Exhibit 99.2
AGREEMENT AND PLAN OF MERGER
dated as of
December 17, 1998
among
PHARMHOUSE CORP.,
Phar-Mor, INC.
and
PHARMACY ACQUISITION CORP.
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER
Section 1.01. The Merger 1
Section 1.02. Conversion of Shares 2
Section 1.03. Surrender and Payment 3
Section 1.04. Employee Stock Options and Restricted Shares 5
Section 1.05 No Set-Off 5
ARTICLE 2
THE SURVIVING CORPORATION
Section 2.01. Certificate of Incorporation 6
Section 2.02. Bylaws 6
Section 2.03. Directors and Officers 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Corporate Existence and Power 6
Section 3.02. Corporate Authorization; Approval of the Board 7
Section 3.03. Governmental Authorization 7
Section 3.04. Noncontravention 7
Section 3.05. Capitalization 8
Section 3.06. Subsidiaries 8
Section 3.07. SEC Filings 9
Section 3.08. Financial Statements. 9
Section 3.09. Proxy Statements; Schedule 13E-3 10
Section 3.10. Absence of Certain Changes 10
Section 3.11. Litigation 12
Section 3.12. No Undisclosed Material Liabilities 12
Section 3.13. Compliance with Laws 12
Section 3.14. Finders' Fees 12
Section 3.15. Taxes 13
Section 3.16. Employee Benefits 13
Section 3.17. Environmental Matters 14
Section 3.18. Material Agreements 15
Section 3.19. Title to Properties; Encumbrances 16
Section 3.20. Labor Matters. 16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01. Corporate Existence and Power 17
Section 4.02. Corporate Authorization 17
Section 4.03. Governmental Authorization 17
Section 4.04. Noncontravention 18
Section 4.05. Proxy Statement; Schedule 13E-3 18
Section 4.06 Litigation 18
Section 4.07. Finders' Fees 18
Section 4.08. Financing 19
ARTICLE 5
COVENANTS OF THE COMPANY
Section 5.01. Conduct of the Company 19
Section 5.02. Stockholder Meeting; Proxy Material 20
Section 5.03. Access to Information 21
Section 5.04. Other Offers 21
Section 5.05. Estoppel Certificates 22
Section 5.06. Confidentiality Agreement 22
Section 5.07. Pre-Closing Balance Sheet 22
ARTICLE 6
COVENANTS OF BUYER
Section 6.01. Obligations of Merger Subsidiary 23
Section 6.02. Director and Officer Liability 23
Section 6.03. Employment Agreements 24
Section 6.04. Standstill 24
Section 6.05 Transitory Nature of Merger Subsidiary 24
Section 6.06. Buyer's Environmental Report 24
ARTICLE 7
COVENANTS OF BUYER AND THE COMPANY
Section 7.01. Commercially Reasonable Efforts; SEC Filings 24
Section 7.02. Public Announcements 25
Section 7.03. Further Assurances 25
Section 7.04. Notices of Certain Events 25
ARTICLE 8
CLOSING; CONDITIONS TO THE MERGER
Section 8.01. Closing 25
Section 8.02. Conditions to the Obligations of Each Party 26
Section 8.03. Conditions to the Obligations of Buyer and Merger
Subsidiary 26
Section 8.04. Conditions to the Obligations of the Company 27
ARTICLE 9TERMINATION
Section 9.01. Termination 27
Section 9.02. Effect of Termination 29
ARTICLE 10
MISCELLANEOUS
Section 10.01. Notices 31
Section 10.02. Survival 32
Section 10.03. Amendments; No Waivers 32
Section 10.04. Expense 33
Section 10.05. Successors and Assigns 33
Section 10.06. Counterparts; Effectiveness 33
Section 10.07. Parties in Interest 33
Section 10.08. No Personal Liability 33
Section 10.09. Governing Law 33
Section 10.10. Jurisdiction 33
Section 10.11. Specific Performance 35
Section 10.12. Interpretation 35
Section 10.13. Entire Agreement; Schedules 35
Section 10.14. Severability 36
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of December 17,
1998 among PHARMHOUSE CORP., a New York corporation (the "Company"), Phar-Mor,
INC., a Pennsylvania corporation ("Buyer") and PHARMACY ACQUISITION CORP., a
New York corporation and a wholly owned subsidiary of Buyer ("Merger
Subsidiary").
WITNESSETH:
WHEREAS, Buyer and the Company desire that Merger Subsidiary be merged
with and into the Company with the Company being the surviving corporation and
a wholly owned subsidiary of Buyer as contemplated hereby; and
WHEREAS, the Board of Directors of the Company has approved this
Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.01. The Merger. (a) Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined
below), Merger Subsidiary shall be merged (the "Merger") with and into the
Company in accordance with the Business Corporation Law of the State of New
York (the "New York Law"), whereupon the separate existence of Merger
Subsidiary shall cease and the Company shall be the surviving corporation (the
"Surviving Corporation"). Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all assets, properties, rights,
privileges, powers and franchises of a public or private nature of the Company
and the Merger Subsidiary shall vest in the Surviving Corporation and all
debts, liabilities, obligations and duties of the Company and the Merger
Subsidiary shall become the debts, liabilities, obligations and duties of the
Surviving Corporation. The Surviving Corporation shall assume and be liable
for all the liabilities, obligations and penalties of the Company and the
Merger Subsidiary. No liability or obligation due or to become due, claim or
demand for any cause existing against either the Company or the Merger
Subsidiary, or any stockholder, officer or director thereof, shall be released
or impaired by the Merger. No action or proceeding, whether criminal or
civil, then pending by or against either the Company or the Merger Subsidiary,
or any stockholder, officer or director thereof, shall xxxxx or be
discontinued by the Merger, but may be enforced, prosecuted, settled or
compromised as if the Merger had not occurred, or the Surviving Corporation
may be substituted in such action or special proceeding in place of either the
Company or the Merger Subsidiary.
(b) As soon as practicable, but in no event later than ten days after
the satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Merger, the Company and Merger Subsidiary will file a
certificate of merger (together with any other documents, certificates and
instruments required by law to effectuate and consummate the Merger, all in a
form reasonably acceptable to the Company and Buyer) with the Department of
State of the State of New York and make all other filings or recordings
required by New York Law in connection with the Merger. The Merger shall
become effective at such time as the certificate of merger is duly filed with
the Department of State of the State of New York (the "Effective Time").
Section 1.02. Conversion of Shares.
(a) At the Effective Time by virtue of the Merger:
(i) each share (each a "Share") of common stock, par value $.01
per share, of the Company (the "Common Stock") held by the Company as treasury
stock or owned by Buyer or any subsidiary of Buyer immediately prior to the
Effective Time shall be canceled, and no payment shall be made with respect
thereto;
(ii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation; and
(iii) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 1.02(a)(i) above or as
provided in Sections 1.02(b), be converted into the right to receive $3.25 in
cash, without interest, but subject to adjustment as provided in Section
1.02(b) (such amount, as so adjusted, the "Per Share Amount"), payable in full
by wire transfer or check of immediately available funds within five business
days after the date when such holder has satisfied the procedures contemplated
by Section 1.03, in accordance with the provisions of this Agreement.
Following the Effective Time, all certificates or other instruments
representing shares of Common Stock outstanding immediately prior to the
Merger shall thereafter only represent the right to receive, upon surrender
thereof, the Merger Consideration (as defined below). At the Effective time,
each share of Common Stock issued and outstanding prior to the Effective time
(all of which shares will be converted into the right to receive the Merger
Consideration) shall be cancelled and retired and shall cease to exist. The
Per Share Amount payable to all issued and outstanding Shares pursuant to this
Section 1.02(a)(iii) is herein referred to as the "Merger Consideration."
(b) The Per Share Amount shall be subject to adjustment as follows:
(i) if the Company ceases to conduct normal retail operations at
any store location at which it conducts such operations on the date hereof,
and Buyer waives any right it may have to terminate this Agreement as a
consequence of such closure(s), the Per Share Amount shall be reduced by an
amount equal to $.10 for each such store closing (including without
limitation the cessation of normal retail operations at either of the
Company's store locations no. 167 and 168 for any reason); provided, however,
that in no event shall the Per Share Amount be reduced by an amount in excess
of $.20 pursuant to this Section 1.02(b); provided further, that if the
Company ceases to conduct normal retail operations at two or more of its
currently existing store locations (other than a cessation of such operations
at the Company's store locations no. 167 and/or 168 resulting from the
termination of the leases for such locations solely by action of the landlord
therefor), then Buyer has the right to terminate this Agreement pursuant to
Section 9.01(g)(i);
(ii) if the Pre-Closing Balance Sheet (as defined below) shows
that the total assets minus the total liabilities of the Company and the
Company Subsidiaries on a consolidated basis (the "Net Assets") as of the date
thereof is less than $1,000,000 then the Per Share Amount shall be reduced by
$.01 for every full $30,000 by which the Net Assets are less than $1,000,000;
provided, however, that if Net Assets are less than negative $1,000,000 then
Buyer has the right to terminate this Agreement pursuant to Section
9.01(g)(ii); provided further, that in determining Net Assets for purposes of
this Section 1.02(b)(ii), no adjustment to the Pre-Closing Balance Sheet shall
be made with respect to Section 1.02(b)(iv) below;
(iii) if the Pre-Closing Balance Sheet shows that the Net Assets
are greater than $5,000,000, then the Per Share Amount shall be increased by
$.01 for every full $30,000 by which the Net Assets are greater than
$5,000,000; provided, however, that if Net Assets are greater than $7,000,000
then the Company has the right to terminate this Agreement pursuant to Section
9.01(l); and
(iv) if the Closing Environmental Liabilities (as defined below)
are greater than $100,000, then the Per Share Amount shall be reduced by $.01
for every full $30,000 by which the Environmental Liabilities exceed $100,000;
provided, however, that in no event shall the Per Share Amount be reduced by
an amount in excess of $.30 pursuant to this Section 1.02(b)(iv); and provided
further, that if the Closing Environmental Liabilities are greater than
$750,000, then Buyer has the right to terminate this Agreement pursuant to
Section 9.01(g)(ii).
Section 1.03. Surrender and Payment. (a) Promptly following
execution of this Agreement, Buyer shall appoint Xxxxxx Bank & Trust Company
(or such other qualified party reasonably acceptable to the Company) (the
"Exchange Agent") for the purpose of exchanging certificates representing
Shares for the Per Share Amount, and the Company shall provide Buyer and the
Exchange Agent with a complete and accurate list of names and addresses for
the stockholders of record of the Company. On or prior to the Effective time,
Buyer shall deposit, or shall cause to be deposited, with or for the account
of the Exchange Agent, for the benefit of the holders of Shares of Common
Stock, cash in an amount equal to the Merger Consideration. Buyer shall
direct the Exchange Agent to invest such funds, pending their disbursement in
accordance herewith, in a money market mutual fund registered under the
Investment Company Act of 1940, as amended, selected by Buyer. Buyer shall
pay all fees and expenses of the Exchange Agent. For purposes of determining
the Merger Consideration to be made available, Buyer shall assume that no
holder of Shares will perfect his right to appraisal of his Shares. Promptly
after the Effective Time, Buyer will send, or will cause the Exchange Agent to
send, to each holder of Shares at the Effective Time a letter of transmittal
for use in such exchange (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the certificates representing Shares to the Exchange Agent).
(b) Each holder of Shares that have been converted into a right to
receive the Per Share Amount, upon surrender to the Exchange Agent of a
certificate or certificates representing such Shares, together with a properly
completed letter of transmittal covering such Shares, will be entitled to
receive the Merger Consideration payable in respect of such Shares, provided
that Buyer shall direct the Exchange Agent to accept an indemnity in the form
reasonably satisfactory to Buyer and the Exchange Agent, for any such
certificate which is lost, stolen or destroyed. Until so surrendered, each
such certificate shall, after the Effective Time, represent for all purposes,
only the right to receive such Merger Consideration. The Exchange Agent or
Buyer, as the case may be, shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement such amounts as the
Exchange Agent or Buyer are required to deduct and withhold under the Internal
Revenue Code of 1986, as amended (the "Code"), or any applicable provision of
state, local or foreign tax law, with respect to the making of any payment in
respect of the Merger Consideration hereunder. To the extent such amounts are
so withheld, such amounts shall be treated for all purposes of this Agreement
as having been paid to the Person with respect to whom such deduction and
withholding was made by the Exchange Agent or Buyer. No such deduction or
withholding shall be made if the relevant Person shall provide documentation
reasonably satisfactory to the Exchange Agent and Buyer establishing an
exemption from withholding, and Buyer shall take customary actions to obtain
such documentation prior to such deduction or withholding.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefore, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the Person requesting such payment shall pay to the Exchange Agent any
transfer or other taxes required by law as a result of such payment to a
Person other than the registered holder of such Shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. For purposes of this Agreement, "Person" means an individual, a
corporation, a limited liability company, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(d) If, after the Effective Time, certificates representing Shares
are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 1.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.03(a) that remains unclaimed by the
holders of Shares six months after the Effective Time shall be returned to
Buyer, upon demand, and any such holder who has not exchanged his Shares for
the Merger Consideration in accordance with this Section prior to that time
shall thereafter look only to Buyer for payment of the Merger Consideration in
respect of his Shares. Notwithstanding the foregoing, Buyer shall not be
liable to any holder of Shares for any amount paid to a public official
pursuant to applicable abandoned property laws. Any amounts remaining
unclaimed by holders of Shares two years after the Effective Time (or such
earlier date immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental entity) shall, to the extent
permitted by applicable law, become the property of Buyer free and clear of
any claims or interest of any Person previously entitled thereto.
Section 1.04. Employee Stock Options and Restricted Shares. (a) At
or immediately prior to the Effective Time, (i) each outstanding option to
purchase Common Stock granted under any employee or nonemployee director stock
option or compensation plan or arrangement of the Company shall be canceled,
and each holder of any such option, whether or not then vested or exercisable,
shall be paid by the Surviving Corporation at the Effective Time for each such
option an amount determined by multiplying (A) the excess, if any, of the Per
Share Amount over the applicable exercise price of such option by (B) the
number of shares of Common Stock such holder could have purchased (assuming
full vesting of all options) had such holder exercised such option in full
immediately prior to the Effective Time, and (ii) each restricted Share
granted under any employee or nonemployee director stock option or other
compensation plan or arrangement of the Company shall be vested and converted
into the right to receive the Per Share Amount in accordance with Section
1.02(c). Schedule 3.16 hereto (A) identifies each employee stock option or
compensation plan or arrangement of the Company and (B) identifies each
employee or nonemployee director of the Company or any Company subsidiary who
holds options pursuant top any such plan, and sets forth with respect to each
such holder (1) the number of options held thereby and (2) the exercise price
per share applicable to each such option.
(b) Prior to the Effective Time, the Company shall (i) use its
commercially reasonable efforts to obtain any consents from holders of options
to purchase shares of Common Stock and restricted Shares granted under the
Company's stock option or compensation plans or arrangements and (ii) make any
permitted amendments to the terms of such stock option or compensation plans
or arrangements, and take any other permitted actions thereunder, that, in the
case of either clauses 1.04(b)(i) or 1.04(b)(ii), are necessary to give effect
to the transactions contemplated by Section 1.04(a). Notwithstanding any
other provision of this Section, payment may be withheld in respect of any
option or restricted Shares until any necessary consent from the holder
thereof is obtained.
Section 1.05 No Set-Off. Except as expressly set forth in Section
9.02(d), Buyer's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any setoff, counterclaim, recoupment, defense or other claim,
right or action which Buyer may have against the Company or any holder of
Common Stock or options to purchase Common Stock.
ARTICLE 2
THE SURVIVING CORPORATION
Section 2.01. Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance herewith and with applicable law.
Section 2.02. Bylaws. The bylaws of the Company in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance herewith and with applicable law.
Section 2.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, the directors and officers of Merger
Subsidiary at the Effective Time shall be the directors and officers of the
Surviving Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
Section 3.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has heretofore
delivered to Buyer true and complete copies of the Company's certificate of
incorporation and bylaws as currently in effect. As used in this Agreement,
the term "Material Adverse Effect" means a material adverse effect on the
business, assets, operations, condition or prospects (financial or otherwise),
results of operations or the conduct of the business of the Company and the
Company Subsidiaries taken as a whole; provided, however, that the cessation
of normal retail operations at any two or more store locations at which either
the Company or any Company Subsidiary conducts business on the date hereof
(other than a cessation of such operations at either of the Company's store
locations no. 167 or 168 resulting from the termination of the leases for such
locations solely by action of the landlords therefor) shall constitute a
Material Adverse Effect; and provided further that the incurrence by the
Company on a consolidated basis of net losses not exceeding $600,000 for
February 1999 and not exceeding $825,000 for March 1999, in and of itself
shall not constitute a Material Adverse Effect for purposes hereof. For
purposes of this Agreement, a "Subsidiary," as to any Person, means any
corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
such Person, and "Company Subsidiary" means any Subsidiary of the Company.
Section 3.02. Corporate Authorization; Approval of the Board. The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby are within
the Company's corporate powers and, except for any required approval by the
Company's stockholders in connection with the consummation of the Merger, have
been duly authorized by all necessary corporate action of the Company. This
Agreement constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except (x) as the same may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors' rights, and (y) for
the limitations imposed by general principles of equity. The foregoing
exceptions (x) and (y) are hereinafter referred to as the "Enforceability
Exceptions." The Board of Directors of the Company has, by resolutions duly
adopted at a meeting duly called and held, [unanimously] approved this
Agreement, the Merger and the other transactions contemplated hereby on the
material terms and conditions set forth herein. The Board of Directors of the
Company has received the opinion as of the date of this Agreement of Jefferies
& Co., Inc., as financial advisor to the Board of Directors of the Company,
that the consideration to be received by the Company's stockholders (other
than Buyer and its Subsidiaries) in the Merger is fair to such stockholders
from a financial point of view, and such opinion has been made available to
Buyer.
Section 3.03. Governmental Authorization. The execution, delivery
and performance by the Company of this Agreement and the consummation of the
Merger by the Company require no material action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
(a) the filing of a certificate of merger in accordance with New York Law, (b)
compliance with any applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (c) for notification pursuant to, and expiration or
termination of the waiting period under, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), and (d) where the failure to take such action or make such
filing would not have, and would not reasonably be expected to have, a
Material Adverse Effect or materially interfere with or delay the transactions
contemplated hereby.
Section 3.04. Noncontravention. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (a)
contravene or conflict with the certificate of incorporation or bylaws of the
Company, (b) assuming compliance with the matters referred to in Section 3.03,
to the best of the Company's knowledge, contravene or conflict in any material
respect with any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company or any Company Subsidiary,
(c) except as set forth on Schedule 3.04 or as disclosed on the SEC Reports
(as defined below) and with such other exceptions as would not individually or
in the aggregate have a Material Adverse Effect, to the best of the Company's
knowledge, constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or any
Company Subsidiary or to a loss of any benefit to which the Company or any
Company Subsidiary is entitled under any provision of any agreement, contract,
real estate lease or other instrument binding upon the Company or any Company
Subsidiary or any license, franchise, permit or other similar authorization
held by the Company or any Company Subsidiary or (d) with such exceptions as
would not individually or in the aggregate have a Material Adverse Effect, to
the best of the Company's knowledge, result in the creation or imposition of
any Lien on any asset of the Company or any Company Subsidiary. For purposes
of this Agreement, "Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
to such asset.
Section 3.05. Capitalization. The authorized capital stock of the
Company consists of 25,000,000 shares of common stock, par value $.01 per
share (defined above as "Common Stock"), and 2,500,000 shares of preferred
stock, par value $.10 per share. As of December 10, 1998, there were
outstanding (i) 2,594,827 shares of Common Stock and no shares of preferred
stock, (ii) stock options held by employees and nonemployee directors of the
Company to purchase a total of 845,319 shares of Common Stock at such exercise
prices as set forth in Schedule 3.05, and (iii) stock awards to nonemployee
directors in aggregate amount equal to 13,728 shares of Common Stock. All
outstanding Shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in this Section and in Schedule
3.05 or as disclosed in the SEC Reports, and except for changes since December
10, 1998 resulting from the exercise of stock options granted to employees and
nonemployee directors of the Company and referred to in the preceding clause
(ii), there are outstanding (a) no shares of capital stock or other voting
securities of the Company, (b) no securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities of the
Company, (c) no options or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company and (d) no stock appreciation rights or similar
rights with respect to any securities of the Company (the items in clauses
3.05(a), 3.05(b), 3.05(c) and 3.05(d) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
Section 3.06. Subsidiaries. (a) Schedule 3.06 lists each of the
Company's subsidiaries and the jurisdiction of incorporation and organization
of each Subsidiary. Each Company Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted and is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect. All Company Subsidiaries and their respective
jurisdictions of incorporation are identified on Schedule 3.06(a).
(b) Except as set forth in Schedule 3.06(b) or as disclosed in the
SEC Reports, all of the outstanding capital stock of, or other ownership
interests in, each Company Subsidiary, is owned by the Company, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). There are no
outstanding (i) securities of the Company or any Company Subsidiary
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Company Subsidiary, (ii) options or
other rights to acquire from the Company or any Company Subsidiary, and no
other obligation of the Company or any Company Subsidiary to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Company Subsidiary or (iii) stock
appreciation rights or similar rights with respect to any securities of any
Company Subsidiary (the items in clauses 3.06(b)(i), 3.06(b)(ii) and
3.06(b)(iii) being referred to collectively as the ("Company Subsidiary
Securities"). There are no outstanding obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any outstanding
Company Subsidiary Securities.
Section 3.07. SEC Filings. (a) The Company has made available to
Buyer (i) the annual reports on Form 10-K for its fiscal years ended January
31, 1998, February 1, 1997 and February 3, 1996, (ii) its quarterly reports on
Form 10-Q for its fiscal quarters ended May 0, Xxxxxx 0 xxx Xxxxxxx 00, 0000,
(xxx) its proxy or information statements relating to meetings of, or actions
taken without a meeting by, the stockholders of the Company held since January
31, 1996, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Securities and Exchange Commission (the
"SEC") since January 31, 1996. As used herein, the term "Form 10-K" means the
Company's annual report on Form 10-K for the fiscal year ended January 31,
1998, the term "Form 10-Q" means the Company's quarterly report on Form 10-Q
for the fiscal quarter ended October 31, 1998, and the term "SEC Reports"
means all of the reports and other filings referred to in the preceding
clauses (i) through (iv).
(b) As of its filing date, each such report or statement filed
pursuant to the Exchange Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(c) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), as of the date such statement or amendment became effective
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.
Section 3.08. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of the Company included in its annual reports on Form 10-K and the quarterly
reports on Form 10-Q referred to in Section 3.07 fairly present, in all
material respects and in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their consolidated
results of the operations and changes in financial position for the periods
then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
Section 3.09. Proxy Statements; Schedule 13E-3. The proxy statement
of the Company (the "Company Proxy Statement") to be mailed to the
stockholders of the Company in connection with the meeting of such
stockholders to vote on the approval and adoption of this Agreement and the
Merger (the "Company Stockholder Meeting"), and any amendments or supplements
to such proxy statement will, when filed with the SEC, to the best of the
Company's knowledge, comply as to form in all material respects with the
applicable requirements of the Exchange Act. At the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company and at the time such stockholders vote on adoption
of this Agreement, the information supplied by the Company for inclusion or
incorporation by reference in the Company Proxy Statement or in the Rule 13e-3
Transaction Statement on Schedule 13E-3 to be filed with the SEC in connection
with the Merger (the "Schedule 13E-3"), as either such document may be
supplemented or amended, if applicable, to the best of the Company's
knowledge, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.10. Absence of Certain Changes. Except as set forth on
Schedule 3.10 or as otherwise permitted by this Agreement, since October 31,
1998, the Company and Subsidiaries have in all material respects conducted
their business in the ordinary course consistent with past practice and there
has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had or reasonably would be expected to have a
Material Adverse Effect (other than those arising from general economic or
industry-wide events or occurrences);
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company, or any repurchase, redemption or other acquisition by the Company
or any Company Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any Company
Subsidiary;
(c) any amendment of any material term of any outstanding
security of the Company or any Company Subsidiary;
(d) any amendment of any material term of any real estate
lease to which the Company or any Company Subsidiary is a party;
(e) any incurrence, assumption or guarantee by the Company
or any Company Subsidiary of any indebtedness for borrowed money in excess of
$50,000 in the aggregate other than in the ordinary course of business and in
amounts and on terms consistent with past practices (but excluding
indebtedness owed to Buyer or any Subsidiary of Buyer);
(f) any creation or assumption by the Company or any
Company Subsidiary of any Lien (other than Permitted Liens (as defined below))
on any material asset other than in the ordinary course of business consistent
with past practices;
(g) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any Company Subsidiary relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any Company Subsidiary of any
contract or other right, in either case, material to the Company and the
Subsidiaries taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practice, those contemplated
by this Agreement and additions of subscribers to existing programming
agreements;
(h) any making of any loan, advance or capital
contributions to or investment in any Person other than advances to employees
in the ordinary course of business consistent with past practice and loans,
advances or capital contributions to or investments in wholly owned Company
Subsidiaries made in the ordinary course of business consistent with past
practices;
(i) any change in any method of accounting or accounting
practice by the Company or any Company Subsidiary, except for any such change
required by reason of a concurrent change in GAAP; or
(j) any (i) grant of any severance or termination pay to
any director, officer or employee of the Company or any of the Company
Subsidiaries, except as set forth in the Company's employment agreements
listed in Schedule 3.20, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company or any of the
Company Subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or (iv) increase in compensation, bonus
or other benefits payable to directors or officers (who are not employees) of
the Company or any of the Company Subsidiaries, or, other than in the ordinary
course of business consistent with past practice, to employees (including
officers who are employees) of the Company or any of the Company Subsidiaries.
For purposes of this Agreement, "Permitted Liens" means (i) materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's, and other like
Liens arising in the ordinary course of business for payments which are not
material in amount, and pledges or deposits to obtain the release of such
Liens; (ii) Liens for current taxes or assessments not yet due and payable or
which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established; (iii) Liens securing
indebtedness owed to Buyer or any Subsidiary of Buyer; and (iv) other Liens or
minor imperfections of title that, taken in the aggregate, do not materially
impair the conduct of the Company's and the Company Subsidiaries' business or
the use of any material assets.
Section 3.11. Litigation. Except as set forth in Schedule 3.11 or as
disclosed in the SEC Reports, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against, the Company or any Company Subsidiary or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official (i) which would reasonably be expected to have a Material Adverse
Effect, or (ii) which seek to prevent, hinder, modify or challenge the
transactions contemplated by this Agreement.
Section 3.12. No Undisclosed Material Liabilities. Neither the
Company nor any of the Company Subsidiaries has any indebtedness, liability or
obligation of any type, whether or not required by GAAP to be reflected on a
balance sheet and whether or not due, except (a) liabilities reflected or
reserved against in the balance sheet set forth in the Form 10-Q, or otherwise
disclosed in the other SEC Reports, (b) liabilities incurred in the ordinary
course of business since October 31, 1998, (c) other liabilities, individually
or in the aggregate, which would not reasonably be expected to have a Material
Adverse Effect and (d) as set forth on any Schedule hereto or any contract or
agreement set forth thereon (other than for breach thereof).
Section 3.13. Compliance with Laws. Except as set forth on Schedule
3.13, the Company and the Company Subsidiaries hold all licenses, franchises,
certificates, consents, permits, qualifications and authorizations from all
governmental authorities necessary for the lawful conduct of their businesses,
except where the failure to hold any of the foregoing would not have, and
would not reasonably be expected to have, a Material Adverse Effect. Neither
the Company nor any Company Subsidiary has violated, or is in violation of,
any such licenses, franchises, certificates, consents, permits, qualifications
or authorizations or any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair competition,
labor practices or corrupt practices) of any governmental authorities, except
where such violations do not have, and would not reasonably be expected to
have, a Material Adverse Effect.
Section 3.14. Finders' Fees. Except for Jefferies & Co., Inc., the
terms of whose engagement are set forth in the engagement letter provided to
Buyer, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf, of the Company
or any Company Subsidiary who might be entitled to any fee or commission from
Buyer or any of its affiliates upon consummation of the transaction
contemplated by this Agreement.
Section 3.15. Taxes. Except as to any items that would not,
individually, or in the aggregate, have a Material Adverse Effect and except
as set forth on Schedule 3.15 or as disclosed in the SEC Reports: (a) the
Company and each of the Company Subsidiaries has (i) paid all United States
federal, state, local and foreign income, FICA/FUTA, sales, excise, franchise
and similar taxes of any nature whatsoever (together with any related
penalties and interest) (any of the foregoing, a "Tax"), required to be paid
by it or collected from employees or customers in the form of payroll
withholding on or before the date hereof (and will duly pay all such amounts
required to be paid between the date hereof and the Effective Time) and (ii)
properly completed in correct form and timely filed all United States federal,
state, local and foreign income (including any estimated Taxes) and other Tax
returns or reports (including declarations of estimated Tax), required to be
filed by it; (b) there are no claims or assessments pending against the
Company or any of the Company Subsidiaries for any alleged deficiency in or
failure to pay any Tax, and the Company does not know of any threatened Tax
claims or assessments against the Company or any of the Company Subsidiaries;
(c) the Company and each of the Company Subsidiaries has established adequate
accruals for Taxes, interest, penalties and other additions thereto and for
any liability for deferred Taxes in accordance with GAAP; (d) there are no
Liens for Taxes (other than for current Taxes not yet due and payable) on the
assets of the Company or any of the Company's Subsidiaries; (e) there are no
agreements, waivers, or other arrangements providing for extensions of time in
respect of the assessment or collection of any unpaid Tax; (f) except as set
forth on Schedule 3.15(f), the Company has not made any payment which will be
or may be characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended; (g) the
Company has not taken any action that could have the effect of deferring any
liability for Taxes from any period ending on or before the Effective Time to
any taxable period ending thereafter; (h) the Federal income tax returns of
the Company have either been audited by the Internal Revenue Service or the
period during which any assessments may be made has expired without waiver or
extension, for all periods prior to and including the taxable year ended 1994;
and (i) from January 31, 1998, there have not been any Tax elections, any
settlements or compromises of any income or other Tax liabilities or any
changes in Tax attributes.
Section 3.16. Employee Benefits. (a) Except as set forth on
Schedule 3.16, the Company does not maintain, contribute to or have any
material liability (whether direct or indirect, including, without limitation,
as a result of an indemnification obligation) under, or with respect to, and
no ERISA Affiliate has any liability which has or will create any material
obligation by, or result in any material liability to, Buyer with respect to
or under, any Employee Benefit Plan. No material liability (whether direct or
indirect, including, without limitation, as a result of an indemnification
obligation) with respect to any Employee Benefit Plan has been or is
reasonably expected to be incurred by the Company or any ERISA Affiliate under
or pursuant to Title I or Title IV of ERISA or the penalty, excise tax or
joint and several liability provisions of the Code relating to employees,
employee compensation or employee benefit plans that could, following the
Effective Time, become or remain a material liability of Buyer or of any
Employee Benefit Plan established or contributed to by Buyer, and no event,
transaction or condition has occurred or exists that could result in any such
liability to their operations or, following the Effective Time, Buyer's.
(b) Except as set forth on Schedule 3.16(b), neither the execution
and delivery by the Company of this Agreement nor the consummation of the
transactions contemplated by this Agreement will result in the acceleration or
creation of any rights of any person to benefits under any Employee Benefit
Plan (including, without limitation, the acceleration of vesting or
exercisability of any stock options or restricted stock, the acceleration of
the accrual or vesting under any Employee Benefit Plan or the acceleration or
creation under any severance, parachute or change of control agreement) which
could result in a material liability to Buyer.
(c) Except as set forth on Schedule 3.16(c), there is no material
action, order, writ, injunction, judgment or decree outstanding or claim,
suit, litigation, proceeding arbitration, governmental audit or investigation
relating to or seeking benefits under any Employee Benefit Plan that is
pending or, to the knowledge of the Company, threatened or anticipated against
the Company, any ERISA Affiliate or any Employee Benefit Plan, other than
claims for benefits in the ordinary course.
(d) Except as set forth on Schedule 3.20, neither any provision of
any employee Benefit Plan or any contract (whether or not written), nor any
transaction, condition or other event exists or has occurred that would
require Buyer to provide any material compensation, payments or benefits,
including, without limitation, severance payments) to or on behalf of any
former or current employee of the Company or any ERISA Affiliate.
(e) As used herein, the term "Employee Benefit Plan" means any
pension, retirement, profit-sharing, deferred compensation, bonus, incentive,
performance, stock option, phantom stock, stock purchase, restricted stock,
premium conversion, medical, hospitalization, vision, dental or other health,
life, disability, severance, termination or other employee benefit plan,
program, arrangement, agreement or policy, whether written or unwritten, to
which the Company or any Company Subsidiary contributes, is obligated to
contribute to, is a party to or is otherwise bound, or with respect to which
the Company or any Company Subsidiary may have any liabilities. As used
herein, the term "ERISA Affiliate" means (i) a member of any "controlled
group" (as defined in Section 414(b) of the Code) of which the Company is a
member, (ii) a trade or business, whether or not incorporated, under common
control (within the meaning of Section 414(c) of the Code) with the Company,
or (iii) a member of any affiliated service group (within the meaning of
Section 414(m) of the Code) of which the Company is a member.
Section 3.17. Environmental Matters.
(a) To the best of the Company's knowledge, except as set forth on
Schedule 3.17 or as disclosed in the SEC Reports, there are no material
Environmental Liabilities (as defined below) of the Company or any of the
Company Subsidiaries. To the best of the Company's knowledge, the Company and
the Company Subsidiaries are in compliance and have been in compliance, in all
material respects, with all Environmental Laws. There has been no report
regarding any material environmental assessment, investigation, study, audit,
test, review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or the Company
Subsidiaries or any property or facility now or previously owned by the
Company or the Company Subsidiaries which has not been delivered to Buyer.
Schedule 3.17 identifies all environmental reports and studies in the
possession or control of the Company relating to any real property that
previously has been or currently is owned or leased by the Company, any
Company Subsidiary or any predecessor thereof, copies of which previously been
furnished to Buyer. Schedule 3.17 identifies all real property owned by the
Company or any Company Subsidiary, and all real property previously or
currently leased or owned by the Company or any Company Subsidiary at which
automotive repair services ever have been performed.
(b) For purposes of this Agreement, "Environmental Liabilities" means
any and all liabilities of the named entity, which (i) arise under or relate
to matters covered by Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time, and includes but is
not limited to fines, penalties, and costs of correcting any compliance
deficiencies, and obligations for site cleanup or investigation or cleanup
resulting from the disposal, release or threatened release of hazardous
substances, pollutants, contaminants, or wastes.
(c) For purposes of this Agreement, "Closing Environmental
Liabilities" means the estimated cost to remediate all Environmental
Liabilities of the Company with respect to the real property locations
identified on Schedule 3.17 as determined by reference to the environmental
report to be obtained by Buyer pursuant to Section 6.06; provided, however,
that if the Company disputes the amount of such remediation costs as so
determined, the Company shall notify the Buyer to such effect within ten
business days of its receipt of Buyer's environmental report pursuant to
Section 6.06, and the amount of the Closing Environmental Liabilities shall
then be determined in accordance with the dispute resolution procedure set
forth in Section 10.10(d).
(d) For purposes of this Agreement, "Environmental Laws" means any
federal, state, and local laws, judicial decisions, regulations, rules,
judgments, orders, decrees, permits, licenses, agreements and governmental
restrictions, relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants or other hazardous
substances or wastes into the environment, including without limitation
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 other hazardous
substances or wastes or the clean-up or other remediation thereof.
Section 3.18. Material Agreements. Except for those contracts listed
on Schedule 3.18 (the "Material Agreements"), or as disclosed in SEC Reports,
neither the Company nor any of the Company Subsidiaries is a party to or is
bound by any written or oral contract, commitment or agreement which is
material to the Company and the Company Subsidiaries taken as a whole or which
involves payments of more than $150,000 in the aggregate over the remaining
term thereof or which restricts the Company and its affiliates from engaging
in any business in a manner that would be consistent with its current
practices and activities. Each Material Agreement is in all material respects
the validly existing, legally enforceable obligation of the Company or one of
the Company Subsidiaries, as the case may be, and, to the best of the
Company's knowledge, of the other parties thereto, subject to the
Enforceability Exceptions. To the best of the Company's knowledge, the
Company and the Company Subsidiaries are validly and lawfully operating in all
material respects under the Material Agreements to which they are a party. To
the best of the Company's knowledge, the Company and the Company Subsidiaries
have duly complied in all material respects with all of the terms and
conditions of each of the Material Agreement to which they are a party.
Section 3.19. Title to Properties; Encumbrances. Except as set forth
on Schedule 3.19 or as disclosed in the SEC Reports, the Company and each of
the Company Subsidiaries has good and marketable title to (or in the case of
leased assets, valid and existing leasehold interests in) the material assets
set forth on the balance sheet included in the Form 10-Q (other than those
disposed of in the ordinary course of business since October 31, 1998), free
and clear of all Liens other than Permitted Liens. Schedule 3.19 sets forth a
list of all real property which is owned or leased by the Company or any of
the Company Subsidiaries, and sets forth with respect to each lease: (i) the
term thereof; (ii) the renewal options, if any, applicable thereto; (iii) the
number of square feet of leased space; and (iv) the rents and other financial
terms applicable thereto. Except as set forth in Schedule 3.19 or disclosed
in the SEC Reports and with such other exceptions as would not have a Material
Adverse Effect, to the best of the Company's knowledge, all buildings,
improvements, furniture, fixtures, equipment and other operating assets of the
Company and the Company Subsidiaries are in good working order and condition,
normal wear and tear excepted.
Section 3.20. Labor Matters. (a) Except as set forth on Schedule
3.20, neither the Company nor any Company Subsidiary is a party to any
employment, labor or collective bargaining agreement, and there are no
employment, labor or collective bargaining agreements which pertain to
employees of the Company or of any Company Subsidiary. The Company has
heretofore made available to Buyer true, complete and correct copies of the
(i) employment agreements listed on Schedule 3.20 and (ii) labor or collective
bargaining agreements listed on such Schedule, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(b) No employees of the Company or of any Company Subsidiary are
represented by any labor organization. To the knowledge of the Company, no
labor organization or group of employees of the Company or of any Company
Subsidiary has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking
a representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. To the knowledge of Company, there are no
organizing activities involving either the Company or any Company Subsidiary
pending with any labor organization or group of employees of the Company or
any Company Subsidiary.
(c) Except as set forth on Schedule 3.20, there are no (i) unfair
labor practice charges, grievances or complaints pending or, to the Company's
knowledge, threatened in writing by or on behalf of any employee or group of
employees of the Company or of any Company Subsidiary which, if resolved
against the Company or any Company Subsidiary, as the case may be, would cause
a Material Adverse Effect on the Company, or (ii) complaints, charges or
claims against the Company or any Company Subsidiary pending or, to the
Company's knowledge, threatened in writing to be brought or filed, with any
governmental entity or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any individual by the Company or any Company Subsidiary which, if resolved
against the Company or any Company Subsidiary, as the case may be, would cause
a Material Adverse Effect.
(d) The Company is in full compliance with the Worker Readjustment
and Notification Act, 29 U.S.C. Section 2101 (the "WARN Act"), including the
prompt and correct furnishing of all notices required to be given thereunder in
connection with any "plant closing" or "mass layoff" to "affected employees,"
"representatives" and any state dislocated worker unit and local government
officials. No reduction in the notification period under the WARN Act is
being relied upon by the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and the Merger Subsidiary, jointly and severally, represent and
warrant to the Company that:
Section 4.01. Corporate Existence and Power. Each of Buyer and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted. Since the
date of its incorporation, Merger Subsidiary has not engaged, and will not
engage, in any activities other than in connection with or as contemplated by
this Agreement or in connection with arranging any financing required to
consummate the transactions contemplated hereby. Buyer has heretofore
delivered to the Company true and complete copies of Buyer's and Merger
Subsidiary's certificate or articles of incorporation and bylaws as in effect
on the date hereof.
Section 4.02. Corporate Authorization. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger Subsidiary and have
been duly authorized by all necessary corporate action of Buyer and Merger
Subsidiary. This Agreement constitutes a valid and binding agreement of each
of Buyer and Merger Subsidiary enforceable against it in accordance with its
terms, subject to the Enforceability Exceptions. The approval of Buyer's
shareholders is not required to execute this Agreement or consummate the
Merger. Buyer's and Merger Subsidiary's Boards of Directors have duly
authorized the Merger and the other transactions contemplated hereby
(including the Subordinated Note Purchase Agreement and the Subordinated Note)
by resolutions adopted at meetings duly held and called.
Section 4.03. Governmental Authorization. The execution, delivery
and performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
by this Agreement require no material action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (a) the
filing of a certificate of merger in accordance with New York Law, (b)
compliance with any applicable requirements of the Exchange Act, (c) for
notification pursuant to, and expiration or termination of the waiting period
under, the HSR Act, and (d) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not have, and would not reasonably be expected to have, a
Buyer MAE or materially interfere with or delay the transactions contemplated
hereby. As used herein, the term "Buyer MAE" means a material adverse effect
on the ability of Buyer and Merger Subsidiary to consummate the Merger in
accordance with the terms and conditions set forth in this Agreement.
Section 4.04. Noncontravention. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby do not and will not (a) contravene or conflict with the certificate or
articles of incorporation or bylaws of Buyer or Merger Subsidiary, (b)
assuming compliance with the matters referred to in Section 4.03, contravene
or conflict in any material respect with any provision of law, regulation,
judgment, order or decree binding upon Buyer or any Subsidiary of Buyer or (c)
except as set forth in Schedule 4.04, and with such exceptions as would not
individually or in the aggregate have a Buyer MAE, constitute a default under
or give rise to any right of termination, cancellation or acceleration of any
right or obligation of Buyer or any Subsidiary of Buyer or to a loss of any
benefit to which Buyer or any Subsidiary of Buyer is entitled under any
agreement, contract or other instrument binding upon Buyer or any Subsidiary
of Buyer.
Section 4.05. Proxy Statement; Schedule 13E-3. The Schedule 13E-3,
and any amendments or supplements thereto, will, when filed with the SEC,
comply as to form in all material respects with the applicable requirements of
the Exchange Act. At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement, the information
supplied by Buyer for inclusion or incorporation by reference in the Company
Proxy Statement or the Schedule 13E-3, as either such document may be amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading.
Section 4.06 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against, Buyer or any Subsidiary of Buyer or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which seeks to prevent, hinder, modify or challenge the transactions
contemplated by this Agreement.
Section 4.07. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to
act on behalf of, Buyer or any Buyer Subsidiary (other than the Company or any
Company Subsidiary) who might be entitled to any fee or commission from the
Company or any of its affiliates upon consummation of the transactions
contemplated by this Agreement.
Section 4.08. Financing. Buyer has, and will have prior to the
Effective Time, sufficient funds available to pay the Merger Consideration in
respect of all of the Shares (other than Shares owned by Buyer or any
Subsidiary of Buyer) and to pay all related fees and expenses pursuant to the
Merger and this Agreement.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
Section 5.01. Conduct of the Company.
(a) Except as set forth in Schedule 5.01 or as otherwise contemplated
herein, from the date hereof until the Effective Time, the Company and the
Company Subsidiaries shall conduct their business in the ordinary course
consistent with past practice in all material respects and shall use their
commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees in all material respects.
Without limiting the generality of the foregoing, from the date hereof until
the Effective Time and except as set forth in Schedule 5.01:
(i) the Company will not adopt or propose any change in its
certificate of incorporation or bylaws;
(ii) the Company will not, and will not permit any Company
Subsidiary to, merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) the Company will not, and will not permit any Company
Subsidiary to, sell, lease, license or otherwise dispose of any material
assets or property except (A) pursuant to existing contracts or commitments
and (B) in the ordinary course consistent with past practice;
(iv) the Company will not, and will not permit any Company
Subsidiary to, agree or commit to do any of the foregoing; and
(v) the Company will not, and will not permit any Company
Subsidiary to take or agree to commit to, take any action that would make any
representation or warranty of the Company hereunder inaccurate in any respect
at the Effective Time.
(b) Notwithstanding anything to the contrary in this Agreement, Buyer
and Merger Subsidiary agree that (i) the Company may pay to: (A) Xxxxxxxxx &
Company, Inc. its fees and expenses in accordance with the existing agreements
in respect of its fairness opinion relating to the Merger, not to exceed
$250,000 in the aggregate; and (B) to other persons fees and expenses relating
to the Merger in an amount not to exceed $250,000 in the aggregate, and (ii)
to the extent that the Company makes any of these payments, none of the
payments, individually or in the aggregate, shall be deemed to (i) have a
Material Adverse Effect on the Company or (ii) provide to Buyer any reason not
to consummate the Merger or make an adjustment to the Per Share Amount.
Section 5.02. Stockholder Meeting; Proxy Material. Subject to the
provisions of Section 5.04, the Company shall cause the Company Stockholder
Meeting to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this Agreement and the
Merger unless a vote of stockholders of the Company is not required by New
York Law. Subject to the provisions of Section 5.04, the Directors of the
Company shall recommend approval and adoption of this Agreement and the Merger
by the Company's stockholders at the Company Stockholder Meeting, and will
include such recommendation in the Company Proxy Statement; provided, however,
that, consistent with its fiduciary duties set forth in Section 5.04, the
Board of Directors of the Company shall be permitted to (i) not recommend to
the Company's stockholders that they give the Company Stockholder Approval or
(ii) withdraw or modify in a manner adverse to Buyer and Merger Subsidiary its
recommendation to the Company's stockholders that they give the Company
Stockholder Approval, but in each of cases (i) and (ii) only if and to the
extent that the Company has complied with Section 5.04 and this Section 5.02
and a Superior Proposal (as defined below) is pending at the time the
Company's Board of Directors determines to take any such action or inaction.
The Company will (i) in connection with the Company Stockholder Meeting,
promptly prepare and file with the SEC, use commercially reasonable efforts to
have cleared by the SEC as promptly as practicable and thereafter mail to its
stockholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for such Company Stockholder Meeting and (ii) unless, to
the extent permitted by the second sentence of this Section 5.02, and subject
to Section 5.04, the Board of Directors shall not recommend to the Company's
stockholders that they give the Company Stockholder Approval or shall have
withdrawn or modified in a manner adverse to Buyer its recommendation, use
commercially reasonable efforts to solicit proxies in favor of the approval of
this Agreement and the Merger, provided that the obligation of the Company to
cause the Company Proxy Statement and the proxy to be mailed to the Company's
stockholders is subject to the Board of Directors of the Company having
received from Jefferies & Co., Inc. confirmation of its opinion referred to in
Section 3.02 as of the date scheduled for mailing of the Company Proxy
Statement if the Board of Directors requests such a confirmation. For
purposes of this Agreement, "Superior Proposal" means any bona fide
Acquisition Proposal, on terms that the Board of Directors of the Company
determines in its reasonable good faith judgment are more favorable to the
Company's stockholders taken as a whole than the transactions contemplated by
this Agreement and with respect to which the Company's Board of Directors
determines, in its reasonable good faith judgment, after consultation with its
financial advisors, the Person making such Acquisition Proposal has the
financial means to consummate such Acquisition Proposal. For purposes of this
Agreement, "Acquisition Proposal" means any offer or proposal for a merger,
consolidation or tender or exchange offer or other business combination
involving the Company or any Subsidiary of the Company or the acquisition of
any substantial debt or equity interest in, or a substantial portion of the
assets of, the Company or of any Company Subsidiary, other than the
transactions contemplated by this Agreement.
Section 5.03. Access to Information. Subject to the provisions of
Section 5.06, from the date hereof until the Effective Time, the Company will
give Buyer, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of
the Company and the Company Subsidiaries, will furnish to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such Persons may
reasonably request and will instruct the Company's employees, counsel and
financial advisors to cooperate with Buyer in its investigation of the
business of the Company and the Company Subsidiaries; provided that such
access shall be upon reasonable advance notice to the Company and during
normal business hours and shall not unreasonably interfere with the Company's
operation of its business; and provided further that no investigation pursuant
to this Section shall affect any representation or warranty given by the
Company to Buyer hereunder.
Section 5.04. Other Offers From the date hereof until the
termination hereof, the Company and the Company Subsidiaries and the officers,
directors, employees or other agents of the Company and the Company
Subsidiaries will not (i) solicit or initiate any inquiries or proposals that
constitute, or reasonably would be expected to lead to, any Acquisition
Proposal or (ii) engage in negotiations with, or disclose any nonpublic
information relating to the Company or any Company Subsidiary or afford access
to the properties, books or records of the Company or any Company Subsidiary,
to any Person (or any of its agents or representatives) that the Company
believes may be considering making, or has made, an Acquisition Proposal,
provided that nothing contained in this Section 5.04 shall (A) prevent the
Company from furnishing nonpublic information to, or entering into
negotiations with, any Person in connection with an unsolicited Acquisition
Proposal received from such Person so long as prior to furnishing nonpublic
information to, or entering into negotiations with, such Person, (1) the
Company receives from such Person an executed confidentiality agreement with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement (as defined below), (2) the Board of Directors has
reasonably concluded that such Acquisition Proposal may constitute a Superior
Proposal and (3) the Company has otherwise complied with this Section 5.04 or
(B) prevent the Company and the Company Subsidiaries from taking actions in
the ordinary course of business consistent with past practice and not in
connection with any Acquisition Proposal. The Company will notify Buyer as
soon as possible, but in any event within 24 hours, after receipt of any
Acquisition Proposal or any request for nonpublic information relating to the
Company or any Company Subsidiary or for access to the properties, books or
records of the Company or any Company Subsidiary by any Person that the
Company believes may be considering making, or has made, an Acquisition
Proposal. Such notice to Buyer shall indicate the identity of the Person
making the Acquisition Proposal or request and in reasonable detail the terms
thereof. If the financial or other material terms of such Acquisition
Proposal are modified in any material respect, then the Company shall notify
Buyer as soon as possible, and in any event within 24 hours. The Company will
immediately cease and cause its advisors and agents to cease any and all
existing activities, discussions or negotiations regarding an Acquisition
Proposal with any parties previously contacted; provided that the Company may
inform such parties that this Agreement has been entered into and that the
previously disclosed exploration of strategic alternatives process has been
terminated. Nothing contained in this Agreement shall prohibit the Board of
Directors of the Company from (i) taking and disclosing to the Company's
shareholders a position with respect to a tender offer for the Shares by a
third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act, (ii) making such disclosure to the Company's shareholders as, in the
judgment of the Board of Directors of the Company, based on the advice of
outside counsel, is required under applicable law or under the rules of the
NASDAQ Stock Market or (iii) responding to any unsolicited proposal or inquiry
solely by advising the person making such proposal or inquiry of the terms of
this Section 5.04. From the date hereof until the termination hereof, the
Company (i) shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement (other than any entered into in the
ordinary course of business not in connection with any Acquisition Proposal
and other than as permitted under the proviso to the first sentence of this
Section 5.04) to which it or any of its Subsidiaries is a party and (ii) shall
enforce, to the fullest extent permitted under applicable law, the provisions
of any such agreement, including, without limitation, by seeking to obtain
injunctions to prevent breaches thereof that are known to it and specific
performance thereof.
Section 5.05. Estoppel Certificates. The Company will undertake
commercially reasonable efforts to obtain from the lessor under each lease
listed in Schedule 3.19 an estoppel certificate certifying (i) that to the
knowledge of such lessor there exists no event or circumstance that
constitutes, or which with the giving of notice or the passage of time would
constitute, an event of default under the lease; (ii) that the lessee under
the lease is current in its rent obligations thereunder; and (iii) that the
material terms of the lease are as described in Schedule 3.19.
Section 5.06. Confidentiality Agreement. The terms and conditions
of the Confidentiality Agreement by and between Buyer and the Company dated
November 5, 1998 (the "Confidentiality Agreement") are incorporated herein by
reference and shall apply to all information relating to the Company and the
Company Subsidiaries provided to Buyer before the execution of this Agreement
and to all information relating to the Company and the Company Subsidiaries
provided to Buyer after the execution of this Agreement, including, without
limitation, pursuant to Section 5.03 hereof.
Section 5.07. Pre-Closing Balance Sheet. The Company shall prepare
and deliver to Buyer, as soon as reasonably practicable and in any event not
less than five days prior to the scheduled Effective Time, a consolidated
balance sheet of the Company and the Company Subsidiaries dated as of January
31, 1999 and satisfying the requirement of this Section 5.07(the "Pre-Closing
Balance Sheet"). If the Effective Time occurs on or before March 15, 1999,
then the Pre-Closing Balance Sheet may be unaudited, and (unless audited by
PricewaterhouseCoopers LLP) shall be accompanied by a certificate executed by
the Chief Financial Officer and by the Executive Vice President and Secretary
of the Company certifying that such Pre-Closing Balance Sheet is correct and
complete in all materials respects and prepared in accordance with generally
accepted accounting principles consistently applied, except as set forth on
Schedule 5.07. If the Effective Time occurs after March 15, 1999, then the
Pre-Closing Balance Sheet shall be audited by PricewaterhouseCoopers LLP and
shall be prepared in accordance with generally accepted accounting principles
consistently applied, except as set forth on Schedule 5.07, and provided that
notwithstanding Schedule 5.07, inventory shrink shall be actual.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
Section 6.01. Obligations of Merger Subsidiary. Buyer will take any
and all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement.
Section 6.02. Director and Officer Liability. For seven years after
the Effective Time, Buyer will, and will cause the Surviving Corporation to,
(i) indemnify and hold harmless the present and former officers, directors and
employees of the Company against all costs and expenses (including attorneys'
fees and expenses), losses, claims, damages or liabilities of any kind or
nature in respect of acts or omissions occurring prior to the Effective Time
(including, without limitation, in respect of acts or omissions in connection
with this Agreement and the transactions contemplated hereby) to the fullest
extent permitted under the Company's certificate of incorporation and bylaws
and (ii) to the fullest extent permitted under applicable law, advance to such
Persons fees and expenses incurred in defending any action or suit with
respect to which indemnity may be available under the Company's certificate of
incorporation or bylaws upon receipt from each such Person to whom fees and
expenses are advanced of an undertaking reasonably satisfactory to Buyer to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification. In the event any claim or claims are asserted or
made within such seven-year period, all rights to indemnification in respect
of any such claim or claims shall continue until disposition of any and all
such claims. Any determination required to be made with respect to whether
any of the foregoing Persons is entitled to indemnification as set forth above
shall be made by independent legal counsel selected mutually by such Person
and Buyer. For seven years after the Effective Time, Buyer will use
commercially reasonable efforts to provide officers' and directors' liability
insurance and fiduciary liability insurance in respect of acts or omissions
occurring on or prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability
insurance policy and fiduciary liability insurance policy on terms with
respect to coverage and amount no less favorable in any material respect than
those of such policies in effect on the date hereof. Buyer may satisfy such
obligation by purchasing officer's and directors' liability and fiduciary
liability run-off coverage for such seven-year period. During such seven-year
period, Buyer shall not cause or permit any amendment or other change to the
articles of incorporation or bylaws of the Surviving Corporation which would
adversely affect the indemnification rights of former officers, directors and
employees of the Company, except to the extent any such amendment may be
required by applicable law. In the event that Buyer or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Buyer or the Surviving Corporation, as the case may
be, shall assume all of the obligations set forth in this Section 6.02.
Section 6.03. Employment Agreements. From and after the Effective
Time, Buyer shall, and shall cause the Surviving Corporation and its
Subsidiaries to, honor in accordance with their terms, the employment
contracts (including without limitation the severance provisions therein)
listed in Schedule 3.20 between the Company or one of the Company Subsidiaries
and certain current or former directors, officers or employees thereof (true
and correct copies of which have been delivered by the Company to Buyer).
Section 6.04. Standstill. If this Agreement is terminated by the
Company pursuant to and in accordance with Section 9.01(e), Buyer shall not
purchase any Shares for a period of one year following such termination
without the prior written consent of the Company.
Section 6.05. Transitory Nature of Merger Subsidiary. Buyer
acknowledges that the Company has agreed to the structure of the merger on the
basis that the transaction will be treated for federal income tax purposes as
an acquisition by Buyer of the stock of the Company from the Company's
shareholders.
Section 6.06. Buyer's Environmental Report. Buyer shall use
commercially reasonable efforts to cause Geologic Services Corporation to
prepare and deliver to Buyer as soon as reasonably possible a Phase II
environmental report covering all of the real property identified in Schedule
3.17, which report shall include an estimate as to the cost of remediating all
Environmental Liabilities with respect to such properties. Buyer shall
deliver a copy of such report to the Company not later than two business days
following Buyer's receipt thereof.
ARTICLE 7
COVENANTS OF BUYER AND THE COMPANY
The parties hereto agree that:
Section 7.01. Commercially Reasonable Efforts; SEC Filings. Each of
the parties hereto agrees to use its commercially reasonable efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement in the most expeditious manner practicable, including but not
limited to the satisfaction of all conditions to the Merger and seeking to
remove promptly any injunction or other legal barrier that may prevent or
delay such consummation. Each of the parties shall promptly notify the other
whenever a consent is obtained and shall keep the other informed as to the
progress in obtaining such consents. The Company and Buyer will promptly
prepare and file with the SEC, and thereafter mail to the stockholders of the
Company as promptly as practicable the Company Proxy Statement and all other
proxy materials for the Company Stockholder Meeting. The Company Proxy
Statement will include therein the information required to be provided to the
Company's stockholders by Rule 13e-3(e) under the Exchange Act.
Section 7.02. Public Announcements. Buyer and the Company agree
that the press release set forth in Exhibit 7.02 hereto shall be released to
the public immediately upon execution hereof. Buyer and the Company will
consult with each other before issuing any other press release or making any
other public statement with respect to this Agreement and the transactions
contemplated hereby and, except as may be required by applicable law or any
listing agreement with any national quotation system, will not issue any such
press release or make any such public statement prior to such consultation.
Section 7.03. Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of the Company or Merger Subsidiary, any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 7.04. Notices of Certain Events. The parties shall promptly
notify each other of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) the occurrence, or threatened occurrence, of any fact
or circumstance that would cause or constitute, or would be reasonably likely
to cause or constitute, a material breach of any of its representations and
warranties set forth herein.
ARTICLE 8
CLOSING; CONDITIONS TO THE MERGER
Section 8.01. Closing. The closing of the transactions contemplated
hereby shall take place at the offices of Xxxxxxx Berlin Shereff Xxxxxxxx,
LLP, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
location as the parties may agree in writing.
Section 8.02. Conditions to the Obligations of Each Party. The
obligations of the Company, Buyer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) if required by New York Law, this Agreement shall have
been adopted by the stockholders of the Company in accordance with such Law;
(b) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger;
(c) the governmental and third party notices,
authorizations, consents, orders or approvals set forth on Schedule 8.02 shall
have been obtained and be in effect; and
(d) (i) no federal, state or foreign court, arbitrator or
governmental body, agency, or official shall have issued any order, and there
shall not have been adopted or promulgated any statute, rule or regulation,
prohibiting the consummation of the Merger or, except for orders, statutes,
rules and regulations of general effect, limiting or restricting Buyer's
conduct or operation of the business of the Company after the Merger in a
manner that would have a Material Adverse Effect, and (ii) no proceeding
seeking to prohibit, alter, prevent or materially delay the Merger shall have
been instituted by any governmental agency or authority before any court,
arbitrator or governmental body, agency or official and be pending.
Section 8.03. Conditions to the Obligations of Buyer and Merger
Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) No Material Adverse Effect shall have occurred and be
continuing as a result of either (i) the breach by the Company of any of the
representations and warranties of the Company contained in this Agreement
(disregarding all exceptions therein for materiality and Material Adverse
Effect), or (ii) the failure of the Company to have performed its obligations
required hereunder, and Buyer shall have received a certificate signed by an
executive officer on behalf of the Company to the foregoing effect;
(b) The amount of the Closing Environmental Liabilities
shall have been definitively resolved in accordance herewith, and shall not be
greater than $750,000;
(c) Buyer shall have received from the Company the Pre-
Closing Balance Sheet and all accompanying certifications and/or reports
required pursuant to Section 5.07 showing that as of the date of such Pre-
Closing Balance Sheet the Net Assets of the Company are not less than negative
$1,000,000; and
(d) Buyer shall have received all customary documents it
may reasonably request relating to the existence of the Company and the
authority of the Company for this Agreement, all in form and substance
reasonably satisfactory to Buyer.
Section 8.04. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) no Buyer MAE shall have occurred and be continuing as a
result of either (i) the breach by Buyer or Merger Subsidiary of any of the
representations and warranties of Buyer contained in this Agreement
(disregarding the exceptions therein for materiality and Buyer MAE) or (ii)
the failure of Buyer or Buyer Subsidiary to have performed its obligations
required hereunder, and the Company shall have received a certificate signed
by an executive officer on behalf of Buyer to the foregoing effect; and
(b) the Company shall have received all customary documents
it may reasonably request relating to the existence of Buyer or Merger
Subsidiary and the authority of Buyer or Merger Subsidiary for this Agreement,
all in form and substance reasonably satisfactory to the Company.
ARTICLE 9
TERMINATION
Section 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
company):
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer if, at the Company
Stockholder Meeting (including any postponement or adjournment thereof), the
Merger and the other transactions contemplated hereby that require such
approval shall fail to be approved and adopted by the affirmative vote
specified herein;
(c) by either the Company or Buyer, if the Merger has not
been consummated by April 30, 1999; provided, however, that no party that has
materially breached its obligations hereunder shall be entitled to terminate
this Agreement under this subsection;
(d) by either the Company or Buyer (so long as such party
has complied in all material respects with its obligations under Section
7.01), if there shall be any law or regulation that makes consummation of the
Merger illegal, or if any judgment, injunction, order or decree enjoining
Buyer or the Company from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(e) by the Company (provided that at the time Buyer would
not be entitled to terminate this Agreement under Section 9.01(f) or 9.01(g)
disregarding the notice provisions therein) if a Buyer MAE has occurred as a
result of either (i) the breach by Buyer of any of the representations and
warranties of Buyer contained in this Agreement (disregarding the exceptions
therein for materiality and Buyer MAE) or (ii) the failure of Buyer or Merger
Subsidiary to have performed its obligations required hereunder (including
without limitation a failure to consummate the Merger when and as required
pursuant to and in accordance with this Agreement), and Buyer does not cure,
or proceed in good faith to cure, such breach within ten business days after
the Company delivers written notice thereof;
(f) by Buyer (provided that at the time the Company would
not be entitled to terminate this Agreement under Section 9.01(e) disregarding
the notice provisions therein) if a Material Adverse Effect has occurred as a
result of either (i) the breach by the Company of any of the representations
and warranties of the Company contained in this Agreement (disregarding the
exceptions therein for materiality and Material Adverse Effect) or (ii) the
failure of the Company to have performed its obligations required hereunder,
and the Company does not cure, or proceed in good faith to cure, such breach
within ten business days after Buyer delivers written notice thereof;
(g) by Buyer if either (i) the Company ceases to conduct
normal retail operations at two or more of its currently existing store
locations (other than a cessation of such retail operations at the Company's
store locations no. 167 and/or 168 resulting from the termination of the
leases for such locations solely be action of the landlord therefor), (ii) the
Pre-Closing Balance Sheet to be delivered by the Company to Buyer as provided
in Section 8.03(c) shows that the Net Assets of the Company are less than
negative $1,000,000, or (iii) the Closing Environmental Liabilities are
greater than $750,000;
(h) by the Company, if prior to the Company Stockholder
Meeting, the Board of Directors of the Company shall have failed to recommend
or shall have withdrawn or modified or changed in a manner adverse to Buyer
its approval or recommendation of this Agreement or the Merger or shall have
failed to include its recommendation in favor of the Merger in the Company
Proxy Statement or shall have recommended or approved or endorsed a Superior
Proposal (provided that the determination by the Board of Directors that an
Acquisition Proposal constitutes a Superior Proposal for purposes of Section
5.04 shall not be treated as recommending, approving or endorsing a Superior
Proposal), or the Company shall have entered into a definitive agreement or a
letter of intent or similar agreement (which shall not include a
confidentiality/standstill agreement permitted by Section 5.04) providing for
a Superior Proposal with a Person other than Buyer or its Subsidiaries, in
each case in accordance with and to the extent permitted by Section 5.02;
provided that the Company shall have made the payment referred to in Section
9.02(b) hereof;
(i) by Buyer if the Board of Directors of the Company shall
have failed to recommend or shall have withdrawn, or modified or changed in a
manner adverse to Buyer its approval or recommendation of this Agreement or
the Merger or shall have failed to include its recommendation in favor of the
Merger in the Company Proxy Statement or shall have recommended or approved or
endorsed a Superior Proposal (provided that the determination by the Board of
Directors that an Acquisition Proposal constitutes a Superior Proposal for
purposes of Section 5.04 shall not be treated as recommending, approving or
endorsing a Superior Proposal), or the Company shall have entered into a
definitive agreement or a letter of intent or similar agreement (which shall
not include a confidentiality/standstill agreement permitted by Section 5.04)
providing for a Superior Proposal with a Person other than Buyer or its
Subsidiaries;
(j) by Buyer (provided that at the time the Company would
not be entitled to terminate this Agreement under Section 9.01(e) disregarding
the notice provisions thereof) if the Company elects not to cause the Company
Proxy Statement and Proxy to be mailed to the Company's stockholders pursuant
to the proviso to the third sentence of Section 5.02;
(k) by the Company (provided that at the time Buyer would
not be entitled to terminate this Agreement under Sections 9.02(f) or 9.02(g)
disregarding the notice provisions therein) if the Company elects not to cause
the Company Proxy Statement and Proxy to be mailed to the Company's
stockholders pursuant to the proviso to the third sentence of Section 5.02; or
(l) by the Company, if the Pre-Closing Balance Sheet to be
delivered by the Company to Buyer as provided in Section 8.03(c) shows that
the Net Assets of the Company are greater than $7,000,000.
The party desiring to terminate this Agreement pursuant to this Section 9.01
shall give written notice of such termination to the other party in accordance
with Section 10.01.
Section 9.02. Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.01, this
Agreement shall become void and of no effect with no liability on the part of
any party hereto, except that the agreements contained in this Section 9.02
and in Section 10.04 shall survive the termination hereof.
(b) In the event that (i) an Acquisition Proposal shall have been
made known to the Company or any Company Subsidiary, or has been made directly
to its stockholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make an Acquisition Proposal and
thereafter Company Stockholder Approval is not obtained or (ii) this Agreement
is terminated by Buyer pursuant to Section 9.01(i) or by the Company pursuant
to Section 9.01(l), then the Company will promptly, but in no event later than
two days after the date of such termination, pay Buyer a fee equal to
$2,000,000 (the "Termination Fee"), payable by wire transfer of same day
funds, plus upon Buyer's request all reasonable and documented out-of-pocket
expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated hereby in an amount (as to such expenses) not to
exceed $300,000, which payments will be in addition to any Termination Fee
that may be payable. In the event that this Agreement is terminated by Buyer
pursuant to Section 9.01(f), then the Company will promptly, but in no event
later than two days after the date of such termination, pay Buyer, upon
Buyer's request, all reasonable and documented out-of-pocket expenses incurred
by Buyer in connection with this Agreement and the transactions contemplated
hereby in an amount not to exceed $300,000. Notwithstanding any other
provision herein, no Termination Fee or any out-of-pocket expenses will be
payable under this Section 9.02(b) (i) if Buyer shall have materially breached
any representation, warranty or covenant applicable to it hereunder and such
breach shall have given rise to a right of termination on the part of the
Company pursuant to Section 9.01(e) (disregarding the notice provision
therein), or (ii) for any reason other than the specific circumstances set
forth in this Section 9.02(b). The Company acknowledges that the agreements
contained in this Section 9.02(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Buyer
would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 9.02(b), and, in order
to obtain such payment, Buyer commences a suit which results in a judgment
against the Company for the fee set forth in this Section 9.02(b), the Company
will pay to Buyer its reasonable costs and expenses (including attorneys' fees
and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
(c) In the event that this Agreement is terminated by the Company
pursuant to Section 9.01(e), then Buyer will promptly, but in no event later
than two days after the date of such event, pay the Company a fee equal to
$2,000,000 (the "Company Termination Fee"), plus upon the Company's request
all reasonable and documented out-of-pocket expenses incurred by the Company
in connection with this Agreement and the transactions contemplated hereby and
thereby in an amount (as to such expenses) not to exceed $300,000, which
payments shall be made in addition to any Company Termination Fee that may be
payable. Notwithstanding any other provision herein, no Company Termination
Fee or any out-of-pocket expenses will be payable under this Section 9.02(c)
to the Company (i) if the Company shall have materially breached any
representation, warranty or covenant applicable to it hereunder and such
breach shall have given rise to a right of termination on the part of Buyer
pursuant to Section 9.01(f) (disregarding the notice provisions therein) or if
Buyer shall be entitled to terminate this Agreement pursuant to Section
9.01(g) or (ii) for any reason other than the specific circumstances set forth
in this Section 9.02(c). Buyer acknowledges that the agreements contained in
this Section 9.02(c) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the Company would not
enter into this Agreement; accordingly, if Buyer fails promptly to pay the
amount due pursuant to this Section 9.02(c), and, in order to obtain such
payment, the Company commences a suit which results in a judgment against
Buyer for the fee set forth in this Section 9.02(c), Buyer will pay to the
Company its reasonable costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount
of the fee at the prime rate of Citibank N.A. in effect on the date such
payment was required to be made.
(d) If any Company Termination Fee is payable pursuant to Section
9.02(c), Buyer in its discretion may satisfy its obligation to pay such
Company Termination Fee (and any Company expenses) by offsetting, in whole or
in part, the obligations of the Company to Buyer under that certain
Subordinated Convertible Note Purchase Agreement between Buyer, as lender, and
the Company, as borrower, dated as of even date herewith (the "Note
Agreement").
ARTICLE 10
MISCELLANEOUS
Section 10.01. Notices. All notices, requests and other communications
given or made pursuant hereto to any party hereunder shall be in writing
(including facsimile or similar writing) and shall be given:
if to Buyer or Merger Subsidiary, to:
Phar-Mor, Inc.
00 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile: 330 -740-2985
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. XxXxx, Xx.
Facsimile: 000-000-0000
if to the Company, to:
Pharmhouse Corp.
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile: 212 -358 -9169
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
and to:
Xxxxxxx, Xxxxxxx & Xxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx
Facsimile: (000) 000-0000
or such other address or facsimile numbers as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received, or (b) if
given by any other means, when delivered at the address specified in this
Section.
Section 10.02. Survival. The representations and warranties contained
herein and in any certificate or other writing delivered pursuant hereto shall
not survive the Effective Time or the termination of this Agreement. All
covenants and agreements contained herein which by their terms are to be
performed in whole or in part after the Effective Time shall survive the
Effective Time and be enforceable in accordance with their terms.
Section 10.03. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Buyer and Merger Subsidiary or in the case of a
waiver, by the party against whom the waiver is to be effective, provided that
after the adoption of this Agreement by the stockholders of the Company, no
such amendment or waiver shall, without the further approval of such
stockholders, alter or change (i) the amount or kind of consideration to be
received in exchange for any shares of capital stock of the Company or (ii)
any of the terms or conditions of this Agreement if such alteration or change
would adversely affect the holders of any shares of capital stock of the
Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 10.04. Expenses. Except as expressly provided in Sections 9.02
and 10.10(c), all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.
Section 10.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of each of the other parties hereto.
Section 10.06. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto
shall have received counterparts hereof signed by all of the other parties
hereto.
Section 10.07. 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 confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except for Sections 6.02, 6.03 and 10.08 (which are also intended
to be for the benefit of the persons provided for therein and may also be
enforced by such persons).
Section 10.08. No Personal Liability. Neither this Agreement nor any
certificate delivered hereunder shall create or be deemed to create or permit
any personal liability or obligation on the part of any direct or indirect
stockholder of any party hereto except the Buyer.
Section 10.09. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
reference to conflicts of laws principles applied in such State.
Section 10.10. Jurisdiction; Jury Trial Waiver. (a) Except as expressly
set forth in Section 10.10(c) or Section 10.10(d), any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with this Agreement or the transactions contemplated
hereby shall be brought in any federal court located in the Southern District
of the State of New York or any New York state court sitting in New York City,
and each of the parties hereto hereby consents to the exclusive jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of New York.
Without limiting the generality of the foregoing, each party hereto agrees
that service of process upon such party may be made at the address referred to
in Section 10.01, and if made in accordance with the provision of Section
10.01, shall be deemed effective service of process upon such party.
(b) Each party hereto hereby waives all rights to trial by jury in
any action or proceeding instituted by either of them against the other which
pertains directly or indirectly to this Agreement, the Merger, any alleged
tortious conduct by any party, or in any way, directly or indirectly, arises
out of or relates to the relationship among the parties hereto. The
prevailing party in any such suit, action or proceeding shall be entitled to
recover all reasonable costs incurred in connection therewith including,
without limitation, attorneys' fees.
(c) In the event that Buyer terminates this Agreement pursuant to
Section 9.01(f) and the Company disputes such termination, the Company, by
written notice delivered to Buyer within five days of such termination, may
require that such dispute be submitted to binding arbitration in accordance
with this Section 10.10(c). Such arbitration shall be held in Youngstown,
Ohio in accordance with the CPR Rules for Nonadministered Arbitration of
Business Disputes (the "CPR Rules"), except as expressly modified by the
provisions hereof. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16, notwithstanding the choice of law
provision of Section 10.09. There shall be one arbitrator, who shall be jointly
selected by Buyer and Company; provided, however, that if the arbitrator has
not been selected within 15 days after a matter is submitted to arbitration,
then the arbitrator shall be selected in accordance with the CPR Rules. The
arbitrator shall be disinterested in the subject matter of the dispute, shall
not have been employed or engaged by either party within the past five years
and shall have appropriate qualifications and experience with respect to
arbitrations of business disputes. The prevailing party in the arbitration
shall be entitled to recover all reasonable costs incurred thereby in
connection with such arbitration proceeding, including without limitation
reasonable attorneys' fees. Notwithstanding any other provision hereof, the
sole question that may be submitted to arbitration pursuant to this Agreement
is whether Buyer's termination of this Agreement pursuant to Section 9.01(f)
was or was not justified.
(d) In the event that the Company disputes the amount of the Closing
Environmental Liabilities as provided in Section 3.17(c), such dispute shall
be resolved as provided in this Section 10.10(d). The Company shall have 20
days following delivery of its dispute notice pursuant to Section 3.17(c) to
engage (at the Company's sole cost and expense) an environmental consultant
to prepare a Phase II report as to the properties identified on Schedule 3.17
(which report shall include an estimate as to the cost of remediating all
Environmental Liabilities with respect to such properties) and to deliver a
copy of such report to Buyer. If the Company shall fail to deliver a copy of
such report to Buyer within such 20-day period, then the Closing Environmental
Liabilities shall be as determined by reference to Buyer's environmental
report. If the Company delivers such environmental report to Buyer within
such 20-day period and it indicates that the estimated cost to remediate all
Environmental Liabilities of the Company with respect to the real property
locations identified on Scheduled 3.17 is not more than $100,000 less than the
remediation cost estimate submitted by Buyer's environmental consultant with
respect to such properties, then the Closing Environmental Liabilities shall
equal the average of the respective remediation cost estimates submitted by
Buyer's environmental consultant and the Company's environmental consultant.
If the Company delivers such environmental report to Buyer within such 20-day
period and it indicates that the estimated cost to remediate all Environmental
Liabilities of the Company with respect to the real property locations
identified on Scheduled 3.17 is at least $100,000 less than the remediation
cost estimate submitted by Buyer's environmental consultant with respect to
such properties, then Buyer and the Company shall direct their respective
environmental consultants to select a third environmental consultant (at the
joint cost and expense of Buyer and the Company) to prepare a Phase II report
as to the properties identified in Schedule 3.17 (which report shall include
an estimate as to the cost of remediating all Environmental Liabilities with
respect to such properties) and to deliver a copy of such report to Buyer and
the Company as soon as reasonably practicable. In such event, the Closing
Environmental Liabilities shall equal the remediation cost estimate submitted
by the third environmental consultant, whose decision shall be final and
binding for all purposes hereof.
Section 10.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court located in the Southern District of the State
of New York or any New York state court sitting in New York City, in addition
to any remedy to which they are entitled at law or in equity.
Section 10.12. Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of or
a Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to December 17, 1998.
Section 10.13. Entire Agreement; Schedules. This Agreement, the
Confidentiality Agreement and the Note Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof. Each party
acknowledges and agrees that no other party hereto makes any representations
or warranties, whether express or implied, other than the express
representations and warranties contained herein or in the certificates to be
delivered at the Effective Time. The fact that any item of information is
disclosed in any Schedule to this Agreement shall not be construed to mean
that such information is required to be disclosed by this Agreement. Such
information and the dollar thresholds set forth herein shall not be used as a
basis for interpreting the terms "material" or "Material Adverse Effect" or
other similar terms in this Agreement. A matter set forth in one section of
the Schedules need not be set forth in any other Section or Schedule so long
as its relevance to the latter Section or Schedule is reasonably clear.
Section 10.14. Severability. If any term or other provision of this
Agreement is determined to be 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 herein is not
affected in any manner materially adverse to any party hereto. 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 a mutually acceptable manner.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PHARMHOUSE CORP.
By:
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Name:
Title:
Phar-Mor, INC.
By:
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Name:
Title:
PHARMACY ACQUISITION CORP.
By:
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Name:
Title:
