited under Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as
disclosed in the Financial Statements and (b) for liabilities and obligations
(i) incurred in the ordinary course of business and consistent with past
practice since December 31, 1996, or (ii) as otherwise disclosed in the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that have, or would be reasonably likely to have, a Company Material
Adverse Effect or that would be required by GAAP to be reflected in, re-
20
served against or otherwise described in a consolidated balance sheet of the
Company (including the notes thereto).
Section 3.8 Litigation. Except as set forth in Section 3.8 of
the Company Disclosure Schedule, there are no suits, claims, actions,
proceedings, including, without limitation, arbitration proceedings or
alternative dispute resolution proceedings, or investigations pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries before any Governmental Entity that, either individually or in the
aggregate, would be reasonably likely to have a Company Material Adverse Effect.
Section 3.9 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Plans" shall
include: each deferred compensation and each incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of the Company or any Subsidiary (the "Plans"). Each
of the Plans that is subject to section 302 or Title IV of ERISA or section 412
of the Internal Revenue Code of 1986, as amended (the "Code") is hereinafter
referred to in this Section 3.9 as a "Title IV Plan." Neither the Company, any
Subsidiary nor any ERISA Affiliate has any commitment or formal plan, whether
legally binding or not, to create any additional employee benefit plan or modify
or change any existing Plan that would affect any
21
employee or former employee of the Company or any Subsidiary.
(b) No liability under Title IV or section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability. No Plan is a Title IV Plan.
(c) Neither the Company or any Subsidiary, any Plan, any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which the Company or any Subsidiary, any Plan,
any such trust, or any trustee or administrator (as defined in Section 3(16)(A)
of ERISA) thereof, or any party in interest (as defined in ERISA Section 3(14))
or fiduciary with respect to any Plan or any such trust could be subject to
either a civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a
tax imposed pursuant to section 4975 or 4976 of the Code, which would be
material in amount.
(d) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code.
(e) Each Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service with respect to the qualified status of such Plan
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986, and nothing has occurred since the issuance of such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
such Plan and the related trust maintained thereunder. The Company has no Plans
intended to satisfy the requirements of Section 501(c)(9).
(f) No Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of the Company or any Subsidiary for periods extending beyond their retirement
or other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits
22
under any "pension plan," or (iii) benefits the full cost of which is borne by
the current or former employee (or his beneficiary) or (iv) post-death exercise
periods in effect under outstanding Company Options.
(g) Except as disclosed in Section 3.9 of the Company
Disclosure Schedule, or as set forth in Section 5.11 of this Agreement, the
consummation of the transactions contemplated by this Agreement will not, either
alone or in combination with another event, (i) entitle any current or former
employee or officer of the Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
(h) There are no pending, or to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits) which would have a material adverse
effect upon the Plans or a Company Material Adverse Effect.
Section 3.10 Tax Matters; Government Benefits.
(a) The Company and each of its Subsidiaries have duly filed
all Tax Returns (as hereinafter defined) that are required to be filed and have
duly paid or caused to be duly paid in full or made adequate provision in
accordance with GAAP (or there has been paid or provision has been made on their
behalf) for the payment of all Taxes (as hereinafter defined) shown due on such
Tax Returns and all other Taxes for which the Company or any of its Subsidiaries
is or might be liable. All such Tax Returns are correct and complete in all
material respects and accurately reflect all liability for Taxes for the periods
covered thereby. All Taxes owed and due by the Company and each of its
Subsidiaries for results of operations through December 31, 1996 (whether or not
shown on any Tax Return) have been paid or have been adequately reflected on the
Company's balance sheet as of December 31, 1996 included in the Financial
Statements (the "Balance Sheet"). Since December 31, 1996, the Company has not
incurred liability for any Taxes other than in the ordinary course of business.
Neither the
23
Company nor any of its Subsidiaries has received notice of any claim made by an
authority in a jurisdiction where neither the Company nor any of its
Subsidiaries file Tax Returns that the Company is or may be subject to taxation
by that jurisdiction.
(b) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Internal Revenue Service (or the
applicable statutes of limitation for the assessment of federal income Taxes for
such periods have expired) for all periods through and including March 31, 1992,
and no material deficiencies were asserted as a result of such examinations that
have not been resolved or fully paid. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations in any jurisdiction in
respect of Taxes or Tax Returns or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(c) Except as set forth on Section 3.10 of the Company
Disclosure Schedule, no federal, state, local or foreign audits, examinations or
other administrative proceedings have been commenced or, to the Company's
knowledge, are pending with regard to any Taxes or Tax Returns of the Company or
of any of its Subsidiaries. No written notification has been received by the
Company or by any of its Subsidiaries that such an audit, examination or other
proceeding is pending or threatened with respect to any Taxes due from or with
respect to or attributable to the Company or any of its Subsidiaries or any Tax
Return filed by or with respect to the Company or any of its Subsidiaries. To
the Company's knowledge, there is no dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries either claimed or raised by
any taxing authority.
(d) Neither the Company nor any of its Subsidiaries is a party
to any agreement, plan, contract or arrangement that could result, separately or
in the aggregate, in a payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(e) Neither the Company nor any of its Subsidiaries has filed
a consent pursuant to Section 341(f) of the Code (or any predecessor provision)
concerning collapsible corporations, or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a
24
"subsection (f) asset" (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company or any of its Subsidiaries.
(f) No taxing authority is asserting or, to the knowledge of
the Company, threatening to assert a claim against the Company or any of its
Subsidiaries under or as a result of Section 482 of the Code or any similar
provision of state, local or foreign law.
(g) Neither the Company nor any of its Subsidiaries is a party
to any material tax sharing, tax indemnity or other agreement or arrangement
with any entity not included in the Company's consolidated financial statements
most recently filed by the Company with the SEC.
(h) None of the Company or any of its Subsidiaries has been a
member of any affiliated group within the meaning of Section 1504(a) of the
Code, or any similar affiliated or consolidated group for tax purposes under
state, local or foreign law (other than a group the common parent of which is
the Company), or has any liability for Taxes of any person (other than the
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law as a transferee or successor,
by contract or otherwise.
(i) No liens for Taxes exist with respect to any of the assets
or properties of any of the Company or its Subsidiaries, except for statutory
liens for Taxes not yet due or payable.
(j) Neither the Company nor any of its Subsidiaries is or has
been a United States real property holding company within the meaning of Section
897(c)(2) of the Code.
(k) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Tax" or "Taxes" shall mean all taxes, charges,
fees, duties, levies, penalties or other assessments imposed by any
federal, state, local or foreign governmental authority, including, but
not limited to, income, gross receipts, excise,
25
property, sales, gain, use, license, custom duty, unemployment, capital
stock, transfer, franchise, payroll, withholding, social security,
minimum estimated, and other taxes, and shall include interest,
penalties or additions attributable thereto; and
(ii) "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 3.11 Intellectual Property.
(a) The Company and its Subsidiaries own or have
adequate rights to use all items of Intellectual Property (as defined below)
utilized in the conduct of the business of the Company and its Subsidiaries as
presently conducted or as currently proposed to be conducted, free and clear of
all Encumbrances (other than Encumbrances which, individually or in the
aggregate, are not expected to have a Company Material Adverse Effect).
(b) To the best knowledge of the Company, the conduct
of the Company's and its Subsidiaries' business and the Intellectual Property
owned or used by the Company and its Subsidiaries, do not infringe any
Intellectual Property rights or any other proprietary right of any person other
than infringements which, individually or in the aggregate, are not expected to
have a Company Material Adverse Effect. The Company and its Subsidiaries have
received no notice of any allegations or threats that the Company's and its
Subsidiaries' use of any of the Intellectual Property infringes upon or is in
conflict with any Intellectual Property or proprietary rights of any third party
other than infringements or conflicts which individually or in the aggregate are
not expected to have a Company Material Adverse Effect.
(c) As used in this Agreement, "Intellectual
Property" means all of the following: (i) U.S. and foreign registered and
unregistered trademarks, trade dress, service marks, logos, trade names,
corporate names and all registrations and applications to register the same (the
"Trademarks"); (ii) issued U.S. and foreign patents and pending patent
applications, patent disclo-
26
sures, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extension thereof, any counterparts claiming
priority therefrom, utility models, patents of importation/confirmation,
certificates of invention and like statutory rights (the "Patents"); (iii) U.S.
and foreign registered and unregistered copyrights (including, but not limited
to, those in computer software and databases) rights of publicity and all
registrations and applications to register the same (the "Copyrights"); (iv) all
categories of trade secrets as defined in the Uniform Trade Secrets Act
including, but not limited to, business information; (v) all licenses and
agreements pursuant to which the Company has acquired rights in or to any
Trademarks, Patents, rights of publicity or Copyrights, or licenses and
agreements pursuant to which the Company has licensed or transferred the right
to use any of the foregoing ("Licenses").
Section 3.12 Employment Matters. Neither the Company nor any
of its Subsidiaries has experienced any strikes, collective labor grievances,
other collective bargaining disputes or Claims of unfair labor practices in the
last five years. To the Company's knowledge, there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company and its Subsidiaries.
Section 3.13 Compliance with Laws. The Company and its
Subsidiaries are in material compliance with, and have not violated in any
material respect any applicable law, rule or regulation of any United States
federal, state, local, or foreign government or agency thereof which affects the
business, properties or assets of the Company and its Subsidiaries, and no
notice, charge, claim, inquiry, investigation action or assertion has been
received by the Company or any of its Subsidiaries or has been filed, commenced
or, to the Company's knowledge, threatened against the Company or any of its
Subsidiaries alleging any such violation. To the knowledge of the Company, all
licenses, permits and approvals required under such laws, rules and regulations
are in full force and effect except where the failure to be in full force and
effect would not have a Company Material Adverse Effect.
27
Section 3.14 Vote Required. The affirmative vote of the
holders of a majority of the outstanding Shares is the only vote of the holders
of any class or series of the Company's capital stock which may be necessary to
approve this Agreement or any of the Transactions.
Section 3.15 Environmental Laws.
(a) The Company and its Subsidiaries are in
compliance with all applicable Environmental Laws (as defined below) (which
compliance includes, without limitation, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof), except where failure to be in compliance, either individually or in
the aggregate, would not have a Company Material Adverse Effect.
(b) There is no Environmental Claim (as defined
below) pending or, to the Company's knowledge, threatened against the Company or
any of the Subsidiaries or, to the Company's knowledge, against any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law which Environmental Claim would have, either individually or in
the aggregate, a Company Material Adverse Effect.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release or presence of any Hazardous Material, which have formed the basis
of any Environmental Claim against the Company or any of its Subsidiaries, or to
the Company's knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law, which
Environmental Claim would have, either individually or in the aggregate, a
Company Material Adverse Effect.
(d) The Company and its Subsidiaries have not, and to
the Company's knowledge, no other person has, placed, stored, deposited,
discharged, buried, dumped or
28
disposed of Hazardous Materials or any other wastes produced by, or resulting
from, any business, commercial or industrial activities, operations or
processes, on, beneath or adjacent to any property currently or formerly owned,
operated or leased by the Company or any of its Subsidiaries, except (x) for
inventories of such substances to be used, and wastes generated therefrom, in
the ordinary course of business of the Company and its Subsidiaries, or (y)
which would not, either individually or in the aggregate, have a Company
Material Adverse Effect.
(e) Without in any way limiting the generality of the
foregoing, none of the properties owned, operated or leased by the Company or
any of its Subsidiaries contain any: underground storage tanks; asbestos;
polychlorinated biphenyls ("PCBs"); underground injection xxxxx; radioactive
materials; or septic tanks or waste disposal pits in which process wastewater or
any Hazardous Materials have been discharged or disposed the existence of which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
(f) The Company has made available to Parent for
review copies of all environmental reports or studies in its possession prepared
since January 1, 1994.
(g) For purposes of this Agreement, (i)
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to releases or
threatened releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials; (ii) "Environmental Claim" means
any claim, action, cause of action, investigation or written notice by any
person or entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the presence, or
release, of any
29
Hazardous Materials at any location, whether or not owned, leased or operated by
the Company or any of its Subsidiaries, or (b) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law; (iii)
"Hazardous Materials" means all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as such by, or
regulated as such under, any Environmental Law.
Section 3.16 Information in Proxy Statement. The Proxy
Statement, if any (or any amendment thereof or supplement thereto), will, at the
date mailed to Company stockholders and at the time of the meeting of Company
stockholders to be held in connection with the Merger, not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.17 Opinion of Financial Advisor. The Board of
Directors of the Company has received the opinion of Xxxxxxx, Sachs & Co.
("Xxxxxxx Xxxxx") addressed to such Board, dated the date hereof, to the effect
that, as of such date, the $18.90 per Share to be received by the holders of
Shares pursuant to this Agreement is fair to such holders, a copy of which
opinion has been delivered to Parent and the Purchaser for information purposes
only. Each of Parent and Purchaser acknowledges and agrees that it may not, and
is not entitled to, rely on the opinion of Xxxxxxx Sachs delivered to the Board
of Directors of the Company. The Company will obtain the consent of Xxxxxxx
Xxxxx to include the opinion of Xxxxxxx Sachs in the Offering Documents.
30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Except as set forth in the schedule attached to this Agreement
setting forth exceptions to the Parent's and Purchaser's representations and
warranties set forth herein (the "Parent Disclosure Schedule"), the Parent and
Purchaser represent and warrant to the Company as set forth below. The Parent
Disclosure Schedule will be arranged in sections corresponding to sections of
this Agreement to be modified by such disclosure schedule.
Section 4.1 Organization. Each of Parent and the Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware and Tennessee, respectively, and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have,
individually or in the aggregate, a Parent Material Adverse Effect. As used in
this Agreement, "Parent Material Adverse Effect" shall mean any event, change
or effect that has, or is reasonably likely to have, a material adverse effect
(A) on the condition (financial or otherwise), business, assets, liabilities,
results of operations or cash flows of Parent and its Subsidiaries, taken as a
whole, or (B) on the ability of Parent or the Purchaser to perform its
obligations under this Agreement or to consummate the transactions contemplated
by this Agreement.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions. The
execution, delivery and performance by Parent and the Purchaser of this
Agreement and the consummation of the Merger and of the Transactions have been
duly authorized by the Board of Directors of Parent and the Purchaser and by
Parent as the sole stockholder of the Purchaser and no other corporate action on
the part of Parent and the Purchaser is necessary to authorize the
31
execution and delivery by Parent and the Purchaser of this Agreement and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by Parent and the Purchaser, as the case any be, and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its respective terms.
Section 4.3 Consents and Approvals; No Violations. Except for
the filings as set forth in Section 4.3 of the Parent Disclosure Schedule and
except for the filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Exchange Act, the
laws of any foreign jurisdiction, state securities or blue sky laws and the
TBCA, none of the execution, delivery or performance of this Agreement by Parent
or the Purchaser, the consummation by Parent or the Purchaser of the
Transactions or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or by-laws of Parent or the Purchaser,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or any of
its Subsidiaries or the Purchaser is a party or by which any of them or any of
their respective properties or assets may be bound, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Parent, any
of its Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
Section 4.4 Information in Proxy Statement. None of the
information supplied by Parent or the Purchaser specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date mailed
32
to stockholders and at the time of the meeting of stockholders to be held in
connection with the Merger, 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.
Section 4.5 Financing. At the closing of the Offer, and at the
Effective Time, Parent and Purchaser will have sufficient cash resources
available to finance the transactions contemplated hereby, subject to compliance
by the Company with the provisions of Section 5.6.
Section 4.6 Capitalization.
(a) As of the date of this Agreement, the authorized capital
stock of Parent consists of 40 million shares of common stock, $.01 par value
per share ("Parent Common Stock"), of which 8,067,985 shares are issued and
outstanding; 5 million shares of preferred stock, par value $.01 per share, none
of which are issued and outstanding. As of the date of this Agreement, options
to acquire 1,186,050 shares of Parent Common Stock (the "Parent Stock Options")
are outstanding under all stock option plans of Parent, 1,415,000 shares of
Parent Common Stock are reserved for issuance pursuant to the Parent Stock
Options, 1,395,011 shares of Parent Common Stock are reserved for issuance upon
conversion of Parent's 4.10% convertible subordinated notes due 2004, 222,152
shares of Parent Common Stock are reserved for issuance upon exercise of
existing Warrants and 10,000 shares are reserved for issuance upon exercise of
an option issued to X. X. Xxxx.
(b) The authorized capital stock of Purchaser consists of
1,000 shares of Purchaser Common Stock, and, as of the date hereof, 100 shares
of common stock are issued and outstanding, all of which are owned by Parent and
such outstanding shares are validly issued, fully paid and nonassessable.
(c) Except as disclosed in this Section 4.6 or in the Parent
SEC Reports (as hereinafter defined) and except as provided in the Shareholders
Agreement or as contemplated by this Agreement, as of the date hereof (i) there
is no outstanding right, subscription, warrant,
33
call, unsatisfied preemptive right, option or other agreement or arrangement of
any kind to purchase or otherwise to receive from Parent or Purchaser any of the
outstanding authorized but unissued or treasury shares of the capital stock or
any other security of Parent or Purchaser; (ii) there is no outstanding security
of any kind convertible into or exchangeable for such capital stock, and (iii)
there is no voting trust or other agreement or understanding to which Parent or
Purchaser is a party or is bound with respect to the voting of the capital stock
of Parent or Purchaser.
(d) Except for the qualifying shares required by certain
foreign jurisdictions and except as set forth on Section 4.6 of the Parent
Disclosure Schedule, all of the issued and outstanding capital stock of each of
the Subsidiaries of Parent has been validly issued, is fully paid and
nonassessable and is owned of record and beneficially, directly or indirectly,
by Parent or one of its Subsidiaries, free of any Lien, preemptive rights or
other restriction with respect thereto.
Section 4.7 Reports and Financial Statements. Parent has
timely filed all reports required to be filed with the SEC pursuant to the
Exchange Act or the Securities Act since January 1, 1995 (collectively, the
"Parent SEC Reports") and has previously made available to the Company true and
complete copies of all such Parent SEC Reports. Such Parent SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such Parent SEC Reports 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. The financial statements of Parent
included in the Parent SEC Reports have been prepared in accordance with GAAP
consistently applied throughout the periods indicated (except as otherwise noted
therein or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and fairly present (subject to, in the case of unaudited statements, to
normal, recurring year-end adjustments and any other adjustments described
therein) the consolidated financial position of Parent and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of operations
and cash flows
34
of Parent and its consolidated Subsidiaries for the periods then ended. Since
January 1, 1996, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Parent of
any or its consolidated Subsidiaries.
Section 4.8 Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in Parent's
financial statements (or reflected in the notes thereto) included in the Parent
SEC Reports filed as of the date of this Agreement or which were incurred after
December 31, 1996 in the ordinary course of business and consistent with past
practices, none of Parent and Parent's Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in the consolidated balance sheet (or reflected
in the notes thereto) or which could reasonably expect it to have a Parent
Material Adverse Effect.
Section 4.9 Litigation. Except as set forth in Parent's Annual
Report on Form 10-K for the year ended December 31, 1996, there are no suits,
claims, actions, proceedings, including without limitation arbitration
proceedings or alternative dispute resolution proceedings, or investigations
pending or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries before any Governmental Entity that, either individually or in the
aggregate, would be reasonably likely to have a Parent Material Adverse Effect.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, or (ii) as agreed in writing by Parent, after the date hereof, and
prior to the time the directors of the Purchaser have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 (the "Appointment Date"):
35
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its Subsidiaries shall use its best
reasonable efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;
(b) the Company will not, directly or indirectly, (i) except
upon exercise of employee stock options outstanding on the date hereof, issue,
sell, transfer or pledge or agree to sell, transfer or pledge any treasury stock
of the Company or any capital stock of any of its Subsidiaries beneficially
owned by it; (ii) amend its Charter or By-laws or similar organizational
documents; or (iii) split, combine or reclassify the outstanding Shares or
Preferred Stock or any outstanding capital stock of any of the Subsidiaries of
the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than dividends paid by
Subsidiaries of the Company to the Company or any of its Subsidiaries in the
ordinary course of business; (ii) issue, sell, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, other
than Shares reserved for issuance on the date hereof pursuant to the exercise of
Company Options outstanding on the date hereof; (iii) transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any assets other than in the
ordinary and usual course of business and consistent with past practice, or
incur or modify any indebtedness or other liability, other than in the ordinary
and usual course of business and consistent with past practice; or (iv) redeem,
purchase or otherwise acquire directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall:
(i) grant any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its executive officers or (ii)(A)
adopt any new, or (B) amend or otherwise increase, or
36
accelerate the payment or vesting of the amounts payable or to become payable
under any existing bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement; or (iii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries, provided, however, that nothing in this Section 5.1 shall
prevent the Company from entering into written or oral employment agreements
with seasonal employees if such agreements do not (i) obligate the Company to
make severance payments to the employee, (ii) extend in duration for a period in
excess of six (6) months or (iii) provide for salary in excess of $30,000 or
hourly wages in excess of $15 per hour;
(e) neither the Company nor any of its Subsidiaries shall
permit any insurance policy naming it as a beneficiary or a loss payable payee
to be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall
enter into any contract or transaction relating to the purchase of assets other
than in the ordinary course of business consistent with prior practice;
(g) neither the Company nor any of its Subsidiaries shall
change any of the accounting methods used by it unless required by GAAP, neither
the Company nor any of its Subsidiaries shall make any material Tax election
except in the ordinary course of business consistent with past practice, change
any material Tax election already made, adopt any material Tax accounting method
except in the ordinary course of business consistent with past practice, change
any material Tax accounting method unless required by GAAP, enter into any
closing agreement, settle any Tax claim or assessment or consent to any Tax
claim or assessment or any waiver of the statute of limitations for any such
claim or assessment;
37
(h) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, (ii) except in the ordinary course of
business and consistent with past practice and in an aggregate amount not to
exceed $5,000,000 (not including any indebtedness incurred in connection with
the payments made pursuant to Section 2.4(a) hereof), incur or assume any
short-term indebtedness; (iii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person; (iv) make any loans, advances or capital
contributions to, or investment in, any other person (other than to wholly-owned
Subsidiaries of the Company or customary loans or advances to employees in
accordance with past practice); or (v) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets);
(i) neither the Company nor any of its Subsidiaries shall
settle or compromise any claim, lawsuit, liability or obligation, and neither
the Company nor any of its Subsidiaries shall pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligation, (x) to the extent reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company and its consolidated Subsidiaries, (y)
incurred in the ordinary course of business and consistent with past practice or
(z) which are legally required to be paid, discharged or satisfied;
(j) neither the Company nor any of its Subsidiaries will take,
or agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or as of
any time prior to, the Effective Time;
(k) except as otherwise permitted by Section 5.4(b) hereof,
neither the Company nor any of its Subsidiaries will take any action with the
intent of causing any of the conditions to the Offer set forth in Annex A not to
be satisfied; and
38
(l) except as otherwise permitted by Section 5.4(b) hereof,
neither the Company nor any of its Subsidiaries will enter into an agreement,
contract, commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
Section 5.2 Access; Confidentiality. (a) Upon reasonable
notice, the Company shall (and shall cause each of its Subsidiaries to) afford
to the officers, employees, accountants, counsel, financing sources and other
representatives of Parent, access, during normal business hours during the
period prior to the Appointment Date, to all its properties, employees, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to the Parent (a)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. After the Appointment
Date, the Company shall provide Parent and such persons as Parent shall
designate with all such information, at such time as Parent shall request.
Unless otherwise required by law and until the Appointment Date, Parent will
hold any such information which is nonpublic in confidence in accordance with
the provisions of a letter agreement dated November 22, 1996, as amended,
between the Company and the Parent (the "Confidentiality Agreement"). The
Company shall promptly, and in any event within ten business days following the
date of this Agreement, deliver to Parent true and complete copies of all Plans
not previously delivered to Parent and any amendments thereto (or if the Plan is
not a written Plan, a description thereof), any related trust or other funding
vehicle, any summary plan description required under ERISA or the Code and the
most recent determination letter received from the Internal Revenue Service with
respect to each Plan intended to qualify under section 401 of the Code.
(b) Following the execution of this Agreement, Parent and the
Company shall cooperate with each other and make all reasonable efforts to
minimize any disruption to the business which may result from the announcement
of the Transactions.
39
Section 5.3 Consents and Approvals. (a) Each of the Company,
Parent and the Purchaser will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
this Agreement and the Transactions and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with this Agreement and
the Transactions. Each of the Company, Parent and the Purchaser will, and will
cause its Subsidiaries to, take all reasonable actions necessary to obtain (and
will cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by Parent, the Purchaser,
the Company or any of their Subsidiaries in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all reasonable actions
necessary to file as soon as practicable, if applicable, notifications under the
Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended, and to respond
as promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 5.4 No Solicitation. (a) Neither the Company nor any
of its Subsidiaries shall (and the Company shall use its best efforts to cause
its officers, directors, employees, representatives and agents, including, but
not limited to, investment bankers, attorneys and accountants, not to), directly
or indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any proposal or offer to acquire all or a
substantial part of the business and properties of the Company or any of its
Subsidiaries or any capital stock of the Company or any of its Subsidiaries,
whether by merger, tender offer, exchange offer, sale of assets or
40
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company (an "Acquisition Proposal"),
except that nothing contained in this Section 5.4 or any other provision hereof
shall prohibit the Company or the Company's Board from (i) taking and disclosing
to the Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act, or (ii) making such disclosure to the Company's stockholders as,
in the good faith judgment of the Board, after receiving advice from outside
counsel, is required under applicable law, provided that the Company may not,
except as permitted by Section 5.4(b), withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or propose to approve or recommend any Acquisition
Proposal, or enter into any agreement with respect to any Acquisition Proposal.
The Company will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
(b) Notwithstanding the foregoing, prior to the acceptance of
Shares pursuant to the Offer, the Company may furnish information concerning the
Company and its Subsidiaries to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality agreements, and may
negotiate and participate in discussions and negotiations with such entity or
group concerning an Acquisition Proposal if (x) such entity or group has on an
unsolicited basis submitted a bona fide written proposal to the Company relating
to any such transaction which the Board determines in good faith, after
consulting with a nationally recognized investment banking firm, represents a
superior transaction to the Offer and the Merger and (y) in the opinion of the
Board of Directors of the Company, only after receipt of advice from outside
legal counsel to the Company, the failure to provide such information or access
or to engage in such discussions or negotiations would reasonably be expected to
cause the Board of Directors to violate its fiduciary duties to the Company's
shareholders under applicable law (an Acquisition Proposal which satisfies
clauses (x) and (y) being referred to herein as a "Superior Proposal"). The
Company will immediately notify Parent of the existence of any proposal or
inquiry received by the Company, the identity of the party making
41
such proposal or inquiry, and the terms (both initial and modified) of any such
proposal or inquiry (and will disclose any written materials delivered in
connection therewith) and the Company will keep Parent reasonably informed of
the status (including amendments or proposed amendments) of any such proposal or
inquiry. The Company will promptly provide to Parent any material non-public
information regarding the Company provided to any other party which was not
previously provided to Parent. At any time after two business days following
notification to Parent of the Company's intent to do so (which notification
shall include the identity of the bidder and the material terms and conditions
of the proposal) and if the Company has otherwise complied with the terms of
this Section 5.4(b), the Board of Directors may withdraw or modify its approval
or recommendation of the Offer and may enter into an agreement with respect to a
Superior Proposal, provided it shall concurrently with entering into such
agreement pay or cause to be paid to Parent the Termination Fee (as defined
below) plus any amount payable at the time for reimbursement of expenses
pursuant to Section 8.1(b). If the Company shall have notified Parent of its
intent to enter into an agreement with respect to a Superior Proposal in
compliance with the preceding sentence and has otherwise complied with such
sentence, the Company may enter into an agreement with respect to such Superior
Proposal (with the bidder and on terms no less favorable than those specified in
such notification) after the expiration of the initial two business day period
without any further notification.
Section 5.5 Brokers or Finders. The Company represents, as to
itself and its Subsidiaries and affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee or any other commission or similar fee from the Company
or any of its Subsidiaries in connection with any of the transactions
contemplated by this Agreement except for Xxxxxxx, Xxxxx & Co., whose engagement
letter has been provided to Parent.
Section 5.6 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all 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 to remove any injunc-
42
tions or other impediments or delays, legal or otherwise, to achieve the
satisfaction of the Minimum Condition and all conditions set forth in Annex A
and Article VI, and to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. Without limiting the foregoing, the
Company shall, and shall cause its representatives and advisors to, without cost
to Parent or Purchaser, assist Parent and Purchaser in connection with their
financing of the transactions contemplated hereby, including, without
limitation, (i) making available on a timely basis any financial information of
the Company and its Subsidiaries that may be requested, (ii) obtaining comfort
letters and updates thereof from the Company's independent certified public
accountants and opinion letters from the Company's attorneys, with such letters
to be in customary form and to cover matters of the type customarily covered by
accountants and attorneys in such financing transactions, and (iii) making
available representatives of the Company and its accountants and attorneys in
connection with any such financing, including for purposes of due diligence and
marketing efforts related thereto. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of the Company, Parent and the
Purchaser shall use all reasonable efforts to take, or cause to be taken, all
such necessary actions. The Company shall use its reasonable best efforts to
effect the retention of the individuals set forth in Section 5.6 of the Company
Disclosure Schedule as employees of the Company following consummation of the
Transactions.
Section 5.7 Publicity. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other Transactions without the prior
consultation of the other party, except as such party believes, after receiving
the advice of outside counsel, may be required by law or by any listing
agreement with a national securities exchange or trading market.
43
Section 5.8 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company, Parent or the
Purchaser, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.8 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.9 Directors' and Officers' Insurance and
Indemnification. (a) For six years after the Effective Time, the Surviving
Corporation (or any successor to the Surviving Corporation) shall indemnify,
defend and hold harmless the present and former officers and directors of the
Company and its Subsidiaries, and persons who become any of the foregoing prior
to the Effective Time (each an "Indemnified Party") against all losses, claims,
damages, liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the written consent of the Parent or the Surviving Corporation which consent
shall not unreasonably be withheld)) arising out of actions or omissions
occurring at or prior to the Effective Time to the full extent required under
applicable Tennessee law, the terms of the Company's Charter or the By-laws, as
in effect at the date hereof, and the terms of any indemnification agreement
entered into with the Company prior to the date hereof; provided that, in the
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims.
(b) Parent or the Surviving Corporation shall maintain the
Company's existing officers' and directors' liability insurance ("D&O
Insurance") for a period of not less than six years after the Effective Time;
provided, that the Parent may substitute therefor policies of
44
substantially equivalent coverage and amounts containing terms no less favorable
to such former directors or officers; provided, further, if the existing D&O
Insurance expires, is terminated or cancelled during such period, Parent or the
Surviving Corporation will use all reasonable efforts to obtain substantially
similar D&O Insurance; provided, further, however, that in no event shall
Parent, the Surviving Corporation or the Company be required to pay aggregate
premiums for insurance under this Section 5.9(b) in excess of 150% of the
aggregate premiums paid by the Company in 1996 on an annualized basis for such
purpose (the "1996 Premium"); and provided, further, that if the Parent or the
Surviving Corporation is unable to obtain the amount of insurance required by
this Section 5.9(b) for such aggregate premium, Parent or the Surviving
Corporation shall obtain as much insurance as can be obtained for an annual
premium not in excess of 150% of the 1996 Premium.
Section 5.10 Notice of Prepayment. Promptly following the
execution of this Agreement, the Company shall provide notice to United Special
Events, Inc. ("USE") of its intention to prepay in full the principal amount
due, and any interest due thereon, pursuant to the terms of a term note, dated
as of May 15, 1996, by and among the Company and USE (the "Term Note"), and
shall prepay such Term Note in accordance with the terms thereof unless USE
exercises its right to convert all or a portion of the prepayment amount into
Shares of the Company.
Section 5.11 Certain Options. Effective as of the Effective
Time and subject to any required shareholder approval necessary to effectuate
the following grants, Parent shall grant options to acquire an aggregate of
500,000 shares of common stock of Parent ("Parent Options") to certain employees
of the Company, in accordance with Schedule 5.11 hereto (which Schedule may be
amended from time to time by executives of the Company prior to the Effective
Time, provided (i) such amendment shall have received the consent of Parent and
(ii) no amendment shall provide for the grant of shares of common stock of
Parent in excess of 500,000 shares). Except as set forth in Schedule 5.11, the
Parent Options shall be subject to the terms and conditions set forth in the
applicable option plan of Parent (as the same may be amended) and the applicable
option agreement.
45
Section 5.12 Board Representation. At the Effective Time,
Parent shall take all actions necessary to (i) appoint Xx. Xxxxxxx X. Xxxx as a
director of Parent's Board of Directors and as Vice Chairman of the Board of
Directors and to such other officer positions as shall be specified in the
Employment Agreement between Xx. Xxxx and Parent executed contemporaneously with
this Agreement, and (ii) appoint another individual selected by Xx. Xxxx and
reasonably acceptable to the Board of Directors of Parent as a director of
Parent's Board of Directors (it being understood that any person who is a Senior
Vice President or Director of the Company on the date hereof is reasonably
acceptable to the Board of Directors of Parent without further action).
Section 5.13 Tax Election. Neither Parent nor Purchaser shall
make an election under Code Section 338 without the prior written consent of the
Company.
ARTICLE VI
CONDITIONS
Section 6.1 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 on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the Shares, if
required by applicable law, in order to consummate the Merger.
(b) Statutes; Court Orders. No statute, rule or regulation
shall have been enacted or promulgated by any governmental authority which
prohibits the consummation of the Merger; and there shall be no order or
injunction of a court of competent jurisdiction in effect precluding
consummation of the Merger.
(c) Purchase of Shares in Offer. Parent, the Purchaser or
their affiliates shall have purchased Shares
46
pursuant to the Offer, except that this condition shall not apply if Parent, the
Purchaser or their affiliates shall have failed to purchase Shares pursuant to
the Offer in breach of their obligations under this Agreement.
Section 6.2 Condition to Parent's and the Purchaser's
Obligations to Effect the Merger. The obligations of Parent and the Purchaser to
consummate the Merger are further subject to the fulfillment of the condition
that all actions contemplated by Section 2.4 hereof shall have been taken, which
may be waived in whole or in part by Parent and the Purchaser.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and
the Transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after shareholder approval thereof:
(a) By the mutual written consent of Parent and the Company.
(b) By either of the Company or Parent:
(i) if the Offer shall have expired without any
Shares being purchased therein; provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i) 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
Parent or the Purchaser, as the case may be, to purchase the Shares
pursuant to the Offer on or prior to such date;
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their reasonable
efforts to lift), which permanently restrains, enjoins or otherwise
prohibits the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such order, decree, ruling
47
or other action shall have become final and nonappealable; or
(iii) if the Offer has not been consummated prior to
September 5, 1997; provided, that the right to terminate this Agreement
under this Section 7.1(b)(iii) 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 Parent or the Purchaser,
as the case may be, to purchase Shares pursuant to the Offer on or
prior to such date.
(c) By the Company:
(i) if Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(i) if the Company is at such time in
breach of its obligations under this Agreement such as to cause a
material adverse effect on the Company and its Subsidiaries, taken as a
whole;
(ii) in connection with entering into a definitive
agreement in accordance with Section 5.4(b), provided it has complied
with all provisions thereof, including the notice provisions therein,
and that it (x) makes simultaneous payment of the amount equal to
Parent's good faith estimate of its expenses, and (y) acknowledges in
writing its obligation to promptly reimburse Parent for its actual
expenses in excess of such estimated expenses payment, all as
contemplated by, and subject to the limits set forth in, Section
8.1(b); or
(iii) if Parent or the Purchaser shall have breached
in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach cannot be or has not been cured, in all material respects,
within 30 days after the giving of written notice to Parent or the
Purchaser, as applicable.
48
(d) By Parent:
(i) if, due to an occurrence, not involving a breach
by Parent or the Purchaser of their obligations hereunder, which makes
it impossible to satisfy any of the conditions set forth in Annex A
hereto, Parent, the Purchaser, or any of their affiliates shall have
failed to commence the Offer, and shall have delivered written notice
to the Company specifying the reason or reasons the Offer has not been
commenced and indicating that Parent is terminating this Agreement
pursuant to this Section 7.1(d)(i), on or prior to five business days
following the date of the initial public announcement of the Offer;
(ii) if prior to the purchase of Shares pursuant to
the Offer, the Company shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which
(A) would give rise to the failure of a condition set forth in Annex A
hereto and (B) cannot be or has not been cured, in all material
respects, within 30 days after the giving of written notice to the
Company; or
(iii) if either Parent or the Purchaser is entitled
to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (d) of Annex A hereto.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to its terms, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
the Parent, the Purchaser or the Company except (A) for fraud or for willful
breach of this Agreement and (B) as set forth in Section 5.2(a) (the penultimate
sentence thereof), this Section 7.2 and Section 8.1.
49
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as contemplated by
this Agreement, including Section 8.1(b) hereof, all costs and expenses incurred
in connection with this Agreement and the consummation of the Transactions shall
be paid by the party incurring such expenses, provided that the Company agrees
to pay $650,000 of the commitment fee payable to Nationsbank pursuant to the
commitment letter dated as of May 2, 1997. Any amounts paid pursuant to the
Nationsbank commitment letter that may be refunded shall be divided equally
between Parent and the Company; provided that the Company shall not be entitled
to any refund in excess of $650,000.
(b) If (x) the Company shall terminate this Agreement pursuant
to Section 7.1(c)(ii), (y) Parent shall terminate this Agreement pursuant to
Section 7.1(d)(iii) hereof, or (z) either the Company or Parent terminates this
Agreement pursuant to Section 7.1(b)(i) and prior thereto there shall have been
publicly announced another Acquisition Proposal, the Company shall pay to
Parent, an amount (the "Expense Reimbursement Amount"), not to exceed $4,250,000
in the aggregate, equal to Parent's actual and reasonably documented
out-of-pocket fees and expenses incurred by Parent and Purchaser in connection
with the Offer, the Merger, this Agreement and the consummation of the
Transactions (including the financing thereof), which shall be payable in same
day funds. The estimated Expense Reimbursement Amount shall be paid concurrently
with any such termination, together with delivery of a written acknowledgement
by the Company of its obligation to reimburse Parent for its actual Expense
Reimbursement Amount in excess of the estimated payment made at the time of such
termination.
Section 8.2 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors (which in the case of the Company shall
include approvals as contemplated in Section
50
1.3(b)), at any time prior to the Closing Date with respect to any of the terms
contained herein; provided, however, that after the approval of this Agreement
by the stockholders of the Company, no such amendment, modification or
supplement shall reduce the amount or change the form of the Merger
Consideration.
Section 8.3 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 8.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Xxxxxxx Sports Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and
(b) if to the Company, to:
Varsity Spirit Corporation
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
51
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx, Carton & Xxxxxxx
Quaker Tower
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone number: (000) 000-0000
Telecopy number: (000) 000-0000
Section 8.5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term "affiliates"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in
one or more counterparts, each 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.
Section 8.7 Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Confidentiality Agreement (including the documents and
the instruments referred to herein and therein): (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Section 5.9 is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8.8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or
52
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is
invalid, void or unenforceable, the parties agree that the court asking such
determination shall have the power to reduce the scope, duration, area or
applicability of the term or provision, to delete specific words or phrases, or
to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement (other than the
provisions relating to the mechanics of the Merger and the obligations of the
directors of the Company under Section 5.4, each of which shall be governed by
the laws of the State of Tennessee) shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
Section 8.10 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 content of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent. 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.
53
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
XXXXXXX SPORTS INC.
By /s/ Xxxxx Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
CHEER ACQUISITION CORP.
By /s/ Xxxxx Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
VARSITY SPIRIT CORPORATION
By /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Director
54
ANNEX A
Certain Conditions of the Offer
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) the Purchaser's rights to extend and
amend the Offer at any time in its sole discretion (subject to the provisions of
the Merger Agreement), the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-l(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate or amend the Offer as to any Shares not then paid for, if (i) the
Minimum Condition has not been satisfied, or (ii) at any time on or after the
date of the Merger Agreement and before the time of acceptance for payment for
any such Shares, any of the following events shall have occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity against the Purchaser, Parent, the Company
or any Subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective Subsidiaries or affiliates) of all or a material portion
of their or the Company's businesses or assets, or to compel Parent or the
Purchaser or their respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under the
Offer, seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by the Agreement, or seeking to obtain from the Company, Parent or the Purchaser
any damages that are material in relation to the Company and its Subsidiaries
taken as a whole, (iii) seeking to impose material limitations on the ability of
the Purchaser, or render the Purchaser unable, to accept for payment, pay for or
purchase some
A-1
or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to
impose material limitations on the ability of Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by it on all matters properly presented
to the Company's stockholders, or (v) which otherwise is reasonably likely to
have a Company Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through (v)
of paragraph (a) above;
(c) there shall have occurred any other event, change or
effect after the date of the Agreement which, either individually or in the
aggregate, would have, or be reasonably likely to have, a Company Material
Adverse Effect;
(d)(i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Agreement, or approved or recommended any Acquisition Proposal or (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.4(b) of the Agreement;
(e) the representations and warranties of the Company set
forth in the Agreement shall not be true and correct, in each case (i) as of the
date referred to in any representation or warranty which addresses matters as of
a particular date, or (ii) as to all other representations and warranties, as of
the date of the Agreement and as of the scheduled expiration of the Offer,
unless the inaccuracies (without giving effect to any materiality or material
adverse effect qualifications or materiality exceptions contained therein) under
such representations and warranties, taking all the inaccuracies under all such
representations and warranties together in their
A-2
entirety, do not, individually or in the aggregate, result in a Company Material
Adverse Effect;
(f) the Company shall have failed to perform any obligation or
to comply with any agreement or covenant to be performed or complied with by it
under the Agreement other than any failure which would not have, either
individually or in the aggregate, a Company Material Adverse Effect or the
persons who are a party to the Shareholders Agreement and Stock Purchase
Agreement shall have failed to comply with their obligations under the
Shareholders Agreement and Stock Purchase Agreement, as the case may be;
(g) any person acquires beneficial ownership (as defined in
Rule 13d-3 promulgated under the Exchange Act), of at least 30% of the
outstanding Common Stock of the Company (other than any person not required to
file a Schedule 13D under the rules promulgated under the Exchange Act); or
(h) the Agreement shall have been terminated in accordance
with its terms; which, in the sole judgment of Parent or the Purchaser, in any
such case, and regardless of the circumstances (including any action or inaction
by Parent or the Purchaser) giving rise to such condition makes it inadvisable
to proceed with the Offer and/or with such acceptance for payment of or payment
for Shares.
The foregoing conditions are for the sole benefit of Parent
and the Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or the Purchaser not in violation of the Agreement) and may be waived by
Parent or the Purchaser in whole or in part at any time and from time to time in
the sole discretion of Parent or the Purchaser, subject in each case to the
terms of the Merger Agreement. The failure by Parent or the Purchaser 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 which may be
asserted at any time and from time to time.
A-3
