AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MERISTAR HOTELS & RESORTS, INC.
MERISTAR BROOKLYN, INC.
and
BRIDGESTREET ACCOMMODATIONS, INC.
Dated as of March 23, 2000
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER.............................................................2
Section 1.1 The Merger.................................................2
Section 1.2 Effective Date.............................................2
Section 1.3 Effect of the Merger.......................................2
Section 1.4 Certificate of Incorporation, By-Laws......................3
Section 1.5 Directors and Officers.....................................4
Section 1.6 Effect on Capital Stock....................................4
Section 1.7 Exchange of Certificates...................................6
Section 1.8 Stock Transfer Books.......................................8
Section 1.9 No Further Ownership Rights in Common Stock................8
Section 1.10 Lost, Stolen or Destroyed Certificates....................9
Section 1.11 Taking of Necessary Action; Further Action................9
Section 1.12 Stockholders' Meeting; Registration Statement.............9
Section 1.13 Material Adverse Effect..................................11
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................11
Section 2.1 Organization and Qualification; Subsidiaries..............12
Section 2.2 Certificate of Incorporation and By-Laws..................12
Section 2.3 Capitalization............................................12
Section 2.4 Authority Relative to this Agreement......................13
Section 2.5 No Conflict; Required Filings and Consents................14
Section 2.6 Compliance, Permits.......................................15
Section 2.7 SEC Filings; Financial Statements.........................16
Section 2.8 Absence of Certain Changes or Events......................16
Section 2.9 No Undisclosed Liabilities................................17
Section 2.10 Absence of Litigation....................................17
Section 2.11 Employee Benefit Plans, Employment Agreements............18
Section 2.12 Employment and Labor Matters.............................20
Section 2.13 Proxy Statement and Registration Statement...............21
Section 2.14 Restrictions on Business Activities......................21
Section 2.15 Title to Property........................................21
Section 2.16 Taxes....................................................22
Section 2.17 Environmental Matters....................................24
Section 2.18 Intellectual Property....................................25
Section 2.19 Interested Party Transactions............................27
Section 2.20 Insurance................................................27
Section 2.21 Opinion of Financial Adviser.............................27
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Page
Section 2.22 Brokers..................................................27
Section 2.23 Section 203 of Delaware Law Not Applicable...............27
Section 2.24 Investment Company Act...................................27
Section 2.25 Vote Required............................................28
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB............................................28
Section 3.1 Organization and Qualification; Subsidiaries..............28
Section 3.2 Certificate of Incorporation and By-Laws..................28
Section 3.3 Capitalization of Parent..................................29
Section 3.4 Authority Relative to this Agreement......................29
Section 3.5 No Conflict, Required Filings and Consents................30
Section 3.6 Compliance, Permits.......................................31
Section 3.7 SEC Filings; Financial Statements.........................31
Section 3.8 Absence of Certain Changes or Events......................32
Section 3.9 No Undisclosed Liabilities................................32
Section 3.10 Absence of Litigation...................................32
Section 3.11 Employment and Labor Matters............................33
Section 3.12 Proxy Statement and Registration Statement..............33
Section 3.13 Taxes...................................................33
Section 3.14 Environmental Matters...................................34
Section 3.15 Interested Party Transactions...........................34
Section 3.16 Insurance...............................................35
Section 3.17 Brokers.................................................35
Section 3.18 Investment Company Act..................................35
Section 3.19 No Prior Activities; Financing..........................35
ARTICLE IV
CONDUCT OF BUSINESS...................................................35
Section 4.1 Conduct of Business by the Company Pending the Merger.....35
Section 4.2 Conduct of Business by Parent Pending the Merger..........39
Section 4.3 No Solicitation; Acquisition Proposals....................40
ARTICLE V
ADDITIONAL AGREEMENTS.................................................42
Section 5.1 HSR Act...................................................42
Section 5.2 Access to Information; Confidentiality....................42
Section 5.3 Consents; Approvals.......................................43
Section 5.4 Indemnification and Insurance.............................43
Section 5.5 Notification of Certain Matters...........................45
Section 5.6 Further Action............................................45
Section 5.7 Public Announcements......................................45
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Section 5.8 Conveyance Taxes..........................................46
Section 5.9 Employee Benefit Plans....................................46
Section 5.10 Listing and Delisting of Securities.....................46
Section 5.11 Audited Financial Statements............................47
Section 5.12 Plan of Reorganization..................................47
Section 5.13 Senior Credit Facility..................................47
ARTICLE VI
CONDITIONS TO THE MERGER..............................................47
Section 6.1 Conditions to Obligation of Each Party to Effect
the Merger................................................47
Section 6.2 Additional Conditions to Obligation of Parent and
Acquisition Sub to Effect the Merger......................49
Section 6.3 Additional Conditions to Obligation of the Company
to Effect the Merger......................................50
ARTICLE VII
TERMINATION...........................................................50
Section 7.1 Termination...............................................50
Section 7.2 Effect of Termination.....................................52
Section 7.3 Fees and Expenses.........................................52
ARTICLE VIII
GENERAL PROVISIONS....................................................53
Section 8.1 Effectiveness of Representations, Warranties and
Agreements................................................53
Section 8.2 Notices...................................................53
Section 8.3 Certain Definitions.......................................55
Section 8.4 Amendment.................................................56
Section 8.5 Waiver....................................................56
Section 8.6 Headings..................................................56
Section 8.7 Severability..............................................56
Section 8.8 Entire Agreement..........................................56
Section 8.9 Assignment; Guarantee of Acquisition Sub Obligations......56
Section 8.10 Parties in Interest.....................................57
Section 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative...57
Section 8.12 Governing Law...........................................57
Section 8.13 Counterparts............................................57
Section 8.14 Interpretation..........................................57
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 23, 2000, is
among BRIDGESTREET ACCOMMODATIONS, INC., a Delaware corporation (the "Company"),
MERISTAR HOTELS & RESORTS, INC. a Delaware corporation ("Parent"), and MERISTAR
BROOKLYN, INC., a Delaware corporation and a wholly owned subsidiary of Parent
("Acquisition Sub").
WHEREAS, the respective Boards of Directors of Parent, Acquisition
Sub and the Company have determined that it is advisable and in the best
interest of their respective stockholders to combine the respective businesses
of Parent and the Company, and consequently have each approved the acquisition
of the Company by Parent, by means of a merger of the Company with Acquisition
Sub (the "Merger"), upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, it is intended that, except as otherwise provided herein,
for federal income tax purposes, the Merger shall qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the rules and regulations promulgated under the Code;
WHEREAS, as a condition to the willingness of Parent and Acquisition
Sub to enter into this Agreement, Parent and Acquisition Sub have entered into a
Stockholders' Agreement, dated as of the date hereof (the "Stockholders'
Agreement"), with each of the stockholders listed on the signature pages
thereto, pursuant to which each such stockholder has agreed, among other things,
(i) to appear, in person or by proxy, for the purpose of obtaining a quorum at
any annual or special meeting of shareholders of the Company and at any
adjournment thereof at which matters relating to the Merger, this Agreement (as
amended from time to time) or any transaction contemplated by this Agreement are
considered; (ii) to vote their respective shares in favor of approval and
adoption of the Merger and this Agreement at an annual or special meeting of
shareholders of the Company; and (iii) to grant to Parent an irrevocable option
to purchase all Shares owned by such stockholder;
WHEREAS, the Board of Directors of the Company (the "Board") has
approved this Agreement and the transactions contemplated hereby and declared
the advisability and resolved to recommend approval of the Merger and approval
and adoption of this Agreement by the stockholders of the Company; and
WHEREAS the Boards of Directors of Parent and Acquisition Sub have
each approved the Merger of the Company with and into Acquisition Sub in
accordance with the Delaware General Corporation Law (the "Delaware Law") upon
the terms and subject to the conditions set forth herein.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Acquisition Sub hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger.
(a) Effective Time. Subject to Section 1.3(b), at the
Effective Time (as defined below), and subject to and upon the terms and
conditions of this Agreement and the Delaware Law, the Company shall be merged
with and into Acquisition Sub; the separate corporate existence of the Company
shall cease and Acquisition Sub shall continue as the surviving corporation.
Acquisition Sub as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the Merger will take place as promptly
as practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI, at the principal offices of
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, unless another date and time or place is agreed to in writing by
the parties hereto (the "Closing Date").
Section 1.2 Effective Date. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI (and in any
event within two business days), the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger as contemplated by the Delaware
Law (the "Certificate of Merger"), together with any required related
certificate, with the Secretary of State of the State of Delaware, in such form
as required by, and executed in accordance with the relevant provisions of the
Delaware Law (the time of such filing being the "Effective Time").
Section 1.3 Effect of the Merger.
(a) At the Effective Time, the effect of the Merger shall be
as provided in this Agreement, the Certificate of Merger and the applicable
provisions of the Delaware Law. Without limiting the generality of the foregoing
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Acquisition Sub shall vest in the
Surviving
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Corporation, and all debts, liabilities and duties of the Company and
Acquisition Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
(b) If (A) on the day upon which the Effective Time occurs the
fair market value of all common stock, par value $0.01 per share, of Parent (the
"Parent Common Stock") to be delivered in connection with the Merger (the "Total
Stock Value") is less than 50% of the sum of (i) the Total Stock Value, (ii) the
aggregate amount of Cash Consideration (as defined below) payable by Parent
pursuant to Section 1.6(a), (iii) cash payable in respect of Dissenting Shares
(as defined below), (iv) cash payable in respect of fractional shares and (v)
any transfer taxes paid or to be paid by Parent or the Company on behalf of
stockholders of the Company in connection with the Merger (such sum being
referred to as the "Total Consideration") or (B) the conditions set forth in
Section 6.2(d) and Section 6.3(c) cannot be satisfied, then the Merger
contemplated by this Section 1.3(b) shall be restructured such that Acquisition
Sub shall be merged with and into the Company, and the Company shall be the
surviving corporation. In such event: all references to the term "Merger" shall
be deemed references to the merger contemplated by this Section 1.3(b); all
references to the term "Surviving Corporation" shall be deemed references to the
Company, as the surviving corporation after the Merger; all references to the
term "Effective Time" shall be deemed references to the time at which the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such later time as is specified in the Certificate of Merger in respect to the
Merger as restructured in the manner contemplated by this Section 1.3(b); and
the conditions set forth in Sections 6.2(d) and 6.3(c) and the covenant set
forth in Section 5.12 shall thereafter cease to apply. The parties shall
cooperate and take all steps necessary to implement such alternative structure.
For purposes of this Section 1.3(b), (A) cash payable in respect of Dissenting
Shares shall mean, for each Dissenting Share, the sum of (i) $1.50 and (ii) 0.5
multiplied by the Average Trading Price (as defined below) of Parent Common
Stock, and (B) the fair market value of the Parent Common Stock delivered in
connection with the Merger shall be determined by reference to the opening price
at which Parent Common Stock is traded on the New York Stock Exchange, Inc.
("NYSE") on the date of the Effective Time or, if there is no such trading of
Parent Common Stock on that date, the volume weighted average per share sales
price of Parent Common Stock on the NYSE on the last date prior to the date of
the Effective Time upon which there was trading of such stock.
Section 1.4 Certificate of Incorporation, By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined
by Parent prior to the Effective Time, at the Effective Time the Certificate of
Incorporation of Acquisition Sub as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by the Delaware Law and such Certificate of
Incorporation.
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(b) By-Laws. Unless otherwise determined by Parent prior to
the Effective Time, at the Effective Time the By-Laws of Acquisition Sub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by the Delaware Law,
the Certificate of Incorporation of the Surviving Corporation and such By-Laws.
Section 1.5 Directors and Officers. At the Effective Time, the
directors of Acquisition Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation, and the officers of Acquisition Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
Section 1.6 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the Parent,
Acquisition Sub, the Company, or the holders of any of the following securities:
(a) Merger Consideration. Each share (a "Share") of common
stock, par value $0.01 per share, of the Company (the "Common Stock") issued and
outstanding immediately prior to the Effective Time (excluding any Shares to be
canceled pursuant to Section 1.6(b) and any Dissenting Shares (as defined in
Section 1.6(e)) shall immediately cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist and be converted
into (i) the right to receive $1.50 in cash, without interest thereon (the "Cash
Consideration"), plus (ii) the right to receive 0.5 shares (the "Exchange
Ratio") of Parent Common Stock (as may be adjusted from time to time, the
"Merger Consideration"), in accordance with Section 1.7 and each holder of any
such Share shall cease to have any rights with respect thereto arising therefrom
(including without limitation the right to vote), except the right to receive
the Merger Consideration in accordance with Section 1.7. Notwithstanding
anything to the contrary contained herein, (i) in the event the Average Trading
Price (as defined below) is less than $2.25, then this Agreement may be
terminated by the Company in accordance with Article VII; or (ii) in the event
the Average Trading Price is more than $3.75, then this Agreement may be
terminated by Parent in accordance with Article VII. As used herein, the
"Average Trading Price" for each share of Parent Common Stock shall be the
average of the closing prices for a share of Parent Common Stock as reported on
the NYSE Composite Transactions Tape for the ten trading days ending three
trading days prior to the Closing Date (the "10-Day Period"). Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time the
outstanding Shares or the outstanding Parent Common Stock shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Merger Consideration shall be
correspondingly adjusted on a per-share basis to reflect such
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stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) Cancellation. Each Share held in the treasury of the
Company and each Share owned by Parent, Acquisition Sub or any direct or
indirect wholly owned subsidiary of the Company or Parent immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, cease to be outstanding, and be canceled and retired
without payment of any consideration therefor and cease to exist.
(c) Stock Options. Immediately prior to the Effective Time,
each outstanding option to purchase Common Stock (a "Stock Option") granted
under the Company's 1997 Equity Incentive Plan or the Stock Option Plan for Non-
Employee Directors or pursuant to any other employee stock option plan or
agreement entered into by the Company with any employee of the Company or any
subsidiary thereof and listed on Section 2.11(c) of the Company Disclosure
Schedule (the "Company Stock Option Plans"), whether or not then exercisable,
shall become exercisable, subject to the terms of the Company Stock Option Plan
pursuant to which such Stock Option was issued. If and to the extent that a
Stock Option shall not have been exercised at the Effective Time, such Stock
Option shall be automatically canceled. Each holder of a canceled Stock Option
shall be entitled to receive as soon as practicable after the first date payment
can be made without liability to such person under Section 16(b) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act") from the Company in consideration
for such cancellation an amount in cash (less applicable withholding taxes)
equal to the product of (i) the number of shares of Common Stock previously
subject to such Stock Option multiplied by (ii) the excess, if any, of the
equivalent cash value of the Merger Consideration at the Effective Time ($1.50
plus 0.5 multiplied by the Average Trading Price for the 10-Day Period) over the
exercise price per share of Common Stock previously subject to such Stock Option
(the "Option Consideration ") upon surrender of such Stock Option to the Company
or an affidavit of loss in the form requested by Parent, together with such
additional documentation as may be reasonably required by Parent or the Company.
The surrender of a Stock Option in exchange for the Option Consideration in
accordance with the terms of this Section 1.6(c) shall be deemed a release of
any and all rights the holder had or may have had in respect of such Stock
Option. Prior to the Effective Time, the Company shall use its reasonable best
efforts to obtain all necessary consents or releases from holders of Stock
Options under the Company Stock Option Plans and take all such other lawful
action as may be necessary to give effect to the transactions contemplated by
this Section 1.6(c). Except as otherwise agreed to by the parties, (i) the
provisions in the Company Stock Option Plans with respect to the right to issue
or grant additional options or rights to acquire Common Stock shall terminate as
of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary thereof shall be
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canceled as of the Effective Time, and (ii) the Company shall use its reasonable
best efforts to assure that following the Effective Time no participant in the
Stock Option Plans or other plans, programs or arrangements shall have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof and to terminate all such plans.
(d) Capital Stock of Acquisition Sub. At the Effective Time,
each share of common stock, par value $0.01 per share, of Acquisition Sub issued
and outstanding immediately prior to the Effective Time shall remain outstanding
as one validly issued, fully paid and nonassessable share of the common stock,
par value $0.01 per share, of the Surviving Corporation.
(e) Dissenting Shares.Notwithstanding anything in this
Agreement to the contrary, Shares issued and outstanding immediately prior to
the Effective Time held by any person who has the right to demand, and who
properly demands, an appraisal of such Shares (the "Dissenting Shares") in
accordance with Section 262 of the Delaware Law (or any successor provision)
shall not be converted into the right to receive the Merger Consideration unless
such holder fails to perfect or otherwise loses such holder's right to such
appraisal, if any. If, after the Effective Time, such holder fails to perfect or
loses any such right to appraisal, each such Share of such holder shall be
treated as a Share that had been converted as of the Effective Time into the
right to receive the Merger Consideration in accordance with Section 1.6(a). At
the Effective Time, any holder of Dissenting Shares shall cease to have any
rights with respect thereto, except the rights provided in Section 262 of the
Delaware Law (or any successor provision) and as provided in the immediately
preceding sentence. The Company shall give prompt notice to Parent of any
demands received by the Company for appraisal of Shares and Parent shall have
the right to participate in and direct all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands.
Section 1.7 Exchange of Certificates.
(a) Exchange Agent and Procedures. Prior to, the Effective
Time, a bank or trust company shall be designated by Parent (the "Paying Agent")
to act as agent in connection with the Merger to receive the funds to which
holders of Shares shall become entitled pursuant to Section 1.6(a). Promptly
after the Effective Time, the Surviving Corporation shall cause to be mailed to
each record holder, as of the Effective Time of a certificate or certificates
(the "Certificates") that, prior to the Effective Time, represented Shares, a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as Parent may reasonably specify) and
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration therefor. Upon the surrender of each such
Certificate formerly
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representing Shares, together with such letter of transmittal and any additional
documents as may reasonably be required by Parent or the Paying Agent, in each
case, duly completed and validly executed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in exchange
(A) a certificate representing the number of whole shares of Parent Common Stock
that such holder is entitled to receive under Section 1.6 and (B) a check in the
amount (after giving effect to any required tax withholding) of the cash portion
of the Merger Consideration plus any cash in lieu of fractional shares that such
holder has the right to receive under Section 1.6 and such Certificate shall
forthwith be canceled. Until so surrendered and exchanged, each such Certificate
(other than Shares held by Parent, Acquisition Sub or the Company, or any direct
or indirect subsidiary thereof) shall represent solely the right to receive the
Merger Consideration. No interest shall be paid or accrue on the Merger
Consideration. If the Merger Consideration (or any portion thereof) is to be
delivered to any person other than to the person in whose name the Certificate
formerly representing Shares surrendered in exchange therefor is registered, it
shall be a condition to such exchange that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
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
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable.
(b) Consideration. When and as needed, Parent or Acquisition
Sub shall deposit or cause to be deposited, in trust with the Paying Agent, the
Merger Consideration to which holders of Shares shall be entitled at the
Effective Time pursuant to Section 1.6(a) hereof.
(c) Investment of Merger Consideration. The cash portion of
the Merger Consideration shall be invested by the Paying Agent, as directed by
Parent, provided that such investments shall be limited to (i) direct
obligations of the United States of America, (ii) obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (iii) commercial paper rated of the highest
quality by Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, or
(iv) certificates of deposit issued by a commercial bank having at least
$1,000,000,000 in assets.
(d) Termination of Duties. Promptly following the date which
is six months after the Effective Time, Parent will cause the Paying Agent to
deliver to the Surviving Corporation all cash and documents in its possession
relating to the transactions described in this Agreement and the Paying Agent's
duties shall terminate thereafter. Thereafter, each holder of a Certificate
formerly representing a Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without any
interest thereon.
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(e) No Liability. Neither Parent, Acquisition Sub nor the
Company shall be liable to any holder of Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. Parent or the Paying Agent shall be
entitled to deduct and withhold from any amounts payable pursuant to this
Agreement to any holder of Common Stock such amounts as Parent or the Paying
Agent is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by Parent or the Paying Agent.
(g) Fractional Shares. No certificates or scrip of shares of
Parent Common Stock representing fractional shares of Parent Common Stock or
book-entry credit of the same shall be issued upon the surrender for exchange of
Certificates and such fractional share interests will not entitle the owner
thereof to vote or to have any rights of a stockholder of Parent or a holder of
shares of Parent Common Stock. Notwithstanding any other provision in this
Agreement, each holder of Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (determined after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (i) such fractional part of a share of Parent
Common Stock multiplied by (ii) the average of the closing prices for a share of
Parent Common Stock as reported on the NYSE Composite Transactions Tape during
the 10-Day Period. As promptly as practicable after the determination of the
amount of cash, if any, to be paid to the holders of fractional interests, the
Paying Agent shall so notify Parent, and Parent shall deposit such amount with
the Paying Agent and shall cause the Paying Agent to forward payments to such
holders of fractional interests subject to and in accordance with the terms
hereof.
Section 1.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Common Stock thereafter on the records of the
Company.
Section 1.9 No Further Ownership Rights in Common Stock. The Merger
Consideration delivered in exchange for the Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration of
transfers on the records of the Surviving Corporation of Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to
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the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article I.
Section 1.10 Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the Paying Agent
shall deliver in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration as may be required pursuant to Section 1.6; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen destroyed Certificate to deliver
a bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against Parent or the Paying Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
Section 1.11 Taking of Necessary Action; Further Action. Each of
Parent, Acquisition Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as possible. If at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Acquisition Sub, the officers and directors of
the Company and Acquisition Sub immediately prior to the Effective Time are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action.
Section 1.12 Stockholders' Meeting; Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, the Company and the Parent shall prepare and file with the Securities
and Exchange Commission (the "SEC") a single document that will constitute (i)
the proxy statement of the Company relating to the stockholders meeting to be
held to consider approval and adoption of this Agreement and the Merger (the
"Stockholders Meeting") and (ii) the registration statement on Form S-4 of
Parent (together with all amendments thereto, the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act") of
(A) the Parent Common Stock to be issued to the stockholders of the Company in
connection with the Merger and (B) the Parent Common Stock to be acquired in the
Merger by the Company's stockholders, such that the shares of such Parent Common
Stock may be freely offered and resold without compliance with Rules 144 and 145
of the Securities Act in transactions in which those Company's stockholders and
any broker/dealer from whom such shares are sold may be deemed to be
underwriters within the meaning of the Securities Act, including the two forms
of prospectus contained in the Registration Statement (such single document,
together with any amendments thereof or supplements thereto, the "Proxy
Statement"). Parent and the Company each shall
10
use its reasonable best efforts to cause the Registration Statement to become
effective as promptly as practicable, and, prior to the effective date of the
Registration Statement (the "Registration Statement Effective Date"), Parent
shall take all or any action required under any applicable Law in connection
with the issuance of Parent Common Stock pursuant to the Merger. Parent or the
Company, as the case may be, shall furnish all information concerning Parent or
the Company as the other party may reasonably request in connection with such
actions and the preparation of the Proxy Statement and the Registration
Statement. As promptly as practicable after the Registration Statement Effective
Date, the proxy statement and prospectus included in the Proxy Statement and all
documents related thereto (collectively, the "Proxy Materials") will be mailed
to the stockholders of the Company. Parent and the Company shall cause the Proxy
Statement to comply as to form and substance in all material respects with the
applicable requirements of (i) the Exchange Act, including Sections 14(a) and
14(d) thereof, (ii) the Securities Act, (iii) the rules and regulations of the
American Stock Exchange and the NYSE and (iv) Delaware Law.
(b) Subject to the duties of the Board under applicable Law as
determined and exercised in good faith by the Board in a manner consistent with
Section 4.3, the Proxy Statement shall include the unconditional recommendation
of the Board to the stockholders of the Company that they vote in favor of the
adoption of this Agreement and the Merger; provided, however, that the Board
may, at any time prior to the Effective Time, withdraw, modify or change any
such recommendation solely in accordance with the provisions of Section 4.3. In
addition, the Proxy Statement and the Proxy Materials will include a copy of the
written opinion of Bank of America Securities LLC ("BAS") referred to in Section
2.21.
(c) No amendment or supplement to the Proxy Statement will be
made without the approval of each of Parent and the Company, which approval
shall not be unreasonably withheld or delayed.
(d) If, at any time prior to the Effective Time any event or
circumstance relating to the Company or any of its subsidiaries, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Proxy Statement or
the Registration Statement so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the Company shall promptly inform Parent.
(e) If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any of its subsidiaries, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Proxy Statement or the Registration
Statement so that any of such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the
11
circumstances under which they were made, not misleading, Parent shall promptly
inform the Company.
(f) The Company shall call and hold the Stockholders Meeting
as promptly as practicable after the Registration Statement Effective Date for
the purpose of voting upon the adoption of this Agreement, and Parent and the
Company will cooperate with each other to cause the Stockholders Meeting to be
held as soon as practicable following the mailing of the Proxy Materials to the
stockholders of the Company. The Company shall use its reasonable best efforts
(through its agents or otherwise) to solicit from its stockholders proxies in
favor of the adoption of this Agreement, and shall take all other action
reasonably necessary or advisable to secure the Requisite Company Vote (as
hereinafter defined), subject to the duties of the Board under applicable law as
determined and exercised in good faith by the Board in a manner consistent with
Section 4.3.
Section 1.13 Material Adverse Effect. When used in connection with
the Company or any of its subsidiaries, or Parent or any of its subsidiaries, as
the case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is materially adverse to the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, or Parent and its subsidiaries, as the case may be, in each case
taken as a whole, other than any such changes, effects or circumstances (i)
expressly set forth in Section 1.13 of the Company Disclosure Schedule or the
Parent Disclosure Schedule (each as hereinafter defined), as the case may be, or
(ii) specifically set forth or described in the Company SEC Reports or the
Parent SEC Reports (each as hereinafter defined), as the case may be, other than
general risk factors, and provided that none of the following shall be deemed by
itself or by themselves, either alone or in combination, to constitute a
Material Adverse Effect for the Company: any changes, effects or circumstances
(x) caused by the public announcement of this Agreement or any of the
transactions contemplated hereby, (y) stockholders' lawsuits for breach of
fiduciary duties or (z) arising or resulting from general industry, economic or
stock market conditions that affect the Company (or the markets in which the
Company competes) in a manner not disproportionate to the manner in which such
conditions affect other companies in the industries or markets in which the
Company competes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub that on the date hereof, except as set forth in the section of the written
disclosure schedule delivered on or prior to the date hereof by the Company to
Parent (the "Company Disclosure Schedule") corresponding to each representation
and warranty made hereunder by the Company:
12
Section 2.1 Organization and Qualification; Subsidiaries. The
Company and each of its subsidiaries are corporations, limited partnerships or
limited liability companies duly organized, validly existing and in good
standing under the respective laws of the jurisdictions of their incorporation
or formation. The Company and each of its subsidiaries have the requisite power
and authority and are in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders (the
"Approvals") necessary to own, lease and operate the properties they purport to
own, lease or operate and to carry on their business as they are now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and Approvals would not, individually
or in the aggregate, have a Material Adverse Effect. The Company and each of its
subsidiaries are duly qualified or licensed as a foreign corporation, limited
partnership or limited liability company to do business, and are in good
standing in each jurisdiction where the character of its properties owned,
leased or operated by them or the nature of their activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. A true and complete list of all
of the Company's subsidiaries, together with the jurisdiction of incorporation
of each subsidiary and the percentage of each subsidiary's outstanding capital
stock owned by the Company or another subsidiary, is set forth in Section 2.1 of
the Company Disclosure Schedule. The Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any person.
Section 2.2 Certificate of Incorporation and By-Laws. The Company
has heretofore furnished to Parent a true, complete and correct copy of its
Certificate of Incorporation and By-Laws, each as amended to date, and has
furnished or made available to Parent the certificate of incorporation and
by-laws (or equivalent organizational documents) of each of its subsidiaries
(the "Subsidiary Documents"). Such Certificate of Incorporation, By-Laws and
Subsidiary Documents are in full force and effect. Neither the Company nor any
of its subsidiaries is in violation of any of the provisions of its Certificate
of Incorporation or By-Laws or Subsidiary Documents.
Section 2.3 Capitalization. The authorized capital stock of the
Company consists of (i) 35,000,000 shares of Common Stock and (ii) 5,000,000
shares of preferred stock, $0.01 par value per share, none of which is issued
and outstanding and none of which is held in treasury. As of March 16, 2000, (i)
8,005,037 shares of Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable, and none of which were held in
treasury, (ii) no shares of Common Stock were held by subsidiaries of the
Company and (iii) 1,091,834 shares of Common Stock were reserved for future
issuance pursuant to outstanding Stock Options granted under the Company Stock
Option Plans and agreements listed in Section 2.3 of the Company Disclosure
Schedule. No material
13
change in such capitalization has occurred between September 30, 1999 and the
date hereof. Section 2.3 of the Company Disclosure Schedule sets forth a true
and complete list of all outstanding options, warrants and other rights for the
purchase of, or conversion into or exchange for Common Stock, the name of each
holder thereof, the number of shares purchasable thereunder or upon conversion
or exchange thereof and the per share exercise or conversion price or exchange
rate of each option, warrant and other right. There are no options, warrants or
other similar rights, agreements, arrangements, commitments or understanding,
whether or not in writing, of any character relating to the issued or unissued
capital stock or other securities of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue (whether upon
conversion, exchange or otherwise) or sell any share of capital stock of, or
other equity interests in or other securities of, the Company or any of its
subsidiaries other than those listed in Section 2.3 of the Company Disclosure
Schedule. All securities subject to issuance as aforesaid upon issuance on the
term and conditions specified in the instruments pursuant to which they are
issuable shall be duly authorized, validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of the Company of any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Common
Stock or capital stock of any subsidiary or any other securities of the Company
or any of its subsidiaries or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity. All of the outstanding shares of capital stock of each of the
Company's subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances of any nature whatsoever (collectively, "Liens").
Section 2.4 Authority Relative to this Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, other than the adoption of this
Agreement by the holders a majority of the outstanding shares of Common Stock
entitled to vote in accordance with the Delaware Law and the Company's
Certificate of Incorporation and By-Laws (the "Requisite Company Vote"). The
Board has approved this Agreement and declared its advisability. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Acquisition Sub, as
applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
14
Section 2.5 No Conflict; Required Filings and Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes
a list of all contracts, agreements, arrangements or understanding, whether or
not in writing, to which the Company or any of its subsidiaries is a party or by
which any of them is bound as of the date hereof, (i) which are required to be
filed as "material contracts" with the SEC pursuant to the requirements of the
Exchange Act; (ii) under which the consequences of a default, nonrenewal or
termination could have a Material Adverse Effect; (iii) pursuant to which
payments are required or acceleration of benefits is required upon a "change of
control" of the Company or its subsidiaries; (iv) which require the consent or
waiver of a third party prior to the Company (or its subsidiary, if applicable)
entering into the transactions contemplated by this Agreement, except where the
failure to obtain such consent or waiver would not, individually or in the
aggregate, have a Material Adverse Effect; (v) whose terms prohibit or would
materially delay the consummation of the Merger and the other transactions
contemplated by this Agreement; (vi) which as of March 1, 2000, pertain to the
rental by the Company or its subsidiaries of accommodations and involve
consideration in excess of $10,000 over the term of the contract or have a term
that will expire more than one year from the date hereof; (vii) which as of
March 1, 2000, constitute contracts, agreements, arrangements or understanding
between the Company or its subsidiaries and any person for the rental by such
person of accommodations and represent individually in excess of $250,000 in
annual revenue to the Company or its subsidiaries, as applicable; or (viii) the
termination of which in accordance with their terms would require or result in
individual payments by the Company, Acquisition Sub, Parent or any of their
subsidiaries or affiliates in excess of $75,000 (the contracts, agreements,
arrangements or understandings referred to in clauses (i) through (viii) above
are referred to collectively herein as the "Material Contracts") and other than
in the ordinary course of business, consistent with past practice neither the
Company nor any of its subsidiaries is currently negotiating, in discussion with
any person with respect to, or a party to any non-binding agreement or
understanding with respect to, any Material Contract, subject to Section 4.3.
(b) Except as set forth in Section 2.5(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of the
Company or any Subsidiary Document, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
result in a modification of any right or benefit under, or impair the Company's
or any of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration, repayment or repurchase, or result in increased payments or
cancellation under, or result in the creation of a Lien on any of
15
the properties or assets of the Company or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except in the case of (ii) or (iii) only for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not
require any consent approval, authorization or permit of, or filing with or
notification to, any national, federal, state, provincial or local governmental
regulatory or administrative authority, agency, commission, court, tribunal,
arbitral body or self- regulated entity, domestic or foreign (collectively, the
"Governmental Authorities"), except for (i) applicable requirements, if any, of
the Securities Act, the Exchange Act, state securities laws ("Blue Sky Laws"),
the premerger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the filing and
recordation of appropriate merger or other documents as required by the Delaware
Law or (ii) as would not have a Material Adverse Effect or prohibit or
materially delay the consummation of the Merger and the other transactions
contemplated by this Agreement.
Section 2.6 Compliance, Permits.
(a) Except as set forth in Section 2.6 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties is bound or affected or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
(b) The Company and its subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Authorities that are necessary to the operation of
the business of the Company and its subsidiaries taken as a whole as it is now
being conducted (collectively, the "Company Permits"), except when the failure
to have such Company permits would not, individually or in the aggregate, have a
Material Adverse Effect. The Company and its subsidiaries are in compliance with
the terms of the Company Permits, and neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of any applicable
laws or regulations except,
16
in each case, where the failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 2.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC including, without limitation, (i) its Annual
Reports on Form 10-K for the fiscal years ended December 31, 1997 and 1998,
respectively, (ii) its Quarterly Reports on Form 10-Q for the periods ended
March 31, 1999, June 30, 1999 and September 30, 1999, (iii) all proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
held since January 1, 1999, (iv) all other reports or registration statements
filed by the Company with the SEC since January 1, 1999 and (v) all amendments
and supplements to all such reports and registration statements filed by the
Company with the SEC since January 1, 1999 (collectively, the "Company SEC
Reports"). The Company SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) 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 the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC or any national securities
exchange or quotation service or comparable Governmental Authority.
(b) Each of the consolidated financial statements (including,
in each case, any related notes and schedules thereto) contained in the Company
SEC Reports was prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto), and each fairly presents in all
material respects the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
Section 2.8 Absence of Certain Changes or Events. Except as set
forth in the Company SEC Reports and Section 2.8 of the Company Disclosure
Schedule, since December 31, 1998, the Company and its subsidiaries have
conducted their business in the ordinary course and there has not occurred: (i)
any Material Adverse Effect; (ii) any amendments or changes in the Certificate
of Incorporation or By-laws of the Company; (iii) any damage to, destruction or
loss of any asset of the Company or its subsidiaries (whether or not covered by
insurance) that would have a Material Adverse Effect; (iv) any material change
by the Company or its subsidiaries in their accounting methods, principles or
practices; (v) any material revaluation by
17
the Company or its subsidiaries of any of their assets, including, without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any sale of a
material amount of property of the Company or any of its subsidiaries, except in
the ordinary course of business; (vii) any declaration, setting aside or payment
of any dividend or distribution in respect of Shares or any redemption, purchase
or other acquisition of any of the Company's securities (except as contemplated
by this Agreement); (viii) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Company or any subsidiary, in each case except in the ordinary course of
business consistent with past practice or except as required by applicable law;
(ix) any creation or assumption by the Company or any of its subsidiaries of any
Lien on any material asset of the Company or any of its subsidiaries, other than
in the ordinary course of business, consistent with past practice; (x) any
making of any loan, advance or capital contribution to or investment in any
person by the Company or any of its subsidiaries, other than advances to
employees to cover travel and other ordinary business-related expenses in the
ordinary course of business consistent with past practice; (xi) any incurrence
or assumption by the Company or any of its subsidiaries of any indebtedness for
borrowed money or any guarantee, endorsement or other incurrence or assumption
of a material liability (whether directly, contingently or otherwise) by the
Company or any of its subsidiaries for the obligations of any other person
(other than any wholly owned subsidiary of the Company), in each case other than
in the ordinary course of business consistent with past practice; or (xii) any
modification, amendment, assignment or termination of or relinquishment by the
Company or any of its subsidiaries of any rights under any Material Contract
that does or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
Section 2.9 No Undisclosed Liabilities. Neither the Company nor any
of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) except liabilities (a) in the aggregate adequately provided for in
the Company's unaudited balance sheet (including any related notes thereto) as
of September 30, 1999 (the "1999 Company Balance Sheet"), (b) incurred in the
ordinary course of business and not required under U.S. generally accepted
accounting principles to be reflected on the 1999 Company Balance Sheet, (c)
incurred since September 30, 1999 in the ordinary course of business consistent
with past practice, (d) incurred in connection with this Agreement, (e)
disclosed in the Company SEC Reports or (f) which would not have a Material
Adverse Effect.
Section 2.10 Absence of Litigation. Except as set forth in Section
2.10 of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
18
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any Governmental
Authority or body, domestic or foreign, nor are there, to the Company's
knowledge, any investigations or reviews by any Governmental Authority pending
or threatened against, relating to or affecting, the Company or any of its
subsidiaries that, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree of
any court or Governmental Authority which, individually or in the aggregate, has
resulted or could reasonably be expected to result in a Material Adverse Effect.
Section 2.11 Employee Benefit Plans, Employment Agreements.
(a) Section 2.11(a) of the Company Disclosure Schedule lists
all employee pension plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended; ("ERISA")), all material
employee welfare plans (as defined in Section 3(1) of ERISA) and all other
material bonus, stock option, stock purchase, incentive or deferred
compensation, supplemental retirement, severance and other fringe or employee
benefit plans, programs, or arrangements, and any material current or former
employment, executive compensation, consulting or severance agreements, written
or otherwise, for the benefit of, or relating to, any employee of or consultant
to, and which is maintained or contributed to, the Company, any trade or
business (whether or not incorporated) which is a member of a controlled group
including the Company or which is under common control with the Company (an
"ERISA Affiliate") within the meaning of Section 414 of the Code, or any
subsidiary of the Company, as well as each plan with respect to which the
Company or an ERISA Affiliate could reasonably be expected to incur liability
under Section 4069 (if such plan has been or were terminated) or Section 4212(c)
of ERISA (collectively the "Company Employee Plans"). There have been made
available to Parent copies of (i) each such written Company Employee Plan (other
than those referred to in Section 4(b) of ERISA), (ii) the most recent annual
report on Form 5500, with accompanying schedules and attachments, filed with
respect to each Company Employee Plan required to make such a filing, and (ii)
the most recent actuarial valuation for each Company Employee Plan subject to
Title IV of ERISA.
(b) Except as set forth in Section 2.11(a) of the Company
Disclosure Schedule, (i) none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than
post- employment benefits provided in accordance with the health care
continuation provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, or comparable state law), and none of the Company Employee
Plans is a "multiemployer plan" as such term is defined in Section 3(37) of
ERISA; (ii) there has been no "prohibited transaction," as such term is defined
in Section 406 of ERISA and Section 4975 of the Code, with respect to any
Company Employee Plan,
19
which could result in any material liability of the Company or any of its
subsidiaries; (iii) all Company Employee Plans are in compliance in all material
respects with the requirements prescribed by any and all statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, the Pension Benefit
Guaranty Corporation (the "PBGC"), the Internal Revenue Service (the "IRS") or
Secretary of the Treasury), and the Company and each of its subsidiaries have
performed all material obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any default or violation by any other party to any of the Company
Employee Plans; (iv) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code is the subject of a favorable determination letter from the
IRS, and nothing has occurred which may reasonably be expected to impair such
determination; (v) all contributions required to be made to any Company Employee
Plan pursuant to Section 412 of the Code, or the terms of the Company Employee
Plan or any collective bargaining agreement, have been made on or before their
due dates; (vi) with respect to each Company Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which the 30 day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred; (vii) neither the Company nor any ERISA Affiliate has
incurred, nor reasonably expects to incur, any liability under Title IV of ERISA
(other than liability for premium payments to the PBGC arising in the ordinary
course); (viii) there is no pending or, to the knowledge of the Company,
threatened litigation, administrative action or proceeding relating to any
Company Employee Plan (other than claims for benefits in the ordinary course of
business); (ix) there has been no announcement or commitment by the Company or
any of its subsidiaries to create an additional Company Employee Plan or to
amend a Company Employee Plan except for amendments required by applicable law
or changes in the ordinary course, in each case which do not materially increase
the cost of such Company Employee Plan; (x) the Company has no liability,
whether absolute or contingent, direct or indirect, including any obligations
under any Company Employee Plan, with respect to any misclassification of a
person as an independent contractor rather than as an employee, or with respect
to any employee leased from another employee; and (xi) with respect to the
Company and its subsidiaries, except as specifically identified in the Company
Disclosure Schedule, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (a) increase the
amount of, accelerate the time of payment of, or the vesting of compensation
payable to any employee or (b) result in any liability to any present or former
employee, including but not limited to, as a result of the Worker Adjustment
Retraining and Notification Act. Neither the Company nor any of its subsidiaries
maintains or contributes to any foreign Employee Plan.
20
(c) Section 2.11(c) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds (i) any Stock
Option as of the date hereof, together with the number of shares of Common Stock
subject to such Stock Option, the option price of such Stock Option (to the
extent determined as of the date hereof) and the expiration date of such option;
and (ii) any other right granted by the Company to acquire, directly or
indirectly, Common Stock, together with the number of shares of Common Stock
subject to such right.
(d) Section 2.11(d) of the Company Disclosure Schedule sets
forth a true and complete list of (i) all employment agreements with employees
and officers of the Company or any of its subsidiaries; (ii) all agreements with
consultants who are individuals obligating the Company or any of its
subsidiaries to make annual cash payments in an amount exceeding $100,000; (iii)
all employees of, or consultants to, the Company or any of its subsidiaries who
have executed a noncompetition agreement with the Company or any of its
subsidiaries; (iv) all severance agreements, programs and policies of the
Company or any of its subsidiaries with or relating to its employees, excluding
programs and policies required to be maintained by law; and (v) all plans,
programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its employees which contain change in control
provisions.
Section 2.12 Employment and Labor Matters.
(a) Except as set forth in Section 2.10 of the Company
Disclosure Schedule, there are no controversies pending or, to the knowledge of
the Company, threatened, between the Company or any of its subsidiaries and any
of their respective employees, which controversies have had or could,
individually or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its subsidiaries, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees; and the Company
has no knowledge of any strikes or lockouts, or any material slowdowns, work
stoppages, or threats thereof, by or with respect to any employees of the
Company or any of its subsidiaries.
(b) Neither the Company nor any of its subsidiaries has
violated, in a manner that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, any provision of federal or state
law or any rule, regulation, order, ruling, decree, judgment or arbitration
award of any Governmental Authority regarding the terms and conditions of
employment of employees, former employees, or prospective employees or other
labor related matters, including without limitation, laws, rules, regulations,
orders, rulings, decrees, judgments and awards relating to discrimination, fair
labor standards and
21
occupational health and safety, wrongful discharge or violation of the personal
rights of employees, former employees or prospective employees.
Section 2.13 Proxy Statement and Registration Statement. None of the
information provided by the Company and/or by its auditors, legal counsel,
financial advisors or other consultants or advisors specifically for use in the
Registration Statement will, on the date it is declared effective, on the date
first published, sent or given to the Company's stockholders and on the date of
the Stockholders Meeting, as the case may be, 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. The Proxy Materials
distributed to the Company's stockholders in connection with the Merger,
including any amendments or supplements thereto, will not, at the time mailed to
the Company's stockholders, at the time of the Stockholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Parent, Acquisition Sub
and/or by their auditors, legal counsel, financial advisors or other consultants
or advisors specifically for use in the Proxy Materials. The Proxy Materials
will comply in all material respects with the provisions of the Exchange Act and
any other applicable law.
Section 2.14 Restrictions on Business Activities.
(a) Except for this Agreement, to the Company's knowledge,
there is no material agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or impairing any material business
practice of the Company or any of its subsidiaries, any acquisition of property
by the Company or any of its subsidiaries or the conduct of business by the
Company or any of its subsidiaries as currently conducted or as proposed to be
conducted by the Company, in any location in the world, except for any
prohibition or impairment as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) To the Company's knowledge, none of the Company's
officers, directors or key employees is a party to any agreement which, by
virtue of such person's relationship with the Company, restricts in any material
respect the Company or any of its subsidiaries of either of them from, directly
or indirectly, engaging in any of the businesses described above.
Section 2.15 Title to Property. The Company and each of its
subsidiaries have good and defensible title to all of their properties and
assets, free and clear of all Liens, except Liens for taxes not yet due and
payable and such Liens
22
or other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would not, individually or in the aggregate, have a Material Adverse
Effect. Section 2.15(a) of the Company Disclosure Schedule is a schedule of all
leases of real property as of March 1, 2000 ("Real Property Leases") pursuant to
which the Company or any of its subsidiaries lease from others which schedule
sets forth (A) the date of each lease and the premises covered thereby, (B) the
term thereof, and (C) the rent payable thereunder. The information set forth in
such Section 2.15(a) is true, correct and complete, except to the extent an
inaccuracy therein would not, individually or in the aggregate, have a Material
Adverse Effect. Section 2.15(b) of the Company Disclosure Schedule lists all
real property owned by the Company and its subsidiaries. The Real Property
Leases and all leases of personal property by the Company or its subsidiaries
from others are in good standing, valid and effective in accordance with their
respective terms and there is not, to the knowledge of the Company, under any of
such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default), except where the
lack of such good standing, validity and effectiveness or the existence of such
default would not, individually or in the aggregate, have a Material Adverse
Effect. No default of the Company's landlord under the Agreement for Underlease
of Kings Wardrobe (the "Kings Wardrobe Lease"), as the lessee under the Kings
Wardrobe superior lease, could reasonably be expected to adversely affect the
Company's occupying of the premises covered by the Kings Wardrobe Lease. To the
Company's knowledge, there are no mortgages or other Liens affecting such
premises, the foreclosure of which would have a Material Adverse Effect or
adversely affect the Company's occupying the premises. The work to be performed
by the landlord under the Kings Wardrobe Lease has been substantially completed
and the Company is occupying all portions of the premises covered by such lease.
Section 2.16 Taxes.
(a) For purposes of this Agreement, "Audit" shall mean any
audit, assessment or other examination relating to Taxes by any tax authority or
any judicial or administrative proceedings related to taxes; "Tax" or "Taxes"
shall mean taxes, fees, levies, duties, tariffs, imposts, and governmental
impositions or charges of any kind in the nature of (or similar to) taxes,
payable to any federal, state, local or foreign taxing authority, including
(without limitation) (i) income, franchise, profits, gross receipts, ad valorem,
net worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns, reports, and
information statements with respect to Taxes required to be filed with the IRS
or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns.
23
(b) Except as set forth in Section 2.16(b) of the Company
Disclosure Schedule, the Company and its subsidiaries (for such periods as each
subsidiary was owned, directly or indirectly, by the Company) have filed all
income Tax Returns and all other material Tax Returns required to be filed by
them, and the Company and its subsidiaries have paid all Taxes due in connection
with or with respect to the periods or transactions covered by such Tax Returns
and have paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings (to the extent that any such proceedings
are required) and except as may be determined to be owed upon completion of any
Tax Return not yet filed based upon an extension of time to file. There are no
other Taxes that would be due if asserted by a taxing authority, except with
respect to which the Company is maintaining reserves to the extent currently
required and except to the extent the failure to do so would not, individually
or in the aggregate, have a Material Adverse Effect. Except as does not involve
or would not result in liability to the Company or any of its subsidiaries that
would have a Material Adverse Effect:
(i) there are no Tax liens on any assets of the
Company or any subsidiary thereof;
(ii) neither the Company nor any of its subsidiaries
has granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax, except as described on
Section 2.16 of the Company Disclosure Schedule;
(iii) as of the date hereof, no Federal, state, local or
foreign Audits are pending (A) with regard to any Taxes or Tax Returns of the
Company or its subsidiaries and (B) for which the Company or any of its
subsidiaries has received written notice. To the best knowledge of the Company
and its subsidiaries no such Audit is threatened;
(iv) as of the date hereof no material adjustments have
been asserted as a result of examinations of the United States Federal income
Tax Returns of the Company and its subsidiaries have been examined by the
applicable tax authorities for all periods through and including December 31,
1998, which have not been (x) resolved and fully paid or (y) reserved on the
1999 Company Balance Sheet in accordance with U.S. generally accepted accounting
principles;
(v) neither the Company nor any of its subsidiaries is
a party to any agreement providing for the allocation, indemnification or
sharing of Taxes with any person other than the Company and its subsidiaries,
and the Company has provided Parent with copies of any such agreement that the
Company or any of its subsidiaries has entered into with any other subsidiary of
the Company;
(vi) neither the Company nor any of its subsidiaries
has been a member of any "affiliated group" (as defined in section 1504(a) of
the
24
Code) other than the affiliated group of which the Company is the "parent" and,
except with respect to any group of which only the Company and/or its
subsidiaries are members, is not subject to Treas. Reg. 1.1502-6 (or any similar
provision under foreign, state or local law) for any period;
(vii) neither the Company nor any of its subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of this Agreement or (ii) in a
distribution which otherwise constitutes part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Merger;
(viii)neither the Company nor any of its subsidiaries
has filed a consent under Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of its subsidiaries has been required
to include in income any adjustment pursuant to Section 481 of the Code (or any
similar provision of state, local or foreign tax law) by reason of a voluntary
change in accounting method initiated by the Company or any of its subsidiaries,
and the IRS has not initiated or proposed any such adjustment or change in
accounting method;
(ix) no closing agreement that could affect the Taxes
of the Company or any of its subsidiaries for periods ending after the Effective
Time pursuant to Section 7121 of the Code (or any predecessor provision) or any
similar provision of any state, local or foreign law has been entered into by or
with respect to the Company or any of its subsidiaries;
(x) there is no contract, agreement, plan or
arrangement covering any person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by the Company or
any of its subsidiaries by reason of Section 162(m) or Section 280G of the Code
and neither the Company nor any of its subsidiaries has made any such payments;
and
(xi) neither the Company nor any of its subsidiaries
is, or has been, a United States real property holding corporation (as defined
in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. To the knowledge of the Company, neither
the Company nor any of its subsidiaries owns any property of a character, the
indirect transfer of which, pursuant to this Agreement, would give rise to any
material documentary, stamp or other transfer tax.
Section 2.17 Environmental Matters. Except in all cases as, in the
aggregate, have not had and would not, individually or in the aggregate, have a
Material Adverse Effect, the Company and each of its subsidiaries (i) to the
Company's knowledge have obtained all applicable permits, licenses and other
25
authorizations (collectively, the "Environmental Permits") which are required to
be obtained under all applicable federal, state or local laws or any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or hazardous or
toxic materials or wastes ("Environmental Laws") by the Company or its
subsidiaries (or their respective agents) which Environmental Permits are in
full force and effect; (ii) to the Company's knowledge are in compliance with
all terms and conditions of such Environmental Permits; (iii) are in compliance
with all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iv) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or
Environmental Permits or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with Environmental Permits or which would give rise to any
common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against the Company or any of its subsidiaries based
on or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous toxic material
or waste; and (v) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
Section 2.18 Intellectual Property.
(a) Section 2.18(a) of the Company Disclosure Schedule sets
forth a true and complete list of all Intellectual Property (as defined below)
owned or used by the Company or its subsidiaries. The Company and/or each of its
subsidiaries owns free and clear of all Liens, or is licensed or otherwise
possesses legally enforceable right to use all patents, trademarks, trade names,
service marks, and any applications therefor, and computer software programs or
applications (the "Intellectual Property") that are used in the business of the
Company and its subsidiaries as currently conducted, and such rights constitute
all the rights necessary for the Company and its subsidiaries to conduct their
business as currently conducted, except, in each case, as would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, the Company is not, nor will it be as a result
of the execution and delivery of this Agreement or the performance of its
obligations
26
hereunder, in violation of any licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company is authorized to
use any third-party Intellectual Property ("Third Party Intellectual Property
Rights"). After the completion of the transactions contemplated by this
Agreement, the Company will continue to own all right, title and interest in,
and to have a license to use all Intellectual Property material to its or any of
its subsidiaries' business and operations on terms and conditions identical in
all material respects to those enjoyed by the Company immediately prior to such
transactions. No claims with respect to the Intellectual Property owned by the
Company or any of its subsidiaries (the "Company Intellectual Property Rights"),
any trade secret material to the Company, or Third Party Intellectual Property
Rights to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property Rights by or through the Company or any
of its subsidiaries, are currently pending or, to the knowledge of the Company,
are threatened by any person, except claims that would not have a Material
Adverse Effect. The Company does not know of any valid grounds for any bona fide
claims (i) to the effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or license by
the Company or any of its subsidiaries, infringes on any Third Party
Intellectual Property Rights; (ii) against the use by the Company or any of its
subsidiaries of any Intellectual Property used in the business of the Company or
any of its subsidiaries as currently conducted or as proposed to be conducted;
(iii) challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the Company or
its subsidiaries; or (iv) challenging the license or legally enforceable right
to use of the Third Party Property Rights by the Company or any of its
subsidiaries, except claims that would not have a Material Adverse Effect.
(c) To the Company's knowledge, all Company Intellectual
Property Rights are valid. To the Company's knowledge, there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including any employee or former
employee of the Company or any of its subsidiaries, except any use, infringement
or misappropriation that would not have a Material Adverse Effect.
(d) All software, hardware, databases, and embedded control
systems (collectively, the "Systems") used by the Company and its subsidiaries
are Year 2000 Compliant (as defined below), except for failures to be Year 2000
Compliant that, individually or in the aggregate, have not resulted and could
not reasonably be expected to result in a Material Adverse Effect. For purposes
of this Agreement, "Year 2000 Compliant" means that the Systems (i) accurately
process date and time data (including calculating, comparing, and sequencing)
from, into, and between the twentieth and twenty-first centuries, the years 1999
and 2000, and leap year calculations and (ii) operate accurately with other
software and hardware that use standard date format (4 digits) for
representation of the year.
27
Section 2.19 Interested Party Transactions. Except as set forth in
the Company SEC Reports and Section 2.19 of the Company Disclosure Schedule,
since the date of the Company's proxy statement dated April 14, 1999, no event
has occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
Section 2.20 Insurance. All material fire and casualty, general
liability, business interruption, product liability, professional liability and
sprinkler and water damage insurance policies maintained by the Company or any
of its subsidiaries are with reputable insurance carriers, provide, to the
Company's knowledge, full and adequate coverage for all normal risks incident to
the business of the Company and its subsidiaries and their respective properties
and assets and are in character and amount at least equivalent to that carried
by entities engaged in similar businesses and subject to the same or similar
perils or hazards, except as would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 2.21 Opinion of Financial Adviser. The Board has orally
received the opinion of the Company's financial advisor, BAS, to the effect
that, as of the date of this Agreement, the Merger Consideration is fair to the
Company's stockholders from a financial point of view and the Company will,
promptly after receipt of such opinion in writing, deliver a signed copy of that
opinion to Parent.
Section 2.22 Brokers. No broker, finder or investment banker (other
than BAS) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and BAS pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder.
Section 2.23 Section 203 of Delaware Law Not Applicable. The Board
has taken all actions so that the restrictions contained in Section 203 of the
Delaware Law applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of this Agreement
or the Stockholders Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 2.24 Investment Company Act. Each of the Company and its
subsidiaries either (i) is not an "investment company," or a company
"controlled" by, or an "affiliated company" with respect to, an "investment
company," within the meanings of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or (ii) satisfies all conditions for an
exemption from the Investment Company Act, and, accordingly, neither the Company
nor any of its subsidiaries is required to be registered under the Investment
Company Act.
28
Section 2.25 Vote Required. The Requisite Company Vote is the only
vote of the holders of any class or series of the Company's capital stock
necessary (under the charter documents of the Company, the Delaware Law, other
applicable law or otherwise) to approve this Agreement, the Merger or the other
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Parent and Acquisition Sub hereby, jointly and severally, represent
and warrant to the Company that, except as set forth in the section of the
written disclosure schedule delivered on or prior to the date hereof, by Parent
to the Company (the "Parent Disclosure Schedule") corresponding to each
representation and warranty made hereunder by Parent and Acquisition Sub:
Section 3.1 Organization and Qualification; Subsidiaries. Each of
Parent and Acquisition Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation. Each
of Parent and Acquisition Sub has the requisite corporate power and authority
and is in possession of all Approvals necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent or
Acquisition Sub. Each of Parent and Acquisition Sub is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, individually or in the aggregate,
have a Material Adverse Effect. A true and complete list of all of Parent's
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and the percentage of each subsidiary's outstanding capital stock owned by
Parent or another subsidiary, is set forth in Section 3.1 of Parent Disclosure
Schedule.
Section 3.2 Certificate of Incorporation and By-Laws. Each of Parent
and Acquisition Sub have heretofore furnished to the Company a true, complete
and correct copy of its Certificate of Incorporation and By-Laws, each as
amended to date. Such Certificate of Incorporation and By-Laws are in full force
and effect. Neither the Parent nor Acquisition Sub is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws.
29
Section 3.3 Capitalization of Parent. The authorized capital stock
of Parent consists of (i) 100,000,000 shares of common stock, par value $0.01
per share, and (ii) 10,000,000 shares of preferred stock, par value $0.01 per
share. As of March 16, 2000, (i) 31,723,650 shares of common stock were issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
and none of which were held in treasury, (ii) no shares of common stock were
held by subsidiaries of Parent, (iii) 3,730,193 shares of common stock were
reserved for future issuance pursuant to outstanding stock options (the "Parent
Stock Options"), and (iv) 3,730,193 shares of common stock were reserved for
issuance upon redemption of certain outstanding units of limited partnership
interest ("OP Units") in MeriStar H&R Operating Company, L.P. No material change
in such capitalization has occurred between December 31, and the date hereof.
Section 3.3 of Parent Disclosure Schedule sets forth a true and complete list of
all outstanding options, warrants and other rights for the purchase of, or
conversion into or exchange for common stock, the name of each holder thereof,
the number of shares purchasable thereunder or upon conversion or exchange
thereof and the per share exercise or conversion price or exchange rate of each
option, warrant and other right. There are no options, warrants or other similar
rights, agreements, arrangements, commitments or understanding, whether or not
in writing, of any character relating to the issued or unissued capital stock or
other securities of Parent or any of its subsidiaries or obligating Parent or
any of its subsidiaries to issue (whether upon conversion, exchange or
otherwise) or sell any share of capital stock of, or other equity interests in
or other securities of, Parent or any of its subsidiaries other than the Parent
Stock Options or OP Units. All securities subject to issuance as aforesaid upon
issuance on the term and conditions specified in the instruments pursuant to
which they are issuable shall be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in Section 3.3 of Parent Disclosure Schedule,
there are no obligations, contingent or otherwise, of Parent of any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of common
stock or capital stock of any subsidiary or any other securities of Parent or
any of its subsidiaries or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity. Except as disclosed in Schedule 3.3 of Parent Disclosure Schedule,
all of the outstanding shares of capital stock of each of Parent's subsidiaries
are duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by Parent or another subsidiary of Parent free and clear of all
Liens. At the Effective Time, all shares of Parent Common Stock to be issued
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and nonassessable.
Section 3.4 Authority Relative to this Agreement. Each of Parent and
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Acquisition Sub and the consummation by
each of Parent and Acquisition Sub of the transactions contemplated hereby have
been duly and validly
30
authorized by all necessary corporate action on the part of Parent and
Acquisition Sub, and no other corporate proceedings on the part of Parent or
Acquisition Sub or the stockholders of Parent are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of Parent and
Acquisition Sub and, assuming the due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation of Parent and
Acquisition Sub enforceable against each of them in accordance with its terms.
Section 3.5 No Conflict, Required Filings and Consents.
(a) Section 3.5(a) of Parent Disclosure Schedule includes a
list of all contracts, agreements, arrangements or understanding, whether or not
in writing, to which Parent or any of its subsidiaries is a party or by which
any of them is bound as of the date hereof, (i) which are required to be filed
as "material contracts" with the SEC pursuant to the requirements of the
Exchange Act; (ii) under which the consequences of a default, nonrenewal or
termination could have a Material Adverse Effect; (iii) which require the
consent or waiver of a third party prior to Parent (or its subsidiary, if
applicable) entering into the transactions contemplated by this Agreement,
except where the failure to obtain such consent or waiver would not,
individually or in the aggregate, have a Material Adverse Effect; or (iv) whose
terms prohibit or would materially delay the consummation of the Merger and the
other transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Parent and
Acquisition Sub do not, and the performance of this Agreement by each of Parent
and Acquisition Sub will not, (i) conflict with or violate the certificate of
incorporation (or equivalent organizational documents) or by-laws of Parent or
Acquisition Sub, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
its or their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or modification in a manner materially
adverse to Parent or its subsidiaries of any right or benefit under, or impair
Parent's or any of its subsidiaries' rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration, repayment or repurchase, increased payments or
cancellation under, or result in the creation of a Lien on any of the properties
or assets of Parent or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its subsidiaries or its
or any of their respective properties are bound or affected, except in the case
of (ii) or (iii) only, for any such conflicts, violations, breaches, defaults or
other occurrences that would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or its subsidiaries.
31
(c) The execution and delivery of this Agreement by each of
Parent and Acquisition Sub does not, and the performance of this Agreement by
each of Parent and Acquisition Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except for (i) applicable requirements, if any, of the Securities
Act, the Exchange Act, the Blue Sky Laws, the pre-merger notification
requirements of the HSR Act, and the filing and recordation of appropriate
merger or other documents as required by the Delaware Law or (ii) as would not
have a Material Adverse Effect or prohibit or materially delay the consummation
of the Merger and the other transactions contemplated by this Agreement.
Section 3.6 Compliance, Permits.
(a) Neither Parent nor any of its subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
its or any of their respective properties is bound or affected or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties is bound or affected, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not have a Material Adverse Effect.
(b) Parent and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from Governmental Authorities that are necessary to the operation of the
business of Parent and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Parent Permits"), except when the failure to have
such Parent Permits would not, individually or in the aggregate, have a Material
Adverse Effect. Parent and its subsidiaries are in compliance with the terms of
Parent Permits, and neither Parent nor any of its subsidiaries is in conflict
with, or in default or violation of any applicable laws or regulations except,
in each case, where the failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.7 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed with the SEC including, without limitation, (i) its Annual Reports
on Form 10-K for the fiscal years ended December 31, 1998 and 1999,
respectively, (ii) all proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since January 1, 1999, (iv) all
other reports or registration statements filed by Parent with the SEC since
January 1, 1999 and (v) all amendments and supplements to all such reports and
registration statements filed by Parent with the SEC since January 1, 1999
(collectively, the "Parent SEC Reports"). Parent SEC Reports (i) were prepared
in all material respects in accordance with the requirements
32
of the Securities Act or the Exchange Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) 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 the
light of the circumstances under which they were made, not misleading. None of
Parent's subsidiaries is required to file any forms, reports or other documents
with the SEC or any national securities exchange or quotation service or
comparable Governmental Authority.
(b) Each of the consolidated financial statements (including,
in each case, any related notes and schedules thereto) contained in Parent SEC
Reports was prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto), and each fairly presents in all
material respects the consolidated financial position of Parent and its
subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
Section 3.8 Absence of Certain Changes or Events. Except as set
forth in Parent SEC Reports or as contemplated by this Agreement, since December
31, 1999, Parent and its subsidiaries have conducted their business in the
ordinary course and there has not occurred: (a) any Material Adverse Effect; or
(b) except as disclosed in Section 3.3 of Parent Disclosure Schedule, any
declaration, setting aside or payment of any dividend or distribution in respect
of shares or any redemption, purchase or other acquisition of any of Parent's
securities (except as contemplated by this Agreement).
Section 3.9 No Undisclosed Liabilities. Neither Parent nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) except liabilities (a) in the aggregate adequately provided for in
Parent's unaudited balance sheet (including any related notes thereto) as of
December 31, 1999 (the "1999 Parent Balance Sheet"), (b) incurred in the
ordinary course of business and not required under U.S. generally accepted
accounting principles to be reflected on the 1999 Company Balance Sheet, (c)
incurred since December 31, 1999 in the ordinary course of business consistent
with past practice, (d) incurred in connection with this Agreement, (e)
disclosed in Parent SEC Reports or (f) which would not have a Material Adverse
Effect, in each case, other than liabilities under the Senior Secured Credit
Agreement, dated as of February 29, 2000, between MeriStar H&R Operating
Company, L.P., as borrower and Societe Generale, Southwest Agency, as
administrative agent thereunder.
Section 3.10 Absence of Litigation. Except as set forth in Section
3.10 of Parent Disclosure Schedule, there are no claims, actions, suits,
33
proceedings or investigations pending or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any Governmental Authority or body, domestic
or foreign, nor are there, to Parent's knowledge, any investigations or reviews
by any Governmental Authority pending or threatened against, relating to or
affecting, Parent or any of its subsidiaries that, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect. Neither
Parent nor any of its subsidiaries is subject to any outstanding order, writ,
injunction or decree of any court or Governmental Authority which, individually
or in the aggregate, has resulted or could reasonably be expected to result in a
Material Adverse Effect.
Section 3.11 Employment and Labor Matters. There are no
controversies pending or, to the knowledge of Parent, threatened, between Parent
or any of its subsidiaries and any of their respective employees, which
controversies have had or could, individually or in the aggregate, have a
Material Adverse Effect. Parent has no knowledge of any strikes or lockouts, or
any material slowdowns, work stoppages, or threats thereof, by or with respect
to any employees of Parent or any of its subsidiaries.
Section 3.12 Proxy Statement and Registration Statement. None of the
information provided by Parent or Acquisition Sub and/or by their auditors,
legal counsel, financial advisors or other consultants or advisors specifically
for use in the Proxy Statement will, on the date the Proxy Statement is first
published, sent or given to the Company's stockholders, on the date of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement, including any amendments or
supplements thereto, will not, at the time declared effective, at the time
mailed to the Company's stockholders, at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, neither Parent nor Acquisition Sub
makes any representation or warranty with respect to any information provided by
the Company and/or by its auditors, legal counsel, financial advisors, or other
consultants or advisors specifically for use in the Registration Statement. The
Registration Statement will comply in all material respects with the provisions
of the Securities Act and any other applicable law.
Section 3.13 Taxes. Parent and its subsidiaries (for such periods as
each subsidiary was owned, directly or indirectly, by Parent) have filed all
income Tax Returns and all other material Tax Returns required to be filed by
them, and Parent and its subsidiaries have paid and discharged all Taxes due in
connection with or with respect to the periods or transactions covered by such
Tax Returns and have paid all other Taxes as are due, except such as are being
contested in good faith by
34
appropriate proceedings (to the extent that any such proceedings are required)
and except as may be determined to be owed upon completion of any Tax Return not
yet filed based upon an extension of time to file, and there are no other Taxes
that would be due if asserted by a taxing authority, except with respect to
which Parent is maintaining reserves to the extent currently required and except
to the extent the failure to do so would not, individually or in the aggregate,
have a Material Adverse Effect. Except as does not involve or would not result
in liability to Parent or any of its subsidiaries that would have a Material
Adverse Effect:
(a) there are no Tax liens on any assets of Parent or any
subsidiary thereof; and
(b) proper and accurate amounts have been (i) withheld by
Parent and its subsidiaries from their employees in compliance with the Tax
withholding provisions of applicable Federal, state and local laws, and (ii)
paid over to appropriate taxing authorities.
Section 3.14 Environmental Matters. Except in all cases as, in the
aggregate, have not had and would not, individually or in the aggregate, have a
Material Adverse Effect, Parent and each of its subsidiaries (i) to Parent's
knowledge have obtained all applicable Environmental Permits which are required
to be obtained under all applicable Environmental Laws by Parent or its
subsidiaries (or their respective agents) which Environmental Permits are in
full force and effect; (ii) to Parent's knowledge are in compliance with all
terms and conditions of such Environmental Permits; (iii) are in compliance with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iv) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or
Environmental Permits or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with Environmental Permits or which would give rise to any
common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against Parent or any of its subsidiaries based on
or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous toxic material
or waste; and (v) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by Parent or its subsidiaries (or any of their respective agents)
thereunder.
Section 3.15 Interested Party Transactions. Except as set forth in
Section 3.15 of Parent Disclosure Schedule and the Parent SEC Reports, no event
has occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
35
Section 3.16 Insurance. All material fire and casualty, general
liability, business interruption, product liability, professional liability and
sprinkler and water damage insurance policies maintained by Parent or any of its
subsidiaries are with reputable insurance carriers, provide, to Parent's
knowledge, full and adequate coverage for all normal risks incident to the
business of Parent and its subsidiaries and their respective properties and
assets and are in character and amount at least equivalent to that carried by
entities engaged in similar businesses and subject to the same or similar perils
or hazards, except as would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.17 Brokers. No broker, finder or investment banker (other
than Xxxxxxx Xxxxx Xxxxxx Inc.) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement.
Section 3.18 Investment Company Act. Each of Parent and its
subsidiaries either (i) is not an "investment company," or a company
"controlled" by, or an "affiliated company" with respect to, an "investment
company," within the meanings of the Investment Company Act, or (ii) satisfies
all conditions for an exemption from the Investment Company Act, and,
accordingly, neither Parent nor any of its subsidiaries is required to be
registered under the Investment Company Act.
Section 3.19 No Prior Activities; Financing.
(a) Acquisition Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement. As of the date
hereof, except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Acquisition Sub has not and will not have
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
(b) Parent has immediately available to it cash necessary to
satisfy its obligations hereunder including, without limitation, the obligation
to pay the cash portion of the Merger Consideration pursuant to the Merger and
to pay all related fees and expenses in connection with the Merger.
ARTICLE IV
CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date of
36
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in writing,
which agreement shall not be unreasonably withheld, delayed, or conditioned, the
Company shall, unless expressly authorized to do otherwise pursuant to
paragraphs (a) through (o) below, in all material respects conduct its business
and shall cause the businesses of its subsidiaries to be conducted only in the
ordinary course of business consistent with past practice, and the Company shall
use reasonable commercial efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the services
of the present officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the Company and its
subsidiaries with customers, suppliers and other persons with which the Company
or any of its subsidiaries has a significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of its subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change the Certificate of Incorporation
or By-Laws of the Company or any of the Subsidiary Documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities,
exchangeable securities or other rights of any kind to acquire any shares of
capital stock of any class, or any other ownership interest (including, without
limitation, any phantom interest) in the Company, any of its subsidiaries or
affiliates (except for (i) the issuance of shares of Common Stock issuable
pursuant to the Stock Options or other agreements listed on Section 2.3 of the
Company Disclosure Schedule and (ii) the issuance of shares of Common Stock
issuable to participants in the Company's Employee Stock Purchase Plan pursuant
to the terms thereof);
(c) sell, pledge, dispose or encumber any assets of the
Company or any of its subsidiaries (except for (i) sales of assets in the
ordinary course of business and in a manner consistent with past practice, (ii)
disposition of obsolete or worthless assets and (iii) sales of immaterial assets
not in excess of $300,000;
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned subsidiary of
the Company may declare and pay a dividend or make advances to its parent or the
Company, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution
37
for shares of its capital stock, or (iii) amend the terms or change the period
of exercisability of, purchase, repurchase, redeem or otherwise acquire, or
permit any subsidiary to purchase, repurchase, redeem or otherwise acquire, any
of its securities or any securities of its subsidiaries, including, without
limitation, shares of Common Stock or any option, warrant, convertible or
exchangeable securities or other right, directly or indirectly, to acquire
shares of Common Stock, or propose to do any of the foregoing, except for the
acceleration or termination of Stock Options pursuant to the terms of the
Company Stock Option Plans and the exercise of such Stock Options or the
termination of any other arrangement providing for the issuance of shares
thereunder;
(e) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any material property or assets, make any investment in, or
make any capital contributions to, any corporation, partnership or other
business organization or division thereof; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for, the obligations of any
person or, except in the ordinary course of business consistent with past
practice or in connection with purchases of equipment or capital improvements,
make any loans or advances (other than loans or advances to or from direct or
indirect wholly owned subsidiaries), (iii) enter into, terminate or amend any
Material Contract or agreement other than in the ordinary course of business or
where such contract, termination or amendment would not, individually or in the
aggregate, have a Material Adverse Effect; (iv) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate, in excess
of $300,000; or (v) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 4.1(e);
(f) except as set forth in the Company Disclosure Schedule,
(i) increase the compensation or fringe benefits payable or to become payable to
its directors, officers or employees, except for increases in salary or wages of
employees of the Company or its subsidiaries in accordance with past practice
and in amounts that are in the aggregate reflected in the budgets previously
provided to Parent, (ii) except pursuant to the existing agreements set forth on
Section 4.1(f) of the Company Disclosure Schedule or with respect to payments
that do not exceed $100,000 in the aggregate or $50,000 per individual, grant
any severance or termination pay to, or enter into any severance agreement or
other agreement providing for severance payments with, any director, officer or
other employee of the Company or any of its subsidiaries, (iii) establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any current or
former directors, officers or employees, (iv) enter into any employment or
consulting agreement except with respect to new hires of non- officer employees
in the ordinary course of business or (v) accelerate the payment, right to
payment or vesting of any bonus, severance, profit sharing, retirement,
38
deferred compensation, stock option, insurance or other compensation or
benefits; except in each of (i) through (v), as may be required by law;
(g) take any action to change material accounting policies or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material Tax election inconsistent with past
practice or settle or compromise any material federal, state, local or foreign
Tax liability or agree to an extension of a statute of limitations, except to
the extent the amount of any such settlement has been reserved for in the
financial statements contained in the Company SEC Reports filed prior to the
date of this Agreement;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement or incurred in the ordinary
course of business and consistent with past practice;
(j) enter into any compromise or settlement of, or take any
material action with respect to, any litigation, action, suit, claim, proceeding
or investigation other than the prosecution, defense and settlement of routine
litigation, actions, suits, claims, proceedings or investigations in the
ordinary course of business;
(k) Subject to Section 4.3 of this Agreement, adopt or enter
into a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material reorganization
or any agreement relating to an Acquisition Proposal (as defined in Section 4.3
of this Agreement);
(l) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's ability to compete with or conduct
any business or line of business other than in the ordinary course of business
consistent with past practice;
(m) plan, announce, implement or effect any reduction in
force, lay-off, early retirement program, severance program or other program or
effort concerning the termination of employment of employees of Company or its
subsidiaries, except, only with respect to employees who do not exercise the
functions of general manager, the equivalent or higher, in the ordinary course
of business consistent with past practice;
(n) enter into any new agreement to acquire or rent
accommodations in an amount in excess of $100,000 or which will remain in effect
39
for longer than one year from the date hereof or with terms other than ordinary
course of business terms consistent with past practice; or
(o) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (n) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect in any material respect or prevent the
Company from performing, or cause the Company not to perform, its covenants
hereunder.
Section 4.2 Conduct of Business by Parent Pending the Merger. Parent
covenants and agrees that, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, unless the Company shall otherwise agree in writing, which
agreement shall not be unreasonably withheld, delayed, or conditioned, Parent
shall, unless expressly authorized to do otherwise pursuant to paragraphs (a)
through (d) below, in all material respects conduct its business and shall cause
the businesses of its subsidiaries to be conducted only in the ordinary course
of business consistent with past practice, and Parent shall use reasonable
commercial efforts to preserve substantially intact the business organization of
Parent and its subsidiaries, to keep available the services of the present
officers, employees and consultants of Parent and its subsidiaries and to
preserve the present relationships of Parent and its subsidiaries with
customers, suppliers and other persons with which Parent or any of its
subsidiaries has a significant business relations. By way of amplification and
not limitation, except as contemplated by this Agreement, neither Parent nor any
of its subsidiaries shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed:
(a) amend or otherwise change the Certificate of Incorporation
or By-Laws of Parent in a manner that would adversely affect the holders of
Parent Common Stock;
(b) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned subsidiary of
Parent may declare and pay a dividend or make advances to its parent or Parent;
other than such distributions ordinarily paid on a quarterly basis with respect
to certain OP Units.
(c) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of Parent, except for a merger or acquisition
which will not impair Parent's ability to consummate the Merger; and
40
(d) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.2 (a) through (c) above, or any action which
would make any of the representations or warranties of Parent or Acquisition Sub
contained in this Agreement untrue or incorrect in any material respect or
prevent Parent or Acquisition Sub from performing, or cause Parent or
Acquisition Sub not to perform, its covenants hereunder.
Section 4.3 No Solicitation; Acquisition Proposals.
(a) The Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
representative or agent of the Company or any of its subsidiaries (including,
without limitation, any investment banker, financial advisor, attorney or
accountant retained by the Company or any of its subsidiaries) to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information or assistance), or take any other action to facilitate
the initiation of any inquiries or proposals regarding an Acquisition Proposal
(as hereinafter defined), (ii) engage in negotiations or discussions concerning,
or provide any nonpublic information to any person relating to, any Acquisition
Proposal, or (iii) agree to approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Section 4.3 shall prohibit the
Company or the Board from taking and disclosing to stockholders a position
contemplated by Rule 14e-2 promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith reasonable
judgment of the Board after consultation with independent counsel, the failure
to so disclose would be inconsistent with its fiduciary obligations to
stockholders under applicable law; and provided, further, that, prior to the
Stockholders Meeting and to the extent that the Board determines in good faith
(after consultation with independent counsel) that not to do so would be
inconsistent with its fiduciary duties to stockholders under applicable law, (y)
the Board on behalf of the Company may upon the bona fide unsolicited request of
a Third Party (as hereinafter defined) furnish information or data (including,
without limitation, confidential information or data) relating to the Company or
its subsidiaries for the purposes of an Acquisition Proposal and participate in
negotiations with a person making an unsolicited bona fide Acquisition Proposal
and (z) following receipt of a Superior Proposal (as hereinafter defined), the
Board may withdraw or modify its recommendation relating to this Agreement or
the Merger if the Board determines in good faith after consultation with outside
legal counsel that failure to take such action would be inconsistent with its
fiduciary duties to stockholders under applicable law; provided, however, that
neither the Company nor the Board may (a) withdraw, modify or change its
recommendation relating to this Agreement, (b) approve or recommend a Superior
Proposal or (c) terminate this Agreement, unless prior to taking any of the
actions referred to in clauses (a), (b) or (c) the Company has complied with the
terms of Section 7.1(g) herein. Subject to the Company's right to terminate this
Agreement pursuant to Section 7.1(f), nothing in this Agreement and no action
taken by the Board pursuant to this Section 4.3 will permit the Company to enter
into any agreement or undertaking providing for any
41
transaction contemplated by an Acquisition Proposal for so long as this
Agreement remains in effect.
As used in this Agreement, "Acquisition Proposal" means either (i) a
transaction pursuant to which any person (or group of persons) other than the
Parent or its affiliates (a "Third Party") acquires 50% or more of the
outstanding shares of the Common Stock of the Company pursuant to a tender offer
or exchange offer or otherwise, (ii) a merger or other business combination
involving the Company pursuant to which any Third Party acquires 50% or more of
the outstanding shares of the Common Stock of the Company or of the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company, and
the entity surviving any merger or business combination including any of them)
of the Company having a fair market value equal to 50% or more of the fair
market value of all the assets of the Company immediately prior to such
transaction, (iv) any public announcement by a Third Party of a proposal, plan
or intention to do any of the foregoing or any agreement to engage in any of the
foregoing, (v) a self tender offer, or (vi) any transaction subject to Rule
13(e)-3 under the Exchange Act.
As used in this Agreement, "Superior Proposal" means an Acquisition
Proposal that (i) is not subject to any financing contingencies or is, in the
good faith judgment of the Board after consultation with a nationally recognized
financial advisor, reasonably capable of being financed and (ii) the Board
determines in good faith, based upon such matters as it deems relevant,
including consultation with a nationally recognized financial advisor, that the
Acquisition Proposal would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than the
Merger.
(b) Prior to providing any information to or entering into
discussions with any person in connection with an Acquisition Proposal by a
person as set forth in Section 4.3(a), the Company shall receive from such
person an executed confidentiality agreement in reasonably customary form and
shall notify Parent orally and in writing of any Acquisition Proposal
(including, without limitation, the material terms and conditions thereof and
the identity of the person making it) or any inquiries indicating that any
person is considering making or wishes to make an Acquisition Proposal, as
promptly as practicable (but in no case later than 24 hours) after its receipt
thereof, and shall provide Parent with a copy of any written Acquisition
Proposal or amendments or supplements thereto, and shall thereafter inform
Parent on a prompt basis of (i) the status of any discussions or negotiations
with any such third party, and any material changes to the terms and conditions
of such Acquisition Proposal, and shall promptly give Parent a copy of any
information delivered to such person which has not previously been reviewed by
Parent and (ii) any request by any person for nonpublic information relating to
its or any of its subsidiaries' properties, books or records.
42
(c) Subject to the foregoing provisions of this Section 4.3,
the Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any person (other than Parent and Acquisition
Sub) conducted heretofore with respect to any of the foregoing. The Company
agrees not to release any third party from the confidentiality provisions of any
confidentiality agreement to which the Company is a party.
(d) The Company shall ensure that the officers and directors
of the Company and its subsidiaries and any investment banker, financial
advisor, attorney, accountant or other advisor or representative retained by the
Company are aware of the restrictions described in this Section 4.3.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 HSR Act. As promptly as practicable after the date of
this Agreement, the Company and Parent shall, if required, file notifications
under the HSR Act in connection with the Merger and the transactions
contemplated hereby and shall respond as promptly as practicable to any
inquiries and requests received from the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") for additional information or documentation and from any State
Attorney General or other Governmental Authority in connection with antitrust
matters.
Section 5.2 Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable efforts
to be released), each party shall, and shall cause each of its subsidiaries to
afford, to the officers, employees, accountants, counsel, financial advisors and
other representatives of the other or the financing sources of Parent of
Acquisition Sub reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each party shall (and shall
cause each of its subsidiaries to) furnish promptly to the other all information
concerning its business, properties and personnel as such other party may
reasonably request, and each party shall make available to the other the
appropriate individuals (including attorneys, accountants, and other
professionals) for discussion of its business, properties and personnel as such
other party may reasonably request. Any such investigation by any party shall
not affect the representations or warranties of such party contained in this
Agreement. Each party shall keep such information confidential in accordance
with the terms of the confidentiality letter dated June 15, 1999 (the
"Confidentiality Letter"), between Parent and the Company.
43
Section 5.3 Consents; Approvals. Subject to Section 4.3, the
Company, Parent and Acquisition Sub shall each use their best efforts to take
all appropriate action to do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate the Merger and the
other transactions contemplated by this Agreement, including, without
limitation, using their best efforts to obtain all consents, waivers, approvals,
authorizations or orders of Governmental Authorities and parties to contracts
with the Company or any of its subsidiaries, and the Company, Parent and
Acquisition Sub shall make all filings including, without limitation, all
filings with Governmental Authorities required in connection with the
authorization, execution and delivery of this Agreement by the Company, Parent
and Acquisition Sub, the consummation by them of the transactions contemplated
hereby and to fulfill the conditions to the Merger.
Section 5.4 Indemnification and Insurance.
(a) The Certificate of Incorporation and By-Laws of the
Surviving Corporation shall contain provisions with respect to indemnification,
advancement of expenses and exculpation at least as protective to any officer or
director as those set forth in the Certificate of Incorporation and By-Laws of
the Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of the Company, unless such
modification is required by law.
(b) Parent shall cause the Surviving Corporation, to the
fullest extent permitted under applicable law, to indemnify and hold harmless,
and advance defense costs and expenses to, each present and former director,
officer or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages and liabilities incurred in
connection with, and amounts paid in settlement of, any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative and wherever asserted, bought or filed, (x) arising out of or
pertaining to the transactions contemplated by this Agreement or (y) otherwise
with respect to any acts or omissions or alleged acts or omissions occurring at
or prior to the Effective Time, to the same extent as provided in the respective
Certificate of Incorporation or By-Laws of the Company or the subsidiaries or
any applicable contract or agreement as in effect on the date hereof, in each
case for a period of six years after the date hereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time) in which there exists no conflict between the
interests of the indemnifying party and the Indemnified Party, the indemnifying
party shall have a right to assume and direct all aspects of the defense
thereof, including settlement, and the Indemnified Party shall cooperate in the
defense of any such matter. The Indemnified Party shall have a right to
participate in (but not control) the defense of any such matter with its own
counsel
44
and at its own expense. The indemnifying party shall not settle any such matter
unless (i) the Indemnified Party gives prior written consent, which shall not be
unreasonably withheld, or (ii) the terms of the settlement provide that the
Indemnified Party shall have no responsibility for the discharge of any
settlement amount and impose no other obligations or duties on the Indemnified
Party and the settlement provides the Indemnified Party with a full release and
discharges all rights against the Indemnified Party with respect to such matter.
In no event shall the indemnifying party be liable for any settlement effected
without its prior written consent; provided that if such indemnifying party
elected not to assume and direct the defense of such action, such indemnifying
party's consent to such settlement shall not be unreasonably withheld or
delayed. Any Indemnified Party wishing to claim indemnification under this
Section 5.4(b), upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Parent and the Surviving Corporation (but the
failure so to notify shall not relieve the indemnifying party from any liability
which it may have under this Section 5.4(b) except to the extent of any damages
caused by such failure to the indemnifying party), and shall deliver to Parent
and the Surviving Corporation the undertaking contemplated by Section 145(e) of
the Delaware Law. If the indemnifying party does not assume the defense of any
such action, the Indemnified Parties as a group may retain only one law firm in
each jurisdiction to represent them with respect to any single action unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
The indemnity agreements of Parent and the Surviving Corporation in this Section
5.4(b) shall extend, on the same terms to, and shall inure to the benefit of and
shall be enforceable by, each person or entity who controls, or in the past
controlled, any present or former director, officer or employee of the Company
or any of its subsidiaries.
(c) For a period of six years after the Effective Time, Parent
shall cause the Surviving Corporation or any successor thereto to maintain in
effect, if available, directors, and officers' liability insurance covering
actions by directors and officers of the Company occurring at or prior to the
Effective Time and covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been made available to Parent) (the "Covered Persons") on terms (including
the amounts of coverage and the amounts of deductible, if any) that are
comparable to the terms now applicable to the Company's directors and officers
under the Company's current policies, and with insurers of no lesser financial
standing than the insurers issuing the Company's current policies; provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend in excess of 250% of the annual premium currently paid by the Company
for such coverage; and provided, further, that if the premium for such coverage
exceeds such amount, Parent or the Surviving Corporation shall purchase a policy
with the greatest coverage available for such 250% of the annual premium.
(d) This Section shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
45
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties. In the event that Parent or Surviving Corporation or any of their
successors or assigns (i) consolidates or merges into any other person or entity
and shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation (as the case may be) assume the obligations of Parent and
the Surviving Corporation set forth in this Section.
(e) From and after the Effective Time, Parent unconditionally
guarantees the obligations of the Surviving Corporation arising under this
Section 5.4.
Section 5.5 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 nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Acquisition Sub, as the case may be, materially 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 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.6 Further Action. Upon the terms and subject to the
conditions hereof (including, without limitation, Section 4.3), each of the
parties shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. Parent shall take
all action necessary to cause Acquisition Sub to perform its obligations under
this Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
Section 5.7 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party, which shall
not be unreasonably withheld, delayed or conditioned; provided, however, that a
party may, without the prior consent of the other part, issue such press release
or make such public statement as may upon the advice of counsel be required by
law or the rules
46
and regulations of the NYSE or the American Stock Exchange, Inc., if it has
used all reasonable efforts to consult with the other party.
Section 5.8 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
Section 5.9 Employee Benefit Plans.
(a) Following the Effective Time, to the extent that Parent
arranges for any employees of the Company or any subsidiary of the Company to
participate in any counterpart Parent benefit plans in accordance with the
eligibility criteria thereof, (i) such participants shall receive full credit
for years of service with the Company or any subsidiary of the Company (and
service otherwise credited by the Company or any subsidiary of the Company)
prior to the Effective Time for all purposes for which such service was
recognized under the Company's Employee Plans, including, but not limited to,
eligibility to participate and vesting but not including the accrual of benefits
and (ii) Parent shall cause any and all pre-existing condition limitations,
eligibility waiting periods and evidence of incurability requirements under any
group plans to be waived with respect to such participants who are eligible to
participate after the Effective Time. Notwithstanding any of the foregoing to
the contrary, none of the provisions contained herein shall operate to duplicate
any benefit provided to any employee of the Company or the funding of any such
benefit or obligate Parent to (i) make any particular benefit plan or benefit
available to any employee, (ii) continue any particular benefit plan or benefit
or (iii) refrain from terminating or amending any particular benefit plan or
benefit.
(b) Following the Effective Time, Parent shall cause the
Surviving Corporation to honor and perform, pursuant to their terms, all
employee benefit obligations to current and former employees and directors of
the Company under any Company Employee Plans; provided, however, that nothing
contained herein shall limit any reserved right in any Company Employee Plan to
amend, modify, suspend, revoke or terminate any such plan as to non-vested
benefits.
Section 5.10 Listing and Delisting of Securities. Parent shall use
its reasonable best efforts to cause the shares of Parent Common Stock to be
issued in the Merger to be approved for quotation on the NYSE, subject to
official notice of issuance, prior to the Effective Time. As soon as practicable
following the Effective Time, the parties hereto shall take all action necessary
to cause the Company's Common Stock to be de-listed from the American Stock
Exchange, Inc. and de-registered under the Exchange Act.
47
Section 5.11 Audited Financial Statements. As soon as practicable,
the Company shall provide to Parent and Acquisition Sub copies of the fully
audited consolidated financial statements of the Company and its consolidated
subsidiaries for the Company's fiscal year ended December 31, 1999.
Section 5.12 Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable best efforts (i) to cause the Merger to qualify, and will not,
without the prior written consent of the parties hereto, knowingly take any
actions or cause any actions to be taken, or knowingly fail to take any action
or fail to cause any action to be taken, which could prevent the Merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code, and (ii) to obtain (in the case of the Company) or to cause to obtain (in
the case of Parent and Acquisition Sub) the opinion of counsel referred to in
Section 6.3(c) below, including the execution of the letters of representations
referred to therein. Following the Effective Time, and consistent with any such
consent, none of the Surviving Corporation, Parent or any of their affiliates
shall knowingly take any action or cause any action to be taken, or knowingly
fail to take any action or fail to cause any action to be taken, which would
cause the Merger to fail to so qualify as a reorganization under Section 368(a)
of the Code.
Section 5.13 Senior Credit Facility. Promptly after the Effective
Time of the Merger, the Surviving Corporation shall pay, and the Parent shall
provide such financing so as to enable the Surviving Corporation to pay, all
amounts outstanding under the Company's Revolving Credit Agreement dated as of
March 31, 1997, as amended, with Fleet National Bank and Bank One, N.A.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver to the extent permissible under law at or
prior to the Effective Time of all the following conditions:
(a) Stockholders' Approval. The Merger and this Agreement
shall have been duly approved by the Requisite Company Vote of the stockholders
of the Company. Parent and Acquisition Sub shall vote their Shares in favor of
the Merger to the extent not otherwise prohibited by law or any judgment,
injunction, decree or order of any Governmental Authority.
48
(b) HSR Act. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated.
(c) Listing. The shares of Parent Common Stock issuable to the
Company's stockholders pursuant to this Agreement shall have been authorized for
quotation on the NYSE upon official notice of issuance.
(d) Governmental Actions. There shall not have been any action
or proceeding brought or threatened by any Governmental Authority or any other
Person (other than, with respect to any action or proceeding brought or
threatened by a Person, as would not have a Material Adverse Effect) or any
statute, regulation, legislation, judgment, decree or order, enacted, entered,
enforced, promulgated, amended, issued or deemed applicable to the Merger by any
Governmental Authority that could have the effect of: (i) making illegal, or
otherwise directly or indirectly restraining or prohibiting or imposing material
penalties or fines or requiring the payment of material damages in connection
with the acceptance for payment of, the payment for, or the ownership, directly
or indirectly, of, some or all of the Shares by Parent or Acquisition Sub or the
consummation of the Merger; (ii) prohibiting or materially limiting, the direct
or indirect ownership or operation by the Company or by Parent of all or any
material portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or compelling Parent to dispose of or hold separate all or any
material portion of the business or assets of the Company or Parent or their
respective subsidiaries, taken as a whole, as a result of the transactions
contemplated by this Agreement; (iii) imposing or confirming material
limitations on the ability of Parent effectively to hold or to exercise full
rights of ownership of shares of capital stock of the Surviving Corporation,
including, without limitation, the right to vote any such shares of capital
stock of the Surviving Corporation on all matters properly presented to the
stockholders of the Surviving Corporation, including, without limitation, the
approval and adoption of the Agreement and the transactions contemplated
thereby; (iv) requiring divestiture by Parent or Acquisition Sub, directly or
indirectly, of any shares of capital stock of the Surviving Corporation; or (v)
which would reasonably be likely to result in a Material Adverse Effect;
provided, however, that prior to invoking this condition, the party so invoking
this condition shall have complied with its obligations under Sections 5.3 and
5.6.
(e) Consents and Approvals. All consents and approvals
necessary to the consummation of the Merger, including without limitations
consents from parties to loans, leases and other agreements and consents from
any Governmental Authority shall have been duly obtained other than consents and
approvals the failure to obtain which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or its subsidiaries or
on Parent or its subsidiaries; provided, however, that prior to invoking this
condition, the party so invoking this condition shall have complied with its
obligations under Sections 5.3 and 5.6.
49
(f) Registration Statement. The Registration Statement shall
have become effective under the Securities Act. No stop order suspending the
effectiveness of such Registration Statement shall have been issued, and no
proceedings for that purpose shall have been initiated or be threatened by the
SEC.
Section 6.2 Additional Conditions to Obligation of Parent and
Acquisition Sub to Effect the Merger. The obligations of each of Parent and
Acquisition Sub to effect the Merger and consummate the other transactions
contemplated hereby are also subject to the satisfaction or waiver by Parent and
Acquisition Sub at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, and Parent shall have received a certificate
(which certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained in this Agreement are so
qualified) signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed or complied in all material respects with all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and Parent shall have received a certificate signed on behalf of the
Company by an executive officer of the Company to such effect.
(c) Dissenting Shares. The aggregate number of Dissenting
Shares shall not exceed 5% of the total number of Shares of Company Common Stock
outstanding on the Closing Date.
(d) Tax Opinion. Parent shall have received the opinion of
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, counsel to Parent, dated the Closing
Date, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of section 368(a) of the Code
and that each party hereto will be treated as a "party to the reorganization"
within the meaning of section 368(b) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such counsel of customary
representation letters from each of Parent, Acquisition Sub and the Company
substantially in the forms of those contained in the Parent officer's
certificate and the Company's officer's certificate attached hereto as Exhibit
A-1 and Exhibit A-2, respectively.
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Section 6.3 Additional Conditions to Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the Merger and
consummate the other transactions contemplated hereby is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of each of Parent and Acquisition Sub set forth in this Agreement
that are qualified as to materiality shall be true and correct, and the
representations and warranties of each of Parent and Acquisition Sub set forth
in this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing Date, except to the extent
the representation or warranty is expressly limited by its terms to another
date, and the Company shall have received a certificate (which certificate may
be qualified by knowledge to the same extent as the representations and
warranties of each of Parent and Acquisition Sub contained in this Agreement are
so qualified) signed on behalf of each of Parent and Acquisition Sub by an
executive officer of Parent to such effect.
(b) Performance of Obligations of Parent and Acquisition Sub.
Each of Parent and Acquisition Sub shall have performed or complied in all
material respects with all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent and Acquisition Sub by an executive
officer of Parent to such effect.
(c) Tax Opinion. The Company shall have received the opinion
of Xxxxxx, XxXxxxxxx & Fish, LLP, counsel to the Company, dated the Closing
Date, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of section 368(a) of the Code
and that each party hereto will be treated as a "party to the reorganization"
within the meaning of section 368(b) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such counsel of customary
representation letters from each of Parent, Acquisition Sub and the Company
substantially in the forms of those contained in the Parent officer's
certificate and the Company's officer's certificate attached hereto as Exhibit
A-1 and Exhibit A-2, respectively.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent:
51
(a) by mutual written consent duly authorized by the boards of
directors or any committee thereof of Parent, Acquisition Sub and the Company;
(b) by either Parent or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a nonappealable final
order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger (provided
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party who has not complied with its obligations under
Sections 5.3 and 5.6 and such noncompliance materially contributed to the
issuance of any such order, decree or ruling or the taking of such action);
(c) by either Parent or the Company if the Effective Time
shall not have occurred on or before August 15, 2000 (or September 15, 2000 if
the failure of the Effective Time to occur shall be the result of a request for
additional information under the HSR Act or the failure to obtain any necessary
governmental or regulatory approval); provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to any
party whose breach or failure to fulfill any obligation under this Agreement has
been the cause of or resulted in such failure of the Effective Time to occur;
(d) by Parent, if the Board shall have (i) failed to
recommend, withdrawn or modified in a manner adverse to Parent or Acquisition
Sub, or publicly taken a position materially inconsistent with, its approval or
recommendation of the Merger or the transactions contemplated by this Agreement,
(ii) approved, endorsed or recommended an Acquisition Proposal, or (iii)
resolved or publicly disclosed any intention to do any of the foregoing;
(e) by Parent or the Company, (i) if any representation or
warranty of the Company or Parent, respectively, set forth in this Agreement
that are qualified by reference to materiality shall not be true and correct or
any representation or warranty of the Company or Parent, respectively, set forth
in this Agreement that is not qualified by reference to materiality shall not be
true and correct in all material respects in each case as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, or (ii) upon a breach of or failure to perform in
any material respect any covenant or agreement on the part of the Company or
Parent, respectively, set forth in this Agreement, except in each of (i) and
(ii) above, where the failure to perform such covenants or agreements or the
failure of such representations and warranties to be so true and correct would
not have a Material Adverse Effect (either (i) or (ii) above being a
"Terminating Breach"); provided, however, that, if such Terminating Breach is
curable by the Company or Parent, as the case may be, through the exercise of
its reasonable best efforts and for so long as the Company or Parent, as the
case may be, continues to exercise such reasonable best efforts, neither Parent
nor the Company, respectively,
52
may terminate this Agreement under this Section 7.1(e), and provided, further,
that the right to terminate this Agreement pursuant to this Section 7.1(e) shall
not be available to any party whose breach of or failure to fulfill its
obligations under this Agreement resulted in the failure of any such condition;
(f) by Parent or the Company if this Agreement and the Merger
shall fail to receive the Requisite Company Vote for adoption at the
Stockholders Meeting or any adjournment or postponement thereof;
(g) by the Company, following the receipt by the Company after
the date hereof, under circumstances not involving any breach of the provisions
of Section 4.3, of a Superior Proposal, if the Board, after consultation with
outside legal counsel, shall have determined in good faith that the failure to
terminate this Agreement would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law, provided that (i) the Company has
complied with all provisions of Section 4.3, including the notice provisions
therein, (ii) the Company enters into a definitive agreement providing for the
transactions contemplated by such Acquisition Proposal immediately following
such termination, (iii) the Board shall have given Parent at least five days
prior written notice of its determination to terminate this Agreement pursuant
to this Section 7.1(g) and shall have afforded Parent a reasonable opportunity
within such five day period to amend the terms of this Agreement and (iv) such
termination shall not be effective until the Company shall have paid to Parent
the Termination Fee (as defined below) in accordance with provisions of Section
7.3; and
(h) by the Company or Parent, respectively, if the Average
Trading Price is less than $2.25 or more than $3.75.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1, there shall be no liability on the
part of any party hereto or any of its affiliates, directors, officers,
employees or stockholders except as set forth in Sections 2.22, 5.2, 5.7, 7.3
and Article VIII and this Agreement shall otherwise forthwith become void.
Except as otherwise provided in Section 7.3, nothing herein shall relieve any
party from liability for any willful breach of any of its representations and
warranties or the breach of any of its covenants or agreements set forth in this
Agreement.
Section 7.3 Fees and Expenses.
(a) Except as otherwise set forth in this Agreement, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated, except that all fees and expenses incurred in
connection with the filing of the Proxy Statement, the printing and mailing of
the
53
Proxy Materials and filings required under the HSR Act shall be shared equally
by Parent and the Company.
(b) The Company shall pay Parent a fee, including Parent's and
Acquisition Sub's actual and reasonable out-of-pocket expenses incurred in
connection with this Agreement and the transactions contemplated hereby, of
$1,800,000 (the "Termination Fee") if this Agreement is terminated by Parent
pursuant to Section 7.1(d) or Section 7.1(e) or by the Company pursuant to
Section 7.1(g).
(c) In the event this Agreement is terminated by either party
pursuant to Section 7.1(f), the Company shall reimburse Parent for actual and
reasonable out-of-pocket expenses incurred in connection with this Agreement and
the transactions contemplated hereof, up to a maximum of $750,000.
(d) The Termination Fee payable pursuant to Section 7.1(g),
Section 7.3(b) or Section 7.3(c) shall be paid by wire transfer in immediately
available funds within three (3) business days of the termination of this
Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Effectiveness of Representations, Warranties and
Agreements. Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties, covenants and agreements in
this Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Section 7.l, as the case may be, except that this
Section 8.1 shall not limit any covenant or any agreement of the parties which
by its terms contemplates performance after the Effective Time and which shall
survive in accordance with its respective terms. The Confidentiality Letter
shall survive termination of this Agreement as provided therein.
Section 8.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
54
(a) If to Parent or Acquisition Sub:
MeriStar Hotels & Resorts, Inc.
0000 Xxxxxxxxx Xxx.
Xxxxxxxxxx, X.X. 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier No.: 212-757-3990
Telephone No.: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
(b) If to the Company:
BridgeStreet Accommodations, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: President
With a copy to:
Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxxxxxx, Esq.
55
Section 8.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) affiliate means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) beneficial owner with respect to any shares of Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
(c) business day means any day other than a day on which banks
in New York are required or authorized to be closed;
(d) control (including the terms controlled by, and under
common control with) means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) knowledge means, with respect to any matter in question,
actual knowledge of any executive officer of the entity in question with respect
to such matter after making reasonable inquiry of officers and other employees
charged with senior administrative or operational responsibility of such
matters;
(f) person means an individual, corporation, partnership,
limited liability company, association, joint venture, trust, unincorporated
organization, other entity or group (as defined in Section 13(d)(3) of the
Exchange Act); and
(g) subsidiary or subsidiaries of the Company, the Surviving
Corporation, Parent or any other person means any person or other legal entity
of which the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders
56
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
Section 8.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 8.5 Waiver. At any time prior to the Effective Time, any
party hereto may with respect to any other party hereto (a) extend the time for
the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
Section 8.6 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 8.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letter), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein.
Section 8.9 Assignment; Guarantee of Acquisition Sub Obligations.
This Agreement shall not be assigned by operation of law or otherwise, except
that Parent and Acquisition Sub may assign all or any of their rights hereunder
to any affiliate provided that no such assignment shall relieve the assigning
party of its obligations hereunder.
57
Section 8.10 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.4 (which is intended to be for the benefit of the Indemnified
Parties and may be enforced by such Indemnified Parties).
Section 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any party hereto in the exercise
of any right hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
Section 8.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
Section 8.13 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 8.14 Interpretation. The parties hereto acknowledge that
certain matters set forth in the Company Disclosure Schedule and certain matters
set forth in the Parent Disclosure Schedule are included for informational
purposes only, notwithstanding the fact that, because they do not rise above
applicable materiality thresholds or otherwise, they would not be required to be
set forth therein by the terms of this Agreement. The parties agree that
disclosure of such matters shall not be taken as an admission by the Company or
Parent, as the case may be, that such disclosure is required to be made under
the terms of any provision of this Agreement and in no event shall the
disclosure of such matters be deemed or interpreted to broaden or otherwise
amplify the representations and warranties contained in this Agreement or to
imply that such matters are or are not material and neither party shall use, in
any dispute between the parties, the fact of any such disclosure as evidence of
what is or is not material for purposes of this Agreement.
58
IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
MERISTAR HOTELS & RESORTS, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
--------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Vice President, Legal
MERISTAR BROOKLYN, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
--------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Vice President, Legal
BRIDGESTREET ACCOMMODATIONS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Executive Officer
