1
EXHIBIT 99.1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXXXX'X, INC.,
LOCOMOTIVE ACQUISITION CORP.
AND
XXXXXXX FOOD AND DRUG STORES COMPANY
Dated as of January 19, 1998
================================================================================
2
TABLE OF CONTENTS
Page
----
ARTICLE I THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
1.2 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.3 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
2.2 Filing; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
2.3 Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
2.4 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
2.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
ARTICLE III CONVERSION OF AND SURRENDER AND PAYMENT FOR
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
3.1 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
3.2 Closing of Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
3.3 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
3.4 Funding of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
3.5 Company Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
ARTICLE IV CERTAIN EFFECTS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
4.1 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
4.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
5.2 Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
5.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
5.4 Proxy Statement; Offer Documents; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 11.
5.5 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
5.6 No Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
5.8 No Prior Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
i.
3
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
6.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
6.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
6.3 Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
6.4 Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
6.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.
6.6 Governmental Authorizations and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.
6.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
6.8 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
6.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
6.10 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.
6.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.
6.12 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.
6.13 Real Estate Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.
6.14 Title to Properties; Absence of Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . 20.
6.15 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.
6.16 Proprietary Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.
6.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.
6.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.
6.19 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.
6.20 Proxy Statement; Offer Documents; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 22.
6.21 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.
6.22 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.
6.23 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.
6.24 Potential Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.
6.25 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
6.26 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
6.27 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
6.28 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
ARTICLE VII COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
7.1 Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
7.2 Conduct of the Business of the Company Prior to the Effective Date . . . . . . . . . . . . . . . . . . 25.
7.3 Company Board Representation; Section 14(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.
7.4 Access to Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.
7.5 Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.
7.6 Acquiror Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.
7.7 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.
7.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.
7.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.
7.10 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.
7.11 Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.
7.12 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.
ii.
4
7.13 Stockholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.
7.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.
7.15 Certain Supplier Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.
7.16 Year 2000 Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.
7.17 Recovery of Certain Amounts Owed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.
ARTICLE VIII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.
8.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 37.
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.
9.2 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.
9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.
9.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.
10.2 Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.
10.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.
10.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.
10.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.
10.8 Invalidity, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.
10.9 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.
10.11 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.
iii.
5
EXHIBITS
EXHIBIT A CONDITIONS TO THE OFFER
EXHIBIT B CERTIFICATE OF MERGER
SCHEDULES
SCHEDULE 3.5 COMPANY STOCK OPTION PLANS
SCHEDULE 6.1 CORPORATE ORGANIZATION
SCHEDULE 6.3 OPTIONS OR OTHER RIGHTS
SCHEDULE 6.5 VIOLATIONS OF/CONSENTS REQUIRED BY MATERIAL
CONTRACTS
SCHEDULE 6.7 LITIGATION INVOLVING THE COMPANY OR THE SUBSIDIARY
SCHEDULE 6.9 ABSENCE OF CERTAIN CHANGES OR EVENTS
SCHEDULE 6.10 BENEFIT PLANS
SCHEDULE 6.11 ERISA
SCHEDULE 6.12 COMPLIANCE WITH ENVIRONMENTAL LAWS
SCHEDULE 6.13 LEASED REAL ESTATE
SCHEDULE 6.14 TITLE TO PROPERTIES; ABSENCE OF LIENS AND
ENCUMBRANCES
SCHEDULE 6.15 TAX MATTERS
SCHEDULE 6.16A LIST OF PROPRIETARY PROPERTY
SCHEDULE 6.17 LABOR MATTERS
SCHEDULE 6.18 INSURANCE
SCHEDULE 6.19 MATERIAL CONTRACTS
SCHEDULE 6.22 SUPPLIERS
SCHEDULE 7.2 CONDUCT OF BUSINESS OF COMPANY PRIOR TO THE EFFECTIVE DATE
SCHEDULE 10.11 DEFINITION
iv.
6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of January 19, 1998
among Xxxxxxxxx'x, Inc., a Delaware corporation (the "Acquiror"), Locomotive
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Acquiror ("Newco"), and Xxxxxxx Food and Drug Stores Company, a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Newco, the Acquiror and the Company
deem advisable and in the best interests of their respective stockholders the
merger of Newco with and into the Company (the "Merger") upon the terms and
conditions set forth herein and in accordance with the General Corporation Law
of the State of Delaware (the "General Corporation Law") (the Company and Newco
being hereinafter sometimes referred to as the "Constituent Corporations" and
the Company, following the effectiveness of the Merger, being hereinafter
sometimes referred to as the "Surviving Corporation");
WHEREAS, in furtherance thereof, it is proposed that Newco make an offer
to purchase for cash (the "Offer") all of the issued and outstanding shares of
Common Stock, $.01 par value, of the Company (the "Common Stock") at a price
per share equal to the Price Per Share (as defined in Section 1.1 hereof),
subject to the terms and conditions set forth herein and in Exhibit A attached
hereto;
WHEREAS, the Boards of Directors of the Acquiror, Newco and the Company
have approved the Offer, and have approved the Merger following expiration of
the Offer, upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has further determined
that the consideration to be paid for each share of Common Stock in the Offer
and the Merger is fair to the holders of such shares and has resolved to
recommend that the holders of such shares accept the Offer and approve this
Agreement and the Merger upon the terms and subject to the conditions set forth
herein; and
WHEREAS, FS Equity Partners II, L.P., a California limited partnership
(the "Major Stockholder"), concurrently herewith is entering into that certain
Tender and Option Agreement (the "Stockholder Agreement"), dated as of the date
hereof, with the Acquiror and Newco, pursuant to which the Major Stockholder
will agree, among other things, to tender the shares of Common Stock held by it
in the Offer and to grant the Acquiror a proxy with respect to the voting of
such shares upon the terms and subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Offer and the Merger and the mode
of carrying the same into effect, the parties hereby agree as follows:
1.
7
ARTICLE I
THE TENDER OFFER
1.1 The Offer.
(a) So long as none of the events set forth in paragraphs
(a) through (g) in Exhibit A attached hereto shall have occurred and be
continuing, Newco shall, as soon as practicable but in no event later than five
Business Days (as defined in Section 1.3) from the date hereof, commence the
Offer to purchase all of the outstanding shares of Common Stock of the Company
at a price of $15.50 per share, in cash (the "Price Per Share") and subject to
(i) at least that number of shares of Common Stock equivalent to a majority of
the total issued and outstanding shares of Common Stock on the date such shares
are purchased pursuant to the Offer (the "Minimum Shares") being validly
tendered and not withdrawn prior to the expiration of the Offer (the "Minimum
Condition") and (ii) the satisfaction of the other conditions set forth in
Exhibit A attached hereto, any of which conditions may be waived by Newco in
its sole discretion, Newco shall not withdraw the Offer and shall at the
earliest time following the expiration of the Offer and subject to the terms of
the Offer accept for payment, purchase and pay for all shares of Common Stock
duly tendered and not withdrawn. The Offer shall be made pursuant to an Offer
to Purchase and related Letter of Transmittal in forms reasonably satisfactory
to the Company and containing terms set forth in this Agreement, the Minimum
Condition and the other conditions set forth in Exhibit A attached hereto,
which terms and conditions shall not be amended without the prior written
consent of the Company.
(b) Neither the Acquiror nor Newco will, without the prior
written consent of the Company, decrease the Price Per Share payable in the
Offer, decrease the number of shares of Common Stock sought pursuant to the
Offer or change the form of consideration payable in the Offer, change or amend
the conditions to the Offer (including the conditions set forth in Exhibit A
attached hereto) or impose additional conditions to the Offer, change the
expiration date of the Offer, or otherwise amend, add or waive any term or
condition of the Offer in any manner adverse to the holders of shares of Common
Stock; provided, however, that if on any scheduled expiration date of the
Offer, which shall initially be twenty Business Days after the date the Offer
is commenced, all conditions to the Offer have not been satisfied or waived,
(i) Newco may, from time to time, extend the expiration date of the Offer and
(ii) Newco shall from time to time after consultation with the Company extend
the expiration date of the Offer as long as (A) the waiting period under the
HSR Act (as defined below) shall not have expired or been terminated or (B) any
order, decree, ruling or other action of or agreement with a Governmental
Authority (as defined below) that has the effect of restraining, enjoining,
prohibiting or delaying the consummation of the Offer or the Merger or imposing
material limitations on the ability of Newco to acquire shares of Common Stock
shall be in effect. Subject to the terms and conditions of this Agreement,
Acquiror agrees that it shall extend the expiration date of the Offer and shall
not terminate the Offer under clause (a) of Exhibit A or Section 9.1(b) or (h)
of this Agreement until it has reached an agreement authorizing consummation of
the Offer and the Merger with the FTC or DOJ (each, as defined below) and any
other Governmental Authority that may have asserted that consummation of the
Offer will violate Antitrust Laws and any injunction or order prohibiting or
limiting consummation of the Offer or the Merger has become final and
non-appealable. Each such extension shall be reasonable under the
circumstances, with the parties acknowledging that
2.
8
they wish to consummate the purchase of shares pursuant to the Offer as
expeditiously as possible. If, immediately prior to the expiration date of the
Offer (as it may be extended), the shares of Common Stock tendered and not
withdrawn pursuant to the Offer constitute less than 90% of the number of
outstanding shares of Common Stock, Newco may extend the Offer for a period not
to exceed ten Business Days, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer; provided that in the
event the Offer is extended pursuant to this sentence then Acquiror and Newco
shall no longer be able to rely on the provisions of subparagraphs (b), (c),
(d), (e), (f) or (g) of Exhibit A, or Sections 9.1(b), (f), (h), (i) and (j)
hereof, then or in the future as grounds for its refusal to accept for payment
and purchase, or to pay for, or as grounds for its delay in the acceptance for
payment for, any shares of Common Stock tendered in the Offer. Acquiror and
Newco will subject to the terms and conditions of this Agreement use their best
efforts to consummate the Offer. Assuming the prior satisfaction or waiver of
all the conditions to the Offer set forth in Exhibit A, and subject to the
terms and conditions of this Agreement, the Acquiror shall cause Newco to
accept for payment and pay for, in accordance with the terms of the Offer, all
shares of Common Stock tendered pursuant to the Offer as soon as permitted
recognizing that the parties wish to close as expeditiously as possible
following expiration or termination of the waiting period under the HSR Act.
The Acquiror shall provide or cause to be provided to Newco, on a timely basis,
the funds necessary to purchase any shares of Common Stock that Newco becomes
obligated to purchase pursuant to the Offer.
1.2 SEC Filings. On or before January 26, 1998, the Acquiror and/or
Newco shall file with the Securities and Exchange Commission (the
"Commission"), with respect to the Offer, a Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1"). The Schedule 14D-1 will comply in all material
respects with the provisions of applicable federal securities laws and will
incorporate by reference to the Offer to Purchase, the related Letter of
Transmittal and any related summary advertisement (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "Offer Documents"). The Company and its
counsel shall be given an opportunity to review and comment upon the Offer
Documents and any amendments or supplements thereto, prior to the filing
thereof with the Commission, and Acquiror and Newco shall in good faith
consider such comments. The Acquiror and Newco agree to provide to the Company
and its counsel any comments which the Acquiror, Newco or their counsel may
receive from the Staff of the Commission with respect to the Offer Documents
promptly after receipt thereof. The Acquiror, Newco and the Company agree to
correct promptly any information provided by any of them for use in the Offer
Documents which shall have become false or misleading in any material respect,
and the Acquiror and Newco further agree to take all steps necessary to cause
the Schedule 14D-1 as so corrected to be filed with the Commission, and the
other Offer Documents as so corrected to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. Notwithstanding the foregoing, the Acquiror and Newco hereby
agree that the Offer Documents to be transmitted to the stockholders of the
Company shall include provisions pursuant to which the depositary or exchange
agent selected by the Acquiror, Newco and the Company will make payment of the
Price Per Share, to any holder who validly tenders at least 45,000 shares of
Common Stock in the Offer on or prior to its expiration date, by wire transfer
of the Price Per Share to such holder within one Business Day of the date that
such shares of Common Stock are accepted for payment and purchased by Newco.
3.
9
Commission a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which will comply in all material respects with the
provisions of applicable federal securities laws. The Acquiror and its counsel
shall be given an opportunity to review and comment upon the Schedule 14D-9 and
any amendments or supplements thereto, prior to the filing thereof with the
Commission, and the Company shall in good faith consider any such comments.
The Company agrees to provide to the Acquiror and Newco and their counsel any
comments which the Company or its counsel may receive from the Staff of the
Commission with respect to the Schedule 14D-9 promptly after receipt thereof.
The Company, Acquiror and Newco agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause such Schedule 14D-9 as so corrected to be
filed with the Commission and disseminated to the Company's stockholders as and
to the extent required by applicable federal securities laws. Subject to the
fiduciary duties of the Board of Directors of the Company, under applicable
law, the Offer Documents shall contain the recommendations of the Board of
Directors of the Company that the Company's stockholders accept the Offer.
Acquiror, Newco and the Company each hereby agree promptly to provide such
information necessary to the preparation of the exhibits and schedules to the
Schedule 14D-9 and the Offer Documents which the respective party responsible
therefor shall reasonably request.
1.3 Company Action.
(a) The Company hereby approves of and consents to the
Offer and represents that its Board of Directors has (i) determined that each
of the Offer and Merger is fair to and in the best interests of the Company's
stockholders, (ii) approved the Merger and the making of the Offer and (iii)
resolved to recommend acceptance of the Offer by the Company's stockholders and
approval and adoption of this Agreement and authorization of the Merger by the
stockholders of the Company; provided, however, that such recommendation may be
withdrawn, modified or amended in accordance with Section 7.5(b). The Company
represents that Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx") has
delivered to the Company's Board of Directors its written opinion that as of
the date hereof, based upon the factors considered by Xxxxxx Xxxxxxx in
connection with the transactions contemplated by this Agreement, the Price Per
Share to be received by the holders of shares of Common Stock pursuant to the
Offer, this Agreement and the Merger is fair, from a financial point of view,
to such holders receiving the Price Per Share and that a copy of such opinion
will be promptly delivered to the Acquiror.
(b) Promptly upon execution of this Agreement and in
connection with the Offer, the Company shall furnish Newco with or cause Newco
to be furnished with such information, including lists of the stockholders of
the Company, mailing labels and lists of securities positions, each as of a
recent date, and shall thereafter render such assistance as the Acquiror or
Newco may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, the Acquiror and Newco and each
of their respective affiliates and associates shall hold in confidence the
information contained in any of such labels and lists, will use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated, will promptly deliver to the Company all copies of
such information then in their
4.
10
possession. Without limiting the generality of the foregoing, upon receipt of
a request from the Acquiror or Newco under Rule 14d-5 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company
will comply with Rule 14d-5(a) by a notice to the Acquiror given no later than
the first Business Day (as defined in Rule 14d-1(b)(7) of the Exchange Act)
after the date of the Acquiror's request, and shall elect to comply with Rule
14d-5(c) within one Business Day thereof.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and conditions hereinafter set forth
and in accordance with the General Corporation Law, at the Effective Date (as
defined in Section 2.3), Newco shall be merged with and into the Company and
thereupon the separate existence of Newco shall cease, and the Company, as the
Surviving Corporation, shall continue to exist under and be governed by the
General Corporation Law.
2.2 Filing; Closing. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Section 8 hereof (other
than the condition set forth in Section 8.1(a), which may not be waived), Newco
and the Company will either (i) cause a Certificate of Merger, in substantially
the form of Exhibit B attached hereto (the "Certificate of Merger"), to be
executed and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the General Corporation Law, or (ii) in the event
Newco shall have acquired 90% or more of the outstanding shares of each class
of capital stock of the Company, cause a Certificate of Ownership to be
executed and filed with the Secretary of State of the State of Delaware as
provided in Section 253 of the General Corporation Law. Prior to such filing,
a closing shall be held at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place as the parties
shall agree, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Section 8 of this Agreement (the
"Closing"). The Closing shall occur no later than the second Business Day
after satisfaction or waiver of the conditions set forth in Section 8 (other
than the condition set forth in Section 8.1(a), which may not be waived).
2.3 Effective Date of the Merger. The Merger shall become effective
immediately upon the filing, in accordance with Section 251 or Section 253, as
the case may be, of the General Corporation Law, of the Certificate of Merger
or a Certificate of Ownership, as the case may be, with the Secretary of State
of the State of Delaware in accordance therewith. The date and time of such
filing is herein sometimes referred to as the "Effective Date."
2.4 Certificate of Incorporation and Bylaws. Upon the effectiveness
of the Merger, the Certificate of Incorporation of the Company shall be the
certificate of incorporation of the Surviving Corporation, and the Bylaws of
Newco as in effect on the Effective Date shall be the Bylaws of the Surviving
Corporation; provided that such Certificate and Bylaws of the Surviving
Corporation shall not be inconsistent with the provisions of Section 7.8
hereof.
5.
11
2.5 Directors and Officers. The persons who are directors of Newco
immediately prior to the Effective Date and the officers of the Company shall,
after the Effective Date and in accordance with the Certificate of Merger or
Certificate of Ownership, as the case may be, serve as the directors and
officers, respectively, of the Surviving Corporation, in each case such
directors and officers to serve until their successors have been duly elected
and qualified in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
ARTICLE III
CONVERSION OF AND SURRENDER AND
PAYMENT FOR COMMON STOCK
3.1 Conversion. At the Effective Date, by virtue of the Merger and
without any action on the part of the holders thereof:
(a) Each issued and outstanding share of the Common Stock
of the Company, other than (i) shares of Common Stock owned of record by the
Acquiror or Newco, (ii) Dissenting Stock (as hereinafter defined) or (iii)
shares of Common Stock held in the treasury of the Company, shall be
automatically converted into the right to receive the Price Per Share in cash.
(b) Each issued and outstanding share of the Common Stock
of Newco shall be converted into one (1) validly issued, fully paid and
nonassessable share of common stock, $.01 par value (the "New Common Stock"),
of the Surviving Corporation.
(c) All shares of Common Stock which are held by the
Company as treasury shares or which are owned of record by the Acquiror or
Newco shall be canceled and retired and cease to exist, without any conversion
thereof or payment with respect thereto.
(d) The right of any stockholder of the Company to receive
the Price Per Share shall be subject to and reduced by the amount of any
required tax withholding obligation.
Notwithstanding any provision of this Agreement to the contrary, shares
of the Common Stock with respect to which appraisal rights have been demanded
and perfected in accordance with Section 262(d) of the General Corporation Law
(the "Dissenting Stock") shall not be converted into the right to receive cash
at or after the Effective Date, and the holder thereof shall be entitled only
to such rights as are granted by the General Corporation Law. Notwithstanding
the preceding sentence, if any holder of shares of Common Stock who demands
appraisal of such shares under the General Corporation Law shall effectively
withdraw his demand for such appraisal (in accordance with Section 262(k) of
the General Corporation Law) or becomes ineligible for such appraisal (through
failure to perfect or otherwise) then, as of the Effective Date or the
occurrence of such event, whichever last occurs, such holder's Dissenting Stock
shall cease to be Dissenting Stock and shall be converted into and represent
the right to receive cash, without interest thereon, as provided in this
Section 3.1. The Company shall give the Acquiror (i) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other instrument served pursuant to Section 262 of the General Corporation Law
received by the
6.
12
Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under such Section. Except
with the prior written consent of Acquiror, prior to the Effective Date, the
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not settle or offer to settle any such demands.
3.2 Closing of Transfer Books. At the Effective Date, the stock
transfer books of the Company shall be closed, and no transfer of shares of
Common Stock of the Company shall thereafter be made. If, after the Effective
Date, certificates previously representing shares of Common Stock are presented
to the Surviving Corporation or the Paying Agent (as defined in Section 3.3),
they shall be canceled and exchanged for cash as provided in Section 3.1(a),
subject to applicable law in the case of Dissenting Stock.
3.3 Surrender of Certificates.
(a) The Company. From and after the Effective Date, such
bank and trust company as Newco, at least five days prior to the mailing of the
Proxy Statement (as defined in Section 7.1), shall designate and the Company
shall approve (which approval shall not be unreasonably withheld), shall act as
paying agent (the "Paying Agent") in effecting the exchange for cash of
certificates that, prior to the Effective Date, represented shares of Common
Stock entitled to payment in cash pursuant to Section 3.1(a). As soon as
practicable after the Effective Date, the Paying Agent shall send a notice and
transmittal form to each holder of record of Common Stock immediately prior to
the Effective Date, advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Paying Agent (who may appoint forwarding
agents with the approval of Newco) the certificate or certificates to be
exchanged pursuant to the Merger. Upon the surrender for exchange of such a
certificate, together with such letter of transmittal duly completed and
properly executed in accordance with instructions thereto and such other
documents as may be required pursuant to such instructions, the holder shall be
paid promptly, without interest thereon and subject to any required withholding
of taxes, the amount of cash to which such holder is entitled hereunder, and
such certificate shall forthwith be canceled. Until so surrendered and
exchanged, each certificate which immediately prior to the Effective Date
represented outstanding shares of the Common Stock (other than Dissenting Stock
and shares of Common Stock owned by the Acquiror or Newco) shall represent
solely the right to receive the cash into which the Common Stock it theretofore
represented shall have been converted pursuant to Section 3.1(a), subject to
any required withholding of taxes. If any payment for Common Stock is to be
made to a person other than the person in whose name the certificates for such
shares surrendered or registered, it shall be a condition of the exchange that
the person requesting such exchange shall pay to the Paying Agent any transfer
or other taxes required by reason of the delivery of such check to a person
other than the registered owner of the certificate surrendered or shall
establish to the satisfaction of the Paying Agent that such tax has been paid
or is not applicable.
(b) Newco. The Acquiror, as the sole stockholder of Newco,
shall, upon surrender to the Surviving Corporation of certificates representing
the common stock, $1.00 par value, of Newco, receive a certificate representing
the number of shares of New Common Stock into which the capital stock of Newco
shall have been converted pursuant to Section 3.1(b).
7.
13
3.4 Funding of Paying Agent. Prior to the Effective Date, the
Company and Newco shall enter into an agreement (the "Payment Agreement") with
the Paying Agent. Prior to the filing of the Certificate of Merger or the
Certificate of Ownership, as the case may be, Newco shall deposit or cause to
be deposited with the Paying Agent in trust for the benefit of stockholders of
the Company, cash in an aggregate amount equal to the product obtained by
multiplying (i) the number of shares of Common Stock outstanding (and not owned
of record by the Acquiror or Newco) immediately prior to the Effective Date, by
(ii) the Price Per Share. The deposit made by Newco pursuant to the preceding
sentence is hereinafter referred to as the "Payment Fund." The Payment
Agreement shall provide, among other things, that (a) the Paying Agent shall
maintain the Payment Fund as a separate fund to be held for the benefit of the
holders of the Common Stock of the Company, which shall be promptly applied by
the Paying Agent to making the payments provided for in Section 3.3, (b) any
portion of the Payment Fund that has not been paid to holders of the Common
Stock pursuant to Section 3.3 prior to that date which is six months from the
Effective Date shall be paid to the Surviving Corporation, and any holders of
Common Stock who shall not have theretofore complied with Section 3.3 shall
thereafter look only to the Acquiror and the Surviving Corporation for payment
of the amount of cash to which they are entitled under this Agreement, (c) the
Payment Fund shall not be used for any purpose that is not provided for herein,
(d) the Paying Agent may invest, if so directed by Acquiror or the Surviving
Corporation, the Payment Fund in obligations of the United States government or
any agency or instrumentality thereof, or in obligations that are guaranteed or
insured by the United States government or any agency or instrumentality
thereof, (e) any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Corporation on demand, and
(f) all expenses of the Paying Agent shall be paid directly by the Surviving
Corporation. Promptly following the date which is six months from the
Effective Date, the Paying Agent shall return to the Surviving Corporation all
cash and any other instruments in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a certificate formerly representing Common Stock
other than the Dissenting Stock may surrender such certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the consideration payable in respect thereto
pursuant to Section 3.1(a) hereof, without interest, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under the General Corporation Law.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable for the Price Per Share to any holder of a certificate
formerly representing Common Stock if such amount is delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3.5 Company Stock Option Plans. Prior to consummation of the Offer
or the Effective Date or both, the Company may, subject to the penultimate
sentence of this Section 3.5 and Schedule 3.5, enter into agreements in respect
of outstanding options to purchase shares of Common Stock (the "Options")
pursuant to the Company's 1990 Nonqualified Performance Stock Option Plan, 1993
Special Option Plan, 1995 Stock Option Plan and the 1996 Nonqualified
Non-Employee Directors Stock Option Plan (collectively, the "Stock Option
Plans"), providing for the payment upon surrender of each vested Option
immediately after the consummation of the Offer up to and including the
Effective Date of an amount of cash per share subject to each such Option equal
to the excess, if any, of the Price Per Share over the exercise price of such
Option
8.
14
less an amount equal to all taxes required to be withheld from such payment
(the "Spread Per Share"). Any Options not so surrendered or exercised prior to
the Effective Date shall terminate no later than the Effective Date in
accordance with the terms of the Stock Option Plans or such agreements with
optionees. The Company may accelerate the vesting of outstanding Options in
accordance with Schedule 3.5. Upon request of the Company following
consummation of the Offer, the Acquiror shall advance to the Company sufficient
funds to enable the Company to pay the aggregate Spread Per Share.
ARTICLE IV
CERTAIN EFFECTS OF MERGER
4.1 Effect of Merger. On and after the Effective Date, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be subject to all
the restrictions, disabilities and duties of each of the Constituent
Corporations; and all and singular rights, privileges, powers and franchises of
each of the Constituent Corporations, and all property, real, personal and
mixed, and all debts due to either of the Constituent Corporations on whatever
account, as well for stock subscriptions as all other things in action or
belonging to each of the Constituent Corporations, shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise, in
either of the Constituent Corporations shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or contracted by it.
4.2 Further Assurances. If at any time after the Effective Date the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, the title to any property or right of the Constituent
Corporations acquired or to be acquired by reason of, or as a result of, the
Merger, or (b) otherwise to carry out the purposes of this Agreement, the
Constituent Corporations agree that the Surviving Corporation and its proper
officers and directors shall and will execute and deliver all such deeds,
assignments and assurances in law and do all acts necessary, desirable or
proper to vest, perfect or confirm title to such property or right in the
Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and that the proper officers and directors of the Constituent
Corporations and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Constituent Corporations or otherwise
to take any and all such action.
9.
15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
ACQUIROR AND NEWCO
The Acquiror and Newco jointly and severally represent and warrant to
the Company as follows:
5.1 Corporate Organization. Each of the Acquiror and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with all requisite corporate
power and authority to own, operate and lease its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have, individually or in the aggregate, a
material adverse effect on Acquiror and its Subsidiaries, taken as a whole.
5.2 Authority Relative to Agreement. Each of the Acquiror and Newco
has full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated on its part hereby. The
execution, delivery and performance by each of the Acquiror and Newco of this
Agreement and the consummation of the transactions contemplated on their parts
hereby have been duly authorized by all necessary corporate action (including,
without limitation, stockholder action) on the part of the Acquiror and Newco.
No other action on the part of the Acquiror or Newco is necessary to authorize
the execution and delivery of this Agreement by the Acquiror and Newco or the
performance by the Acquiror and Newco of their respective obligations
hereunder. This Agreement has been duly executed and delivered by each of the
Acquiror and Newco, and is a legal, valid and binding obligation of each of the
Acquiror and Newco, enforceable against each of the Acquiror and Newco in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
5.3 No Violation. The execution, delivery and performance of this
Agreement by each of the Acquiror and Newco and the consummation by each of
them of the transactions contemplated hereby, will not (i) violate or conflict
with any provision of any material law applicable to the Acquiror or Newco or
by which any property or asset of either of them is bound, (ii) require the
consent, waiver, approval, license or authorization of or any filing by the
Acquiror or Newco with any public authority (other than (a) the filing of a
pre-merger notification report under The Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (collectively, the "HSR Act"), (b) in connection with or in
compliance with the provisions of the Exchange Act, the General Corporation
Law, the "takeover" or "blue sky" laws of various states, (c) applicable state
statutes and regulations regulating the sale of various items and services sold
by the Acquiror or Newco, and (d) any other filings and approvals expressly
contemplated by this Agreement), (iii) conflict with or result in any breach of
any material provision of the respective certificate of incorporation or
by-laws of the Acquiror and Newco in any material respect or (iv) violate,
conflict with, result in a breach of or the acceleration of any obligation
under, or constitute a default (or an event which with notice or the lapse of
time or both would become a default) under, or give to others any right of
10.
16
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Acquiror, Newco, or any of their respective subsidiaries (collectively, the
"Subsidiaries") pursuant to any provision of any indenture, mortgage, lien,
lease, agreement, contract, instrument, order, judgment, ordinance, regulation
or decree to which the Acquiror or Newco is subject or by which the Acquiror or
Newco or any of their property or assets is bound, except in the case of
clauses (i), (ii) and (iv) where failure to give such notice, make such
filings, or obtain such authorizations, consents or approvals, or where such
violations, conflicts, breaches or defaults, individually or in the aggregate,
would not prevent or delay consummation of the Offer or the Merger, or
otherwise adversely effect the ability of the Acquiror or Newco to consummate
the transactions contemplated by this Agreement or to perform their respective
obligations hereunder.
5.4 Proxy Statement; Offer Documents; Other Information. Neither
the Offer Documents nor any of the information supplied or to be supplied in
writing by either the Acquiror or Newco for inclusion in the Schedule 14D-9,
the Proxy Statement (as defined in Section 7.1) and any other documents to be
filed with the Commission or any regulatory agency in connection with the
transactions contemplated hereby, including any amendment or supplement to such
documents, will, at the respective times such documents are filed, and, with
respect to the Schedule 14D-9, the Proxy Statement and the Offer Documents,
when first published, sent or given to stockholders of the Company, 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 are made not misleading or, in the case of the
Schedule 14D-9 and the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Meeting (as defined in Section 7.1) and at the
Effective Date, contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which
they are made, not false or misleading or necessary to correct any statement in
any earlier communication with respect to the Offer or the solicitation of
proxies for the Meeting which shall have become false or misleading. If, at
any time prior to the Effective Date, any event relating to the Acquiror or any
of its affiliates, officers or directors is discovered by the Acquiror that
should be set forth in an amendment or supplement to the Schedule 14D-9, the
Proxy Statement or the Offer Documents, the Acquiror will promptly inform the
Company, and such amendment or supplement will be promptly filed with the
Commission and appropriate state securities administrators, and disseminated to
the stockholders of the Company, to the extent required by applicable federal
and state securities laws. All documents which the Acquiror or Newco files or
is responsible for filing with the Commission and any regulatory agency in
connection with the Offer or the Merger (including, without limitation, the
Offer Documents and the Proxy Statement) will comply as to form and content in
all material respects with the provisions of applicable law. Notwithstanding
the foregoing, neither the Acquiror nor Newco makes any representation or
warranty with respect to any information that has been supplied by the Company
or the Subsidiary or their auditors, attorneys, financial advisors, other
consultants or advisors specifically for use in the Offer Documents, or in any
other documents to be filed with the Commission or any regulatory agency in
connection with the transactions contemplated hereby.
5.5 Financing. The Acquiror and Newco have funds or other financial
resources available sufficient to consummate the Offer and the Merger on the
terms contemplated by this
11.
17
Agreement, and at the expiration of the Offer and the Effective Date of the
Merger, the Acquiror and Newco will have available all of the funds necessary
for the acquisition of all shares of Common Stock pursuant to the Offer and the
Merger, as the case may be, and to perform their respective obligations under
this Agreement.
5.6 No Prior Activities. Newco has not incurred nor will it incur
any liabilities or obligations, except those incurred in connection with its
organization and with the negotiation of this Agreement and the performance
hereof, and the consummation of the transactions contemplated hereby, including
the Merger. Except as contemplated by this Agreement, Newco has not engaged in
any business activities of any type or kind whatsoever, or entered into any
agreements or arrangements with any person or entity, or become subject to or
bound by any obligation or undertaking. As of the date hereof, the authorized
capital stock of Newco consists of 1,000 shares of common stock, par value
$1.00 per share, 100 shares of which have been issued, and all of which are
owned beneficially and of record by the Acquiror.
5.7 Brokers. Neither the Acquiror nor Newco has paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with this Agreement.
5.8 No Prior Ownership. To the best knowledge of the Acquiror and
Newco, none of the Acquiror, Newco or any of their respective affiliates,
beneficially or of record owns any shares of Common Stock of the Company, other
than shares of Common Stock, if any, held by or for the account of employees or
former employees of the Acquiror, Newco or any of their respective affiliates
pursuant to any of such employees' employee benefit plans or arrangements.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror and Newco as
follows:
6.1 Corporate Organization. Each of the Company and its subsidiary,
Xxxxxxx Food and Drug Company (the "Subsidiary"), is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted,
and is qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed, in the
aggregate, would have or be reasonably likely to have a material adverse effect
on the business, operations, properties (including intangible properties),
condition (financial or otherwise), results of operations, assets or
liabilities of the Company and the Subsidiary, taken as a whole. True and
complete copies of the Certificate of Incorporation and the Bylaws of the
Company and the Subsidiary have been delivered to Acquiror and Newco. Such
Certificates of Incorporation and Bylaws are in full force and effect. Neither
the Company nor the Subsidiary is in violation of any material provision of its
Certificate of Incorporation or Bylaws in any material respect. Except for the
Subsidiary, the Pharmacy Corporation (as defined below) and as set forth in
Schedule 6.1, neither the Company nor the Subsidiary owns (i) any equity
interest in any corporation or other entity or (ii) marketable
12.
18
securities where the Company's or the Subsidiary's equity interest in any
entity exceeds five percent of the outstanding equity of such entity on the
date hereof. Other than the Pharmacy Corporation (as defined in the next
sentence), the Subsidiary is the only subsidiary, direct or indirect, of the
Company. The Subsidiary owns 490 shares of the common stock, $100 par value,
of N.D. Pharmacy, Inc., a corporation organized under the laws of the State of
North Dakota (the "Pharmacy Corporation").
6.2 Capital Stock. As of the date hereof, (i) the authorized
capital stock of the Company consists in its entirety of 15,000,000 shares of
Common Stock, $.01 par value, 8,644,631 of which are issued and outstanding and
none of which are held in the Company's treasury, 199,722 shares of Non-Voting
Common Stock, $.01 par value, none of which are issued and outstanding, and
1,000,000 shares of Preferred Stock, $.01 par value, none of which is issued
and outstanding, (ii) the authorized capital stock of the Subsidiary consists
in its entirety of 1,000 shares of common stock, $.01 par value, all of which
is issued and outstanding and owned beneficially and of record by the Company,
and (iii) the authorized capital stock of the Pharmacy Corporation consists in
its entirety of 2,000 shares of Common Stock, $100 par value, 490 shares of
which are issued and outstanding and owned beneficially and of record by the
Subsidiary, and 510 shares of which are issued and outstanding and owned
beneficially and of record by Xxxxxx Xxxxxxxxx. All of the outstanding shares
of capital stock of the Subsidiary and all of the outstanding shares of capital
stock of the Pharmacy Corporation owned by the Subsidiary are held free and
clear of all liens, charges, encumbrances, options, rights of first refusal or
limitations or agreements regarding voting rights of any nature, are duly
authorized and have been validly issued and are fully paid and nonassessable.
6.3 Options or Other Rights. Except as set forth on Schedule 6.3 or
as contemplated by this Agreement, there is no outstanding right, subscription,
warrant, call, unsatisfied preemptive right, option or other agreement or
arrangement of any kind to purchase or otherwise to receive from the Company or
the Subsidiary any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the capital stock or any other security of the Company or
the Subsidiary and there is no outstanding security of any kind convertible
into or exchangeable for such capital stock. Except as set forth on Schedule
6.3, there are no voting trusts or other agreements or understandings to which
the Company, the Subsidiary or the Pharmacy Corporation is a party with respect
to the voting of the capital stock of the Company, the Subsidiary or the
Pharmacy Corporation.
6.4 Authority Relative to Agreement. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated on its part hereby. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated on its part hereby have been duly authorized by its
Board of Directors, and (other than the approval of the voting stockholders as
provided in Section 7.1 hereof) no other action on the part of the Company or
its stockholders is necessary to authorize the execution and delivery of this
Agreement by the Company or the consummation of the transactions contemplated
on its part hereby. This Agreement has been duly executed and delivered by the
Company, and is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that
13.
19
its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
6.5 No Violation. Except as set forth on Schedule 6.5, the
execution, delivery and performance of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby will not (i)
materially violate or conflict with any provision of any material law
applicable to the Company or the Subsidiary or by which a material amount of
their property or assets of either of them is bound, (ii) require any consent,
waiver, approval, license or authorization of or any filing by the Company or
the Subsidiary with any public authority (other than (a) the filing of a
premerger notification report under the HSR Act, (b) in connection with or in
compliance with the provisions of the Exchange Act, the General Corporation Law
or the "takeover" or "blue sky" laws of various states, (c) state statutes and
regulations regulating the sale of certain items and services sold or provided
by the Company and the Subsidiary, (d) any such consent, waiver, approval,
license, authorization or filing the failure to obtain or make would not
materially impact the Company's operations and (e) any other filings and
approvals expressly contemplated by this Section 6.5), (iii) conflict with or
result in any breach of any material provision of the certificate of
incorporation or by-laws of the Company or the Subsidiary in any material
respect or (iv) materially violate, conflict with or result in a breach of or
the acceleration of any obligation under, or constitute a default (or an event
which with notice or the lapse of time or both would become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any material property or asset of the Company or the Subsidiary pursuant to any
provision of any material indenture, mortgage, lien, lease, agreement, contract
or instrument (the "Company Agreements") or any material order, judgment,
ordinance, regulation or decree to which the Company or the Subsidiary is
subject or by which the Company or the Subsidiary or a material amount of their
property or assets is bound. Schedule 6.5 sets forth a list of all material
third party consents and approvals required to be obtained under any Company
Agreement prior to the consummation of the transactions contemplated by this
Agreement.
6.6 Governmental Authorizations and Regulations. The Company and
the Subsidiary hold all governmental licenses, permits and other authorizations
material to the conduct of their businesses. Such material governmental
licenses, permits and other authorizations are valid and sufficient in all
material respects for all business presently carried on by the Company and the
Subsidiary, and the Company knows of no threatened suspension, cancellation or
invalidation of any such material license, permit or other authorization.
Neither the Company nor the Subsidiary is in material conflict with, or is in
material default or violation of, (i) any material law, rule, regulation,
order, judgment, ordinance, regulation or decree applicable to the Company or
the Subsidiary or by which a material amount of the property or assets of
either of them is bound or affected, or (ii) any material indenture, mortgage,
lien, lease, agreement, instrument, contract, note, bond, license, permit,
franchise or other material authorization or obligation to which the Company or
the Subsidiary is a party or by which the Company or the Subsidiary or a
material amount of the property or assets of either of them is bound or
affected. No notice, charge, claim, action or assertion has been received by
the Company or the Subsidiary or has been filed, commenced or, to the Company's
knowledge, threatened against the Company or the Subsidiary alleging any such
material conflict, default or violation.
14.
20
6.7 Litigation. Except as set forth on Schedule 6.7, and except for
actions which are instituted or, to the Company's knowledge, threatened after
the date hereof challenging or seeking to prevent, or which arise as a result
of, directly or indirectly, the consummation of the transactions contemplated
by this Agreement or the Stockholder Agreement, there are no material suits,
claims, arbitrations, mediations, actions, proceedings, unfair labor practice
complaints or grievances pending or, to the best of the Company's or the
Subsidiary's knowledge, threatened or, to the best of the Company's or the
Subsidiary's knowledge, investigations pending or threatened against the
Company or the Subsidiary or with respect to a material amount of the property
or assets of either of them before any court, arbitrator, administrator or
governmental or regulatory authority or body. Neither the Company nor the
Subsidiary nor a material amount of the property or assets of either of them is
subject to any material order, judgment, injunction or decree.
6.8 Financial Statements and Reports. The Company has filed with
the Commission all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1995 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"). The reports,
statements and registration statements referred to in the immediately preceding
sentence (including, without limitation, any financial statements or schedules
or other information incorporated by reference therein) are referred to in this
Agreement as the "Company SEC Filings." As of the respective times such
documents were filed or, as applicable, became effective, the Company SEC
Filings complied as to form and content, in all material respects, with the
requirements of the Securities Act, and the Exchange Act, as the case may be,
and the rules and regulations promulgated thereunder, and 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, in light of
the circumstances under which they were made, not misleading. The Subsidiary
is not required to file any material forms, reports, schedules, statements or
other documents with the Commission. The financial statements of the Company
included in the Company SEC Filings were prepared from, and are, in all
material respects, in accordance with, the books and records of the Company and
the Subsidiary, comply in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto were prepared, in all material respects, in accordance with
United States generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and present fairly in all material respects the
consolidated financial position, results of operations and cash flows of the
Company and the Subsidiary as of the dates and for the periods indicated
subject, in the case of unaudited interim consolidated financial statements, to
normal recurring year-end adjustments and any other adjustments described
therein which adjustments will not be material either singly or in the
aggregate. (The unaudited consolidated balance sheet of the Company and the
Subsidiary as of November 1, 1997 included in the Form 10-Q for the Company's
fiscal quarter ended November 1, 1997 is hereinafter called the "Company
Balance Sheet," and November 1, 1997 is hereinafter called the "Company Balance
Sheet Date.")
6.9 Absence of Certain Changes or Events. Since the Company Balance
Sheet Date and except as disclosed on Schedule 6.9, the business of the Company
and the Subsidiary have been conducted in the ordinary course, and there has
not been (i) from the Company Balance Sheet Date to the date of this Agreement
any material adverse change in the business, operations, properties (including
intangible properties), condition (financial or otherwise), results of
15.
21
operations, assets or liabilities of the Company and the Subsidiary, taken as a
whole, excluding any such change or changes caused by a general change in the
economy (including any such change caused by a general change in the markets
served by the Company and the Subsidiary); (ii) any material indebtedness
incurred by the Company or the Subsidiary for borrowed money, other than in the
ordinary course of business; (iii) any declaration, setting aside or payment of
any dividend or other distribution or payment in cash, stock or property in
respect of shares of its capital stock; (iv) any material increase in the
compensation payable or to become payable by the Company or the Subsidiary to
any of their employees, officers or directors or in any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made to, for or
with any such directors, officers or key employees (other than as provided on
Schedule 6.10, except in accordance with collective bargaining agreements set
forth on Schedule 6.17, and except for cost of living adjustments and other
increases in the ordinary course and consistent with past practice and other
increases which are reasonably necessary for the operation of the business of
the Company and the Subsidiary); (v) any entry by the Company or the Subsidiary
into any commitment or transaction out of the ordinary course of business which
is material to the Company and the Subsidiary taken as a whole; or (vi) any
action taken, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures, except for changes required by generally accepted accounting
principles.
6.10 Benefit Plans. Except as disclosed on Schedule 6.10 or Schedule
6.11 and for plans, programs, arrangements or agreements that provide only
immaterial benefits, neither the Company nor the Subsidiary has outstanding any
employment agreement with any officer or employee of the Company or the
Subsidiary and neither the Company, the Subsidiary nor any other entity ("ERISA
Affiliate") that, together the Company or the Subsidiary would be deemed a
"single employer" for purposes of Section 4001(b)(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), sponsors, maintains,
contributes to or is required to contribute to, any bonus, incentive
compensation, deferred compensation, profit sharing, stock option, stock bonus,
stock purchase, stock appreciation right or other stock-based incentive,
savings, change in control, severance, or termination pay, salary continuation,
consulting, hospitalization or other medical, life, disability or other
insurance, profit-sharing, retirement (including, without limitation, health
and life insurance benefits provided after retirement) or pension plan
(including, without limitation, Company Employee Benefit Plans as defined in
Section 6.11 hereof), program, agreement or arrangement with or for the benefit
of any current or former director, officer, employee, consultant, agent, or
independent contractor of the Company or the Subsidiary, or for the benefit of
any group of such persons ("Company Plans"). Except as provided in Schedule
6.10 or as required by the terms of a collective bargaining agreement, neither
the Company, the Subsidiary nor any ERISA
16.
22
Affiliate has any formal plan or commitment to create any additional Company
Plan or modify an existing Company Plan in any material respect that would
affect any current or former employee or director of the Company, the
Subsidiary or any ERISA Affiliate. With respect to each of the Company Plans,
the Company has heretofore delivered to Acquiror true and complete copies of
(i) the plan document (including all amendments thereto) or a written
description of any Company Plan that is not otherwise in writing; (ii) if the
Company Plan is funded through a trust or any other funding vehicle, a copy of
the trust or other funding agreement (including all amendments thereto); and
(iii) all contracts relating to the Company Plans with respect to which the
Company, the Subsidiary or any ERISA Affiliate may have any material liability.
Except as disclosed on Schedule 6.10, neither the Company nor the Subsidiary
has made, or entered into any agreement to make, any payment that could
reasonably be expected to be treated as an "excess parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"). Each of the Company Plans has been operated and administered in all
material respects in accordance with their terms and all applicable material
laws, including, without limitation, ERISA and the Code. There are no material
actions, suits or claims pending, other than routine claims for benefits and
proceedings relating to "qualified domestic relations orders" (within the
meaning of Code Section 414(p)), with respect to the Company Plans or their
operation, administration or maintenance. Except as provided in Schedule 6.10,
none of the Company Plans or any other agreement or arrangement with respect to
which the Company or the Subsidiary may have any liability could give rise to
the payment of any material amount that would fail to be deductible for federal
income tax purposes by reason of Section 162(m) of the Code. No Company Plan
provides material amounts of benefits, including without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees after retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of the Company, the Subsidiary or any ERISA Affiliate, or (iv)
benefits, the full cost of which is borne by the current or former employee (or
his beneficiary). Except as disclosed on Schedule 6.10, the consummation of
the transactions contemplated hereunder will not result in the payment,
vesting, acceleration or enhancement of any material benefit under any Company
Plan. Only the first sentence of this Section 6.10 shall apply to any Company
Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA
("Multiemployer Plan").
6.11 ERISA. Set forth on Schedule 6.10 and Schedule 6.11 are all of
the employee benefit plans, as defined in Section 3(3) of ERISA that are
sponsored, or are being maintained or contributed to, or are required to be
contributed to, by the Company, the Subsidiary, or any ERISA Affiliate
("Company Employee Benefit Plans"), including but without limitation, any
Multiemployer Plan. The Company has furnished Acquiror (a) a true and complete
copy of the current plan document and summary plan description (if applicable),
together with the current summary of material modifications issued with respect
to such summary plan description for each Company Employee Benefit Plan (or
written description of any Company Employee Benefit Plan that is not otherwise
in writing), (b) a true and complete copy of the most recently filed Form 5500
(including the related schedules) with respect to each Company Employee Benefit
Plan for which such form is required to be filed, and (c) a true and complete
copy of any trust agreement, insurance contract or other agreement or
arrangement serving as a source of funding for any benefits payable under any
Company Employee Benefit Plan. No"prohibited transactions" (as such term is
defined in Section 4975 of the Code or in Part 4 of Subtitle B of Title I of
ERISA) have occurred with respect to the Company Employee Benefit Plans that
could result, individually or in the aggregate, in the imposition of a material
amount of taxes or penalties. With respect to each of the Company Employee
Benefit Plans that is intended to qualify for favorable income tax treatment
under Section 401(a) of the Code, (i) the Internal Revenue Service ("IRS") has
issued a favorable determination letter with respect to such plan; (ii) the
Company will furnish Acquiror with a copy of the determination letter most
recently issued by the IRS with respect to such plan within two days of the
date of this Agreement; and (iii) to the best
17.
23
knowledge of the Company, no event has occurred from the date of each such
favorable determination letter that would materially and adversely affect the
tax-qualified status of the plan in question. With respect to the Company
Employee Benefit Plans, neither the Company, the Subsidiary, nor any ERISA
Affiliate has incurred any material liabilities as a result of the violation of
or the failure to comply with any applicable provision of ERISA, the Code, any
other applicable provision of law, or any provision of such plan. None of the
Company Employee Benefit Plans is subject to Section 302 of ERISA or Section
412 of the Code and no plan at any time sponsored, maintained, contributed to
or required to be contributed to by the Company or the Subsidiary is or was
subject to Title IV of ERISA. Neither the Company nor the Subsidiary has any
reasonable risk of incurring any material liability under Sections 4064 or 4069
of ERISA. Neither the Company, the Subsidiary, nor any ERISA Affiliate has
failed to make any material contribution to, or to make any material payment
under, the Company Employee Benefit Plans (including, without limitation,
Multiemployer Plans) that it was required to make pursuant to the terms of the
plans or pursuant to applicable law and all such material amounts properly
accrued through the Closing with respect to the current plan year thereof will
be paid by the Company, the Subsidiary or such ERISA Affiliate prior to the
Closing, or will be properly recorded in the Company's financial statements or
books and records. There is no pending or, to the best knowledge of the
Company, threatened material legal action, proceeding or investigation against
or involving the Company Employee Benefit Plans which could result individually
or in the aggregate in material liabilities to such plans, the Company or the
Subsidiary. With respect to any Company Employee Benefit Plan that is a
Multiemployer Plan (i) neither the Company, the Subsidiary nor any ERISA
Affiliate has, since September 26, 1980 through the date hereof, made or
suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Section 4203 and 4205 of ERISA, that individually or in
the aggregate could result in a material liability, (ii) through the date
hereof no event has occurred that presents a material risk of a complete or
partial withdrawal that, individually or in the aggregate, could result in a
material liability, and (iii) except as listed in Schedule 6.11, neither the
Company, the Subsidiary nor any ERISA Affiliate has any material contingent
liability under Section 4204 of ERISA. The Company has provided to Acquiror a
list of all Multiemployer Plans that are subject to Title IV of ERISA to which
the Company and the Subsidiary contribute or are required to contribute. All
representations made by the Company in this Section 6.11 are likewise true with
respect to the Subsidiary. Except as expressly referenced herein, the term
"Company Employee Benefit Plan" shall not include any Multiemployer Plan for
purposes of this Section 6.11.
6.12 Environmental Matters.
(a) Schedule 6.14 discloses all real property owned by the
Company and the Subsidiary, and Schedule 6.13 discloses all real property
leased or operated by the Company and the Subsidiary (collectively, the
"Company Real Properties").
(b) Except as disclosed in the Company SEC Filings or set
forth on Schedule 6.12, (i) none of the Company, the Subsidiary or, to the
Company's knowledge, any of the Company Real Properties fails to comply in any
material respect with any Environmental Laws; (ii) no governmental agency or
third party has alleged that the Company, the Subsidiary or, to the Company's
knowledge, the Company Real Properties is in material violation of, or subject
to any administrative or judicial proceeding pursuant to, any Environmental Law
in any material respect;
18.
24
(iii) to the Company's knowledge, there has not occurred, nor is there
presently occurring, any Release or Releases of any amount of any Hazardous
Materials on, into or beneath the surface of the Company Real Properties or any
property located adjacent to the Company Real Properties in a manner which
materially and adversely affects the Company Real Properties or the Company and
the Subsidiary, taken as a whole; (iv) neither the Company nor the Subsidiary
has disposed, or allowed or arranged for any third parties to dispose, of any
amount of any Hazardous Materials upon any of the Company Real Properties in a
manner which materially and adversely affects the Company Real Properties or
the Company and the Subsidiary, taken as a whole; (v) neither the Company nor
the Subsidiary has received any notice that either of them or any of the
Company Real Properties is a potentially responsible party for a federal or
state environmental cleanup site or sites or for corrective actions under any
Environmental Law with respect to any material matters; and (vi) the Company
has delivered to the Acquiror copies of all material audits, environmental
assessments or environmental studies undertaken by or in the possession of the
Company or the Subsidiary with respect to their operations or the Company Real
Properties.
(c) For purposes of this Agreement, "Hazardous Materials"
shall mean asbestos, petroleum products, underground tanks of any type and all
other materials now or hereafter defined as "hazardous substances", "hazardous
wastes", "toxic substances", "solid wastes", or otherwise now or hereafter
listed or regulated pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq. ("CERCLA"); the Resource Conservation and Recovery Act, 42 U.S.C. Section
Section 6901 et seq. ("RCRA"), and any amendments thereto; the Hazardous
Materials Transportation Act, 49 U.S.C. Section Section 1801 et seq. ("HMTA");
the Clean Water Act, the Safe Drinking Water Act; the Atomic Energy Act; the
Federal Insecticide, Fungicide, and Rodenticide Act; the Clean Air Act; and any
other similar federal, state or local statute, regulation, ordinance, order,
decree, or any other law, common law theory or reported decision of any state
or federal court, as now or at any time hereafter in effect, relating to, or
imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material.
(d) For purposes of this Agreement, "Environmental Laws"
means any and all federal, state and local laws (including, without limitation,
common law), statutes, ordinances, rules, regulations, judgments, orders,
decrees, permits, licenses, or other governmental restrictions or requirements
relating to health, pollution, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
the release or threatened release, discharge, emission, of any Hazardous
Materials or materials containing Hazardous Materials, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials or the pollution of the
environment or the protection of human health, including, without limitation,
CERCLA, RCRA and HMTA.
(e) For purposes of this Agreement, "Release" shall mean
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, escaping, leaching, disposing or dumping.
6.13 Real Estate Leases. Schedule 6.13 sets forth a list as of the
date of this Agreement of (i) all real property which is leased by the Company
or the Subsidiary (the "Leased Real
19.
25
Property"); (ii) all material options held by the Company or the Subsidiary or
contractual obligations on the part of the Company or the Subsidiary to
purchase or acquire any interest in real property; and (iii) all options
granted by the Company or the Subsidiary or contractual obligations on the part
of the Company or the Subsidiary to sell or dispose of any material interest in
real property. True and complete copies of all leases and all material
amendments and modifications thereto entered into by the Company or the
Subsidiary with respect to the Leased Real Property (the "Leases") have
heretofore been delivered by the Company to the Acquiror. The Leases are in
full force and effect and constitute binding obligations of the Company or the
Subsidiary and, to the best of its knowledge, the other parties thereto, and,
to the best knowledge of the Company and the Subsidiary (i) there are no
material defaults thereunder by the Company or the Subsidiary and (ii) to the
Company's knowledge, no event has occurred which (with notice, lapse of time or
both or occurrence of any other event) would constitute a material default by
the Company or the Subsidiary or by any other party thereto.
6.14 Title to Properties; Absence of Liens and Encumbrances.
Schedule 6.14 lists all real property owned by the Company or the Subsidiary as
of the date of this Agreement. The Company and/or the Subsidiary has good and
marketable title to all of the real property listed on Schedule 6.14 free and
clear of all Encumbrances (as defined below) except for Permitted Encumbrances
(as defined below). The term "Permitted Encumbrances" means (i) statutory
liens for current taxes or assessments not due or delinquent or the validity of
which is being contested in good faith, (ii) mechanics, workers, repairmen's
and other similar liens arising or incurred in the ordinary course of business,
(iii) such other liens, imperfections in title, charges, easements,
restrictions and other encumbrances, if any, which in the aggregate are not
material in amount (to the extent they relate to monetary obligations) and do
not materially and adversely affect the use of the property subject thereto (as
such property is used on the date hereof), and (iv) liens securing obligations
reflected on the Company Balance Sheet and other encumbrances and matters
specifically set forth on Schedule 6.14. Except for leased assets, the Company
and the Subsidiary have good and marketable title to all of their material
tangible personal property used in their businesses, including, without
limitation, those reflected in the Company Balance Sheet (other than assets
disposed of in the ordinary course of business since the Company Balance Sheet
Date), free and clear of all liens, charges, pledges, security interests or
other encumbrances ("Encumbrances"), except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as would not,
in the aggregate, materially and adversely affect the operation of the business
of the Company or the Subsidiary, and except as reflected or disclosed in the
Company Balance Sheet, the Company SEC Filings or on Schedule 6.14.
6.15 Tax Matters. Except as disclosed on Schedule 6.15, the Company
and the Subsidiary have timely filed all material tax returns which the Company
and/or the Subsidiary (as the case may be) are required to file ("Tax Returns")
with respect to all federal, state, local, foreign or other governmental
income, franchise, payroll, F.I.C.A., unemployment, withholding, real property,
personal property, sales, payroll, disability and all other material taxes
imposed on the Company or the Subsidiary or with respect to any of their
respective properties, or otherwise payable by them, including interest and
penalties, if any, in respect thereof (collectively, "Company Taxes"), and have
paid or provided for all Company Taxes shown to be due thereon. The Company
has made available copies of all such Tax Returns to the Acquiror. Except as
set forth on Schedule 6.15, (i) neither the Company nor the Subsidiary has
filed or entered into, or is
20.
26
otherwise bound by, any election, consent or extension agreement that extends
any applicable statute of limitations with respect to taxable periods of the
Company and (ii) the Company is not a party to any contractual obligation
requiring the indemnification or reimbursement of any person with respect to
the payment of any material Company Tax. Except as set forth on Schedule 6.15,
to the Company's knowledge, no action or proceeding is pending or threatened by
any governmental authority for any audit, examination, deficiency, assessment
or collection from the Company or the Subsidiary of any material Company Taxes,
no unresolved claim for any deficiency, assessment or collection of any
material Company Taxes has been asserted against the Company or the Subsidiary,
and all resolved assessments of Company Taxes have been paid or are reflected
in the Company Balance Sheet. Except as set forth on Schedule 6.15, no power
of attorney has been granted by the Company or the Subsidiary, and is currently
in force, with respect to any matter relating to Company Taxes. Except as set
forth on Schedule 6.15, all material tax deficiencies asserted or assessed
against the Company have been paid. The Company has made available to the
Acquiror true and complete copies of all employment contracts which relate to
any and all employees of the Company or the Subsidiary. Except as set forth on
Schedule 6.15, neither the Company nor the Subsidiary has been a member of an
affiliated group other than the group in which the Company is the parent.
6.16 Proprietary Property. To the best knowledge of the Company,
Schedule 6.16A contains a complete and accurate list of all material trade
names, logos, trademarks, trade secrets, service marks, copyrights and other
intellectual property rights (collectively "Proprietary Property"), including
all contracts, agreements and licenses relating thereto, owned by the Company
or the Subsidiary or in which either of them has any rights. To the Company's
knowledge, neither the Company nor the Subsidiary has materially infringed or
is now materially infringing on any Proprietary Property belonging to any other
person, firm or corporation. The Company and the Subsidiary own or hold
material licenses or other material rights to use all Proprietary Property
necessary for them to conduct their respective businesses as they are being
conducted. Neither the Company nor the Subsidiary has granted any licenses
with respect to any of their respective Proprietary Property. Neither the
Company nor the Subsidiary has received any notice, nor does the Company know,
of any material conflict or claimed material conflict with respect to the
rights of others to the use of their corporate name or any of their Proprietary
Property.
6.17 Labor Matters. Schedule 6.17 lists, as of the date of this
Agreement, all collective bargaining agreements which relate to any of the
employees of the Company and the Subsidiary. As of the date of this Agreement,
except as set forth on Schedule 6.17, neither the Company nor the Subsidiary
knows of any activity or proceedings of any labor union (or representatives
thereof) to organize any unorganized employees employed by the Company or the
Subsidiary, nor of any strikes, slowdowns, work stoppages, lockouts or threats
thereof, by or with respect to any of the employees of the Company or the
Subsidiary. Except as set forth on Schedule 6.17, as of the date of this
Agreement, neither the Company nor the Subsidiary has received notice of any
material claim, or has knowledge of any facts which are likely to give rise to
any material claim, that they have not complied in any respect with any laws
relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, collective bargaining, the payment
of social security and similar taxes, equal employment opportunity, employment
discrimination or employment safety.
21.
27
6.18 Insurance. Schedule 6.18 lists, as of the date of this
Agreement, all material policies of fire, products liability, general
liability, vehicle, worker's compensation, directors' and officers' liability,
title and other insurance owned or held by or covering the Company or the
Subsidiary or any of their property or assets which are material to the
business of the Company and the Subsidiary, taken as a whole. As of the date
of this Agreement, there is no material claim pending under any of such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies and to the best of the Company's knowledge as of
the date of this Agreement there is no basis for an underwriter of such policy
to deny any such pending material claim. As of the date of this Agreement, all
of such policies are in full force and effect in all material respects, and no
notice of cancellation or termination has been received with respect to any
such policy which has not been replaced or cannot be replaced on substantially
similar terms prior to the date of such cancellation or termination. All
premiums due and payable under such policies have been paid. Except as set
forth on Schedule 6.18 no insurance policy or arrangement provides for any
retrospective premium adjustment, experience based liability or loss sharing
arrangement affecting the Company or the Subsidiary except adjustments,
liabilities or loss sharing arrangements which would not be material in amount.
6.19 Material Contracts. Schedule 6.19 lists, as of the date of this
Agreement, (i) all contracts in the nature of mortgages, indentures, promissory
notes, loan or credit agreements or similar instruments under which the Company
and the Subsidiary have borrowed or may borrow at least $200,000 and (ii) all
contracts or other written agreements, whether or not made in the ordinary
course of business, which are material to the business of the Company and the
Subsidiary taken as a whole (other than Leases and agreements relating to real
property listed on Schedule 6.14 hereof), but excluding in the case of clause
(ii) any contract or agreement which (x) does not require or involve payments
of at least $100,000 in the aggregate in any given calendar year, or (y) would
be terminable by the Company and/or the Subsidiary on less than 90 days prior
notice without payment of a material termination penalty. Neither the Company
nor the Subsidiary is in material default and no event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence
of any other event) would constitute a material default under any of the
contracts or agreements listed on Schedule 6.19.
6.20 Proxy Statement; Offer Documents; Other Information. Neither
the Schedule 14D-9 nor any of the information supplied or to be supplied in
writing by the Company for inclusion in the Proxy Statement and any other
documents, including the Offer Documents, to be filed with the Commission or
any regulatory agency in connection with the transactions contemplated hereby,
including any amendment or supplement to such documents, will, at the
respective times such documents are filed, and, with respect to the Proxy
Statement and the Offer Documents, when first published, sent or given to
stockholders of the Company, contain any untrue statement of 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 are made not misleading
or, in the case of the Offer Documents and the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Meeting and at the Effective
Date, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading or necessary to correct any statement in any
earlier communication with respect to the Offer or the solicitation of proxies
for the Meeting which shall
22.
28
have become false or misleading. If, at any time prior to the Effective Date,
any event relating to the Company or any of its affiliates, officers or
directors is discovered by the Company that should be set forth in an amendment
or supplement to the Proxy Statement or the Offer Documents, the Company will
promptly inform the Acquiror, and such amendment or supplement will be promptly
filed with the Commission and appropriate state securities administrators, and
disseminated to the stockholders of the Company, to the extent required by
applicable federal and state securities laws. All documents which the Company
files or is responsible for filing with the Commission and any regulatory
agency in connection with the Offer or the Merger (including, without
limitation, the Schedule 14D-9 and the Proxy Statement) will comply as to form
and content in all material respects with the provisions of applicable law.
Notwithstanding the foregoing, neither the Company nor the Subsidiary makes any
representations or warranties with respect to any information that has been
supplied by the Acquiror or Newco, or their auditors, attorneys, financial
advisors, other consultants or advisors specifically for use in the Schedule
14D-9 and the Proxy Statement, or in any other documents to be filed with the
Commission or any regulatory agency in connection with the transactions
contemplated hereby.
6.21 Brokers. Neither the Company nor the Subsidiary has paid or
become obligated to pay any fee or commission to any broker, finder, investment
banker or other intermediary in connection with this Agreement, except that the
Company has retained Xxxxxx Xxxxxxx to provide a "fairness opinion" and advice
on certain matters pursuant to that certain Letter Agreement between Xxxxxx
Xxxxxxx and the Company dated January 8, 1998.
6.22 Suppliers and Customers. Except as set forth in Schedule 6.22,
the Company has no commitment or obligation to continue to utilize the services
of, or otherwise to do business with, any licensor, vendor, supplier or
licensee of the Company or the Subsidiary which is not terminable by the
Company on less than 60 days notice without penalty and which required
aggregate payments within the 12 months preceding the date of this Agreement in
excess of $200,000 or which is reasonably likely to require payments during the
12 months following the date of this Agreement in excess of $200,000.
6.23 Inventories. As of the date of the Company Balance Sheet, the
inventories shown on the Company Balance Sheet consisted in all material
respects of items of a quantity and quality usable or saleable in the ordinary
course of business net of reserves. All of such inventories were acquired in
the ordinary course of business and have been replenished in all material
respects in the ordinary course of business consistent with past practice. All
such inventories are valued on the Company Balance Sheet in accordance with
generally accepted accounting principles applied on a basis consistent with the
Company's past practices, and provision has been made or reserves have been
established on the Company Balance Sheet, in each case in an amount believed by
the Company as of the date of this Agreement to be adequate, for all
slow-moving, obsolete or unusable inventories.
6.24 Potential Conflict of Interest. As of the date of this
Agreement, except as set forth in the Company SEC Filings filed prior to the
date hereof, since February 1, 1997, there have been no transactions,
agreements, arrangements or understandings between the Company or the
Subsidiary, on the one hand, and their respective affiliates, on the other
hand, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
23.
29
6.25 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
6.26 No Undisclosed Liabilities. Neither the Company nor the
Subsidiary has any material liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) that were not fully reflected or reserved
against in the Company Balance Sheet, except for liabilities and obligations of
a nature not required to be reflected or reserved against in the Company
Balance Sheet in accordance with generally accepted accounting principles or
incurred in the ordinary course of business and consistent with past practice
since the date thereof.
6.27 Product Liability. There are not presently pending or, to the
Company's knowledge, threatened any material civil, criminal or administrative
actions, suits, demands, claims, hearings, notices of violation,
investigations, proceedings or demand letters relating to any alleged material
hazard or alleged material defect in design, manufacture, materials or
workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any product distributed or sold
by or on behalf of the Company or the Subsidiary. Neither the Company nor the
Subsidiary has extended to any of its customers any material written,
non-uniform product warranties, indemnifications or guarantees.
6.28 Full Disclosure. Neither any representation or warranty by the
Company in this Agreement nor any statement by the Company in any Schedules
hereto omits to state any material fact necessary in order to make the
representations, warranties or statements made herein or therein, in the light
of the circumstances under which they were made, not misleading.
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Stockholders Meeting.
(a) The Company agrees, subject to Section 7.1(b), Section
9.1(e) and applicable law, that this Agreement shall be submitted at a meeting
(the "Meeting") of its stockholders duly called and held pursuant to Section
251(c) of the General Corporation Law. As soon as practicable after the
acquisition by Newco of the Minimum Shares pursuant to the Offer, the Company
shall take all action, to the extent necessary to consummate the Merger, in
accordance with applicable law, its Certificate of Incorporation and Bylaws, to
convene a meeting of its stockholders promptly to consider and vote upon the
approval of the Merger and to obtain the necessary approval of the Merger and
the Agreement by its stockholders, and the Company shall prepare and file with
the Commission, subject to the prior approval of Acquiror, which approval
Acquiror shall not unreasonably withhold, preliminary and final versions of a
proxy statement and proxy and other filings relating to the Meeting as required
by the Exchange Act. The term "Proxy Statement" shall mean such proxy
statement at the time it is first mailed, sent or given to stockholders, and
all duly filed amendments or revisions made thereto, if any, similarly mailed,
sent or given to such stockholders. Except as otherwise permitted by Section
7.5, the
24.
30
Company shall include in the Proxy Statement the recommendation of the Board of
Directors of the Company that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement. Notice of the
Meeting shall be mailed to the stockholders of the Company along with the Proxy
Statement. The Company, the Acquiror and Newco each shall use its reasonable
best efforts to obtain and furnish the information required to be included in
the Proxy Statement, and the Company, after consultation with Newco, shall
respond promptly to any comments made by the Commission with respect to the
Proxy Statement and cause the Proxy Statement and proxy to be mailed to its
stockholders at the earliest practicable time.
(b) Notwithstanding the preceding paragraph or any other
provision of this Agreement, in the event Newco owns 90% or more of the
outstanding shares of each class of the capital stock of the Company following
expiration of the Offer, the Company shall not be required to call the Meeting
or to file or mail the Proxy Statement, and the parties hereto shall, at the
request of the Acquiror and subject to Article VIII, take all necessary and
appropriate action to cause the Merger to become effective, as soon as
practicable following such expiration, without a meeting of stockholders of the
Company in accordance with Section 253 of the General Corporation Law.
7.2 Conduct of the Business of the Company Prior to the Effective
Date. Except (i) as set forth on Schedule 7.2, (ii) as expressly permitted by
this Agreement or (iii) as otherwise consented to or approved in writing by
Acquiror, the Company agrees that prior to the Effective Date:
(a) the business of the Company and the Subsidiary shall be
conducted only in the ordinary course and consistent in all material respects
with past practice;
(b) each of the Company and the Subsidiary shall not (i)
amend its Certificate of Incorporation or Bylaws, (ii) change the number of
authorized, issued or outstanding shares of its capital stock, except upon the
exercise of stock options outstanding on the date hereof described on Schedule
7.2, (iii) declare, set aside or pay any dividend or other distribution or
payment in cash, stock or property in respect of shares of its capital stock,
(iv) make any direct or indirect redemption, retirement, purchase or other
acquisition of any of its capital stock (except for repurchases of Common Stock
from employees pursuant to existing stock subscription agreements between the
Company and certain of its employees described on Schedule 7.2) or (v) split,
combine or reclassify its outstanding shares of capital stock;
(c) neither the Company nor the Subsidiary shall, directly
or indirectly, (i) issue, grant or sell or agree or propose to issue, grant or
sell any shares of, or rights of any kind to acquire any shares of the capital
stock of the Company or the Subsidiary, except that the Company may issue
shares of Common Stock upon the exercise of Options and warrants outstanding on
the date hereof, (ii) other than in the ordinary course of business, incur any
indebtedness for borrowed money, (iii) waive, release, grant or transfer any
intangible rights of material value, except in the ordinary course of business,
(iv) transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any personal property of the Company or the Subsidiary other than in the
ordinary course of business and consistent with past practice or
25.
31
(v) transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any real property of the Company or the Subsidiary;
(d) the Company and the Subsidiary shall use their
reasonable best efforts to preserve intact the business organization of the
Company and the Subsidiary, to keep available the services of its operating
personnel, to preserve the goodwill of those having business relationships with
each of them and to carry on their respective businesses in substantially the
same manner as carried on heretofore;
(e) neither the Company nor the Subsidiary will, directly
or indirectly, (i) increase the compensation payable or to become payable by it
to any of its employees, officers, directors, agents or consultants or under
any bonus, insurance, pension or other employee benefit plan or arrangement
made to, for or with any such persons (other than as provided in employment
agreements and welfare and benefit plans set forth on Schedule 6.10 as in
effect on the date hereof, except in accordance with collective bargaining
agreements set forth on Schedule 6.17, and except for cost of living
adjustments and other increases in the ordinary course consistent with past
practice or other increases which are reasonably necessary for the operation of
the business of the Company and the Subsidiary), (ii) adopt, or make any
payment or amend any provision, other than as required by existing plans or
agreements as in effect on the date hereof and provisions and actions under
existing stock option plans authorized in connection with the Offer or the
Merger, any bonus, profit sharing, pension, retirement, deferred compensation,
employment or other payment or employee compensation plan, agreement or
arrangement for the benefit of any employee, officer, director, agent or
consultant of the Company or the Subsidiary or modify the terms of any Option
except in accordance with Section 3.5, (iii) grant any stock appreciation
rights, (iv) enter into or amend in any respect any employment agreement, (v)
make any loan or advance to, or make any change in its existing borrowing or
lending arrangements for or on behalf of or enter into any written contract,
lease or commitment with, any affiliate, officer or director of the Company or
the Subsidiary (pursuant to an employee benefit plan or otherwise), (vi) enter
into any collective bargaining agreement, or (vii) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any
employee, officer, director, agent or consultant, or pay or agree to pay or
make any accrual or arrangement for payment to any employee, officer, director,
agent or consultant of the Company or the Subsidiary of any amount relating to
unused vacation days, except payments and accruals made in the ordinary course
consistent with past practice or as required by the terms of any such plan or
collective bargaining agreement;
(f) neither the Company nor the Subsidiary shall, directly
or indirectly, assume, guarantee, endorse or otherwise become responsible for
the obligations of any other individual, firm or corporation other than the
Subsidiary, or make any loans or advances to any individual, firm or
corporation except in the ordinary course of its business and consistent with
past practices;
(g) except (i) as set forth on Schedule 7.2, (ii) for
replacement of equipment in the ordinary course of business and (iii) for
expenditures not in excess of $100,000 per month (with unexpended amounts to
carry forward to future months), neither the Company nor the
26.
32
Subsidiary shall make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfers or otherwise,
or by the purchase of any property or assets of any other individual, firm or
corporation; provided, that the Company will confer with Acquiror if the amount
of any capital expenditure would exceed $25,000;
(h) neither the Company nor the Subsidiary shall enter
into, modify or amend in any material respect or take any action to terminate
their respective material contracts;
(i) neither the Company nor the Subsidiary shall take any
action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures, except for changes required by generally accepted accounting
principles;
(j) neither the Company nor the Subsidiary shall, without
the consent of Acquiror, which consent shall not be unreasonably withheld, make
any material Tax election, change any material Tax election already made, adopt
any material Tax accounting method, change any material Tax accounting method
unless required by United States generally accepted accounting principles,
enter into any closing agreement, settle any Tax claim or assessment or consent
to any Tax claim or assessment or any waiver of the statute of limitations for
any such claim or assessment;
(k) neither the Company nor the Subsidiary shall take, or
agree to commit to take, any action that (i) would or is reasonably likely to
result in any of the conditions to the Offer set forth in Exhibit A or any of
the conditions to the Merger set forth in Article VIII not being satisfied,
(ii) would make any representation or warranty of the Company contained herein
inaccurate in any material respect at, or as of any time prior to, consummation
of the Offer (provided that any violation of this covenant will not give rise
to any claim for damages, but may be the subject of a claim for equitable
relief), or (iii) would materially impair the ability of the Company to
consummate the Offer or the Merger in accordance with the terms hereof or
materially delay such consummation and the Company and the Subsidiary will
promptly advise the Acquiror in writing of any material adverse effect on the
business, operations, properties (including intangible properties), condition
(financial or otherwise), results of operations, assets or liabilities of the
Company and the Subsidiary, taken as a whole or any breach of the Company's
representations or warranties, or any material breach of a covenant contained
herein of which the Company or the Subsidiary has knowledge;
(l) neither the Company nor the Subsidiary shall adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or the
Subsidiary (other than the Merger);
(m) neither the Company nor the Subsidiary shall pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice, of claims, liabilities or obligations (i)
reflected or reserved against in, or contemplated by, the financial statements
(or the notes thereto) included in the
27.
33
Company SEC Filings or (ii) incurred in the ordinary course of business since
the date of such financial statements;
(n) neither the Company nor the Subsidiary shall permit any
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to the Acquiror, except in the ordinary
course of business and consistent with past practice; and
(o) neither the Company nor the Subsidiary shall enter into
an agreement, commitment or arrangement to do any of the things described in
clauses (a) through (n) of this Section 7.2, or authorize, recommend, propose
or announce an intention to do any of such things.
The consent of Acquiror required by this Section 7.2 will not be
unreasonably withheld subject to the following qualifications: (i) consent to
actions described in clauses (b) and (c)(i) and (c)(v) may be withheld at any
time for any reason and (ii) it shall be unreasonable to withhold such consent
120 days or more after the date of this Agreement unless the action would
materially and adversely affect the value of the business of the Company and
the Subsidiary to the Acquiror.
7.3 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by the Acquiror or any of
its Subsidiaries of the Minimum Shares pursuant to the Offer, and from time to
time thereafter, the Acquiror shall be entitled to designate up to such number
of directors, rounded up to the next whole number, on the Board of the Company
(the "Board") as shall give the Acquiror representation on the Board equal to
the product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage,
expressed as a decimal, that the aggregate number of shares of Common Stock
beneficially owned by the Acquiror or any affiliate of the Acquiror following
such purchase bears to the total number of shares of Common Stock then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause the Acquiror's designees to be elected as directors of the
Company, including increasing the size of the Board or securing the
resignations of incumbent directors, or both. The Company shall cause persons
designated by the Acquiror to constitute the same percentage as persons
designated by the Acquiror shall constitute of the Board of (i) each committee
of the Board, (ii) the board of directors of the Subsidiary and (iii) each
committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the earlier of (i) the
time the Acquiror acquires a majority of the then outstanding shares of Common
Stock, and (ii) the Effective Date, the Company shall use its best efforts to
ensure that all the members of the Board and each committee of the Board and
such boards and committees of the Subsidiary as of the date hereof who are not
employees of the Company shall remain members of the Board and of such boards
and committees.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 7.3, and
shall include in the Schedule 14D-9 such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1 to fulfill such obligations. The Acquiror and Newco shall supply to
the Company and
28.
34
be solely responsible for any information with respect to either of them and
their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1.
(c) In the event that the Acquiror's designees are elected
to the Company's Board of Directors, until the Effective Date, the Company's
Board of Directors shall have at least two directors who are directors on the
date hereof (the "Independent Directors"); provided, however, that in such
event if the number of Independent Directors will be reduced below two for any
reason whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains, the
other directors shall designate persons to fill such vacancies who shall not be
stockholders, affiliates or associates of the Acquiror or Newco and such
persons shall be deemed to be Independent Directors for purposes of this
Agreement. Notwithstanding anything in this Agreement to the contrary, in the
event that the Acquiror's designees are elected to the Company's Board of
Directors after the acceptance for payment of shares of Common Stock pursuant
to the Offer and prior to the Effective Date, the affirmative vote of a
majority of the Independent Directors shall be required to (i) amend or
terminate this Agreement by the Company, (ii) exercise or waive any of the
Company's rights, benefits or remedies hereunder or (iii) take any other action
by the Company's Board of Directors under or in connection with this Agreement
which would adversely affect the rights of Company stockholders under this
Agreement; provided, however, that if there will be no such directors, such
actions may be effected by the unanimous vote of the entire Board of Directors
of the Company. The provisions of this Section 7.3 are in addition to and
shall not limit any rights which the Acquiror, Newco or any of their affiliates
may have as a holder or beneficial owner of shares of Common Stock as a matter
of law with respect to the election of directors or otherwise; provided, that
none of Acquiror, Newco or such affiliates shall take any action to remove or
replace the Independent Directors prior to the Effective Date.
7.4 Access to Properties and Records. The Company and the
Subsidiary shall afford to the Acquiror and its accountants, counsel and
representatives, reasonable access during normal business hours throughout the
period prior to the Effective Date to all of their respective properties,
books, contracts, commitments and written records (including but not limited to
tax returns), and shall make reasonably available their respective officers and
employees to answer fully and promptly questions put to them thereby (so long
as such questions are not outside of the scope of purpose of this Section 7.4);
provided that no investigation pursuant to this Section 7.4 shall alter any
representation or warranties of any party hereto or conditions to the
obligation of the parties hereto; provided, further, that such access shall not
unreasonably interfere with the normal business operations of the Company or
the Subsidiary. The Acquiror and Newco agree to provide the Company and the
Subsidiary with reasonable notice prior to visiting any such property for the
purpose of any such investigation, including notice of the purpose and reason
for such investigation. Notwithstanding the foregoing, the Acquiror and Newco
agree that, it will obtain the approval of the Chief Executive Officer or the
Chief Financial Officer of the Company (not to be unreasonably withheld) prior
to any such investigation to be conducted at any of the warehouses or retail
stores of the Company or the Subsidiary.
29.
35
7.5 Negotiations.
(a) Following the execution of this Agreement by the
Company, neither the Company nor the Subsidiary nor any affiliate of either of
them as of the date of this Agreement, nor the directors, officers, employees,
representatives or agents of any of them, shall, directly or indirectly,
solicit, initiate encourage or participate in discussions or negotiations with
or the submission of any offer or proposal by or provide any information to,
any corporation, partnership, person, or other entity or group (other than
Newco or Acquiror or an officer or other authorized representative of Newco or
Acquiror) concerning any Third Party Transaction (as defined in Section 9.2(b))
or proposal related thereto or, participate in any negotiation regarding any
Third Party Transaction or otherwise cooperate in any way with or encourage any
effort or attempt by any other person to effectuate a Third Party Transaction.
Notwithstanding the foregoing, prior to the acceptance for payment of shares of
Common Stock pursuant to the Offer, the Company may (x) furnish information and
access to any corporation, partnership, person or other entity or group
pursuant to appropriate confidentiality agreements in response to unsolicited
written requests therefor, and (y) negotiate and participate in discussions and
negotiations with such entity or group concerning a Third Party Transaction or
proposal related thereto if (with respect to clause (y) only) the Board has
determined in its good faith judgement, based as to legal matters and the
written advise of outside legal counsel (i) that the exercise of the directors'
fiduciary duties requires the taking of such action and, (ii) after
consultation with all of its principal advisors in connection with the
transactions contemplated herein, that such Third Party Transaction or proposal
related thereto is a bona fide written proposal that would, upon consummation
thereof, result in a transaction more favorable to the stockholders of the
Company than the transactions contemplated herein and in the good faith
reasonable judgement of the Board (based in part upon the advise of all of its
principal advisors in connection with the transactions contemplated herein) is
proposed by a corporation, partnership, person or other entity or group with
sufficient financial resources available to it or available from third parties
to consummate such transaction (a proposal that satisfies clauses (i) and (ii)
being referred to herein as a "Superior Proposal"). The Company will
immediately notify the Acquiror of the existence of any proposal, discussion,
negotiation or inquiry received by the Company, and the Company shall
immediately communicate to the Acquiror the terms of any proposal, discussion,
negotiation or inquiry which it may receive and the identity of the party
making such proposal or inquiry or engaging in such discussion or negotiation.
The Company shall promptly provide to the Acquiror any non-public information
concerning the Company provided to any other party which was not previously
provided to the Acquiror. Nothing contained in this Section 7.5 shall prohibit
the Company or its Board of Directors from disclosing to the Company's
stockholders a position with respect to a tender offer by a third party
pursuant to Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act, or
from making such disclosure to the Company's stockholders which, in the
judgment of the Board of Directors, after receipt of advice from counsel, may
be required under applicable law, provided, that the Company may not, except as
permitted by Section 7.5(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to the Offer or the Merger or approve or
recommend, or propose to approve or recommend any Third Party Transaction or
proposal relating thereto, or enter into any agreement with respect thereto.
The Company shall immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company agrees not to
30.
36
release any third party from, or waive any provision of, any confidentiality
agreement to which the Company is a party.
(b) Except as set forth herein, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Acquiror
or Newco, the approval or recommendation by such Board of Directors or any such
committee of the Offer, this Agreement or the Merger, (ii) approve or recommend
or propose to approve or recommend, any proposal related to a Third Party
Transaction or (iii) enter into any agreement with respect to any such
proposal. Notwithstanding the foregoing, prior to the time of acceptance for
payment of shares of Common Stock pursuant to the Offer, the Board of Directors
of the Company may (subject to the terms of this and the following sentence)
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the fifth Business Day following the Acquiror's receipt of written notice
advising the Acquiror that the Board of Directors has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal; provided,
however, that the Company shall not enter into an agreement with respect to a
Superior Proposal unless the Company shall have furnished the Acquiror with
written notice not later than 12:00 noon (Boise time) five Business Days in
advance of any date that it intends to enter into such agreement and shall have
caused its financial and legal advisors to negotiate with the Acquiror to make
such adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated hereby on such
adjusted terms. In addition, if the Company enters into an agreement with
respect to any Third Party Transaction, it shall concurrently with entering
into such agreement pay, or cause to be paid, to the Acquiror the Termination
Fee (as defined in Section 9.2(a)), plus any amounts payable at said time for
reimbursement of expenses pursuant to the provisions of Section 9.2(a).
7.6 Acquiror Vote. Acquiror shall vote all shares of Common Stock
and all proxies it holds in favor of the Merger. After the date hereof, and
prior to the expiration of the Offer the Acquiror shall not purchase, offer to
purchase, or enter into any contract, agreement or understanding regarding the
purchase of shares of Common Stock of the Company, except pursuant to the terms
of the Stockholder Agreement, the Offer and the Merger.
7.7 Employee Benefits.
(a) The Acquiror will cause the Surviving Corporation to
provide or will directly provide to the employees of the Subsidiary and the
Company employee benefits that are substantially equivalent in the aggregate to
those provided by Acquiror to similarly situated employees of Acquiror, and in
determining the level of benefits under its employee benefit plans will provide
full credit for years of service with the Company or the Subsidiary, as such
years of service are currently recognized by the Company and the Subsidiary for
its employee benefits for purposes of eligibility, vesting and benefit accrual
but not for purposes of benefit accrual with respect to any "defined benefit
pension plan." Nothing contained herein shall be deemed to require the
Acquiror or the Company to continue in effect following the closing any
existing Company Plan, except as may be required by any applicable collective
bargaining agreement.
31.
37
(b) The Board of Directors of the Company shall adopt
resolutions, effective immediately prior to the Closing, terminating each tax
qualified defined contribution retirement plan sponsored, maintained,
contributed to or required to be contributed to by the Company, the Subsidiary
or any ERISA Affiliate, except any such plan required to be maintained by any
applicable collective bargaining agreement.
7.8 Indemnification.
(a) From and after the Effective Date, in addition to any
indemnification available to any officer or director by the Company or the
Subsidiary, the Acquiror and Surviving Corporation shall (in each case to the
fullest extent permitted by applicable law) indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Date, an officer, director or employee of the
Company or the Subsidiary (the "Indemnified Parties") against any and all
losses, damages, costs, expenses, liabilities or judgments, or amounts that are
paid in settlement of, or in connection with, any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of the Company or the Subsidiary at or prior to the Effective Date and
whether asserted or claimed prior to, or at or within 5 years after the
Effective Date, and including, without limitation, any which arise out of or
relate to the transactions contemplated by this Agreement (collectively, the
"Indemnified Liabilities") (and the Acquiror and Surviving Corporation shall
pay reasonable expenses in advance of the final disposition of any such action
or proceeding to each Indemnified Party to the fullest extent permitted by
law); provided, however, that neither the Acquiror nor Surviving Corporation
shall be required to indemnify any Indemnified Party in connection with any
proceeding (or portion thereof) involving any claim, action, suit, proceeding
or investigation initiated by such Indemnified Party unless the initiation of
such proceeding (or portion thereof) was authorized by the Board of Directors
of the Acquiror or unless such proceeding is brought by an Indemnified Party to
enforce rights under this Section 7.8. The Acquiror and Surviving Corporation
shall not take, or cause to be taken, at any time, any action to modify or
terminate the indemnification arrangements or limitation of liability
provisions contained in the Certificate of Incorporation or Bylaws of either
the Company or the Subsidiary, or in any indemnification agreements entered
into by either the Company or the Subsidiary, in a manner that would adversely
affect the Indemnified Parties. Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought against
any Indemnified Party (whether arising before or after the Effective Date), (i)
any counsel retained by the Indemnified Parties for any period after the
Effective Date shall be reasonably satisfactory to the Acquiror; (ii) after the
Effective Date, the Acquiror or Surviving Corporation shall pay all reasonable
fees and expenses of counsel for the Indemnified Parties promptly as statements
therefor are received; provided that Acquiror shall not be obligated to pay for
more than one counsel for all Indemnified Parties with respect to the same
matter unless (A) the Acquiror and an Indemnified Party shall have mutually
agreed to the contrary; or (B) the representation of one or more such
Indemnified Party and any other Indemnified Party pursuant to the preceding
sentence in any such proceeding by the same counsel would be inappropriate due
to actual or potential differing interests between such Indemnified Parties;
and (iii) after the Effective Date, the Acquiror and Surviving Corporation
shall use all reasonable efforts to assist in the vigorous defense of any such
matter, provided that the Acquiror and Surviving Corporation shall not be
liable for any settlement of any claim effected
32.
38
without their written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 7.8, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify the Acquiror and Surviving
Corporation (but the failure so to notify the Acquiror and Surviving
Corporation shall not relieve either such corporation from any liability which
it may have under this Section 7.8 except to the extent such failure materially
prejudices the Acquiror or Surviving Corporation).
(b) This Section 7.8 shall survive the closing of all of
the transactions contemplated hereby, is intended to benefit the Company, the
Subsidiary, the Surviving Corporation and each of the Indemnified Parties (each
of whom shall be entitled to enforce this Section 7.8 against the Acquiror or
the Surviving Corporation, as the case may be) and shall be binding on all
successors and assigns of the Surviving Corporation and the Acquiror.
7.9 Confidentiality. The terms of the Confidentiality Agreement,
dated December 22, 1997 (the "Acquiror Confidentiality Agreement") between the
Company and the Acquiror are herewith incorporated by reference and shall
continue in full force and effect until the Effective Date shall have occurred,
and if this Agreement is terminated or if the Effective Date shall not have
occurred for any reason whatsoever, the Acquiror Confidentiality Agreement
shall thereafter remain in full force and effect in accordance with its terms.
Notwithstanding the foregoing, the Company hereby expressly consents to the
disclosure of any information subject to the Acquiror Confidentiality Agreement
required to be disclosed by applicable law in connection with the consummation
of the transactions contemplated by this Agreement; provided, that the Acquiror
shall consult with the Company prior to the disclosure of any such information.
7.10 Best Efforts. Subject to the terms and conditions hereof, each
of the parties hereto agrees to use their reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary to satisfy the conditions set forth herein as soon as practicable,
including, without limitation, reasonable best efforts necessary (i) to have
removed or rescinded any and all temporary, preliminary or permanent
injunctions or other orders, and (ii) to defend against any and all claims,
actions, suits, proceedings, investigations or litigation, including, without
limitation, any injunctions or other orders or claims, actions, suits,
proceedings or investigations which arise out of or relate to the transactions
contemplated by this Agreement, and including those described in Section 8.1(b)
of this Agreement. Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require the Company, the Acquiror or Newco to commence any
litigation against any entity in order to facilitate the consummation of any of
the transactions contemplated hereby; provided, however, that in the event the
Acquiror or Newco elects to commence any such litigation, the Company shall use
its reasonable best efforts to cooperate fully in the prosecution of such
litigation. Except for any such litigation that may be commenced by the
Acquiror or Newco pursuant to Section 7.11, no party hereto will take any
action for the purpose of or that may have the effect of delaying, impairing or
impeding the receipt of any required consent, authorization, order or approval
or the making of any required filing or registration. In case at any time
after the Effective Date any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of the
Company, the Acquiror and Newco shall use all reasonable efforts to take, or
cause to be taken, all such necessary actions.
33.
39
7.11 Antitrust.
(a) Notwithstanding anything contained in Section 7.10 of
this Agreement to the contrary, the Acquiror and the Company each agree to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or required by the United States Federal Trade Commission (the
"FTC") or the United States Department of Justice (the "DOJ") in connection
with the expiration or termination of the waiting period under the HSR Act as a
result of the transactions contemplated by this Agreement; provided, however,
that nothing set forth in this Section 7.11 shall be construed so as to
preclude, prevent or otherwise limit the Acquiror or Newco from instituting or
prosecuting or defending a suit or claim in good faith with respect to any
suit, objection, requirement or other action by the FTC, the DOJ, any other
such governmental authority or any private party with respect to the
transactions contemplated hereby. The Acquiror shall pay all filing fees
incurred in connection with such filings under the HSR Act. Each party hereto
shall promptly inform the other of any material communication from the FTC, the
DOJ or any other government or governmental authority regarding any of the
transactions contemplated hereby. If either the Acquiror or the Company or any
of their respective affiliates receives a request for additional information or
documentary material from any such government or governmental authority with
respect to the transactions contemplated by this Agreement, then such party
shall endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. The Acquiror shall
advise the Company, and the Company shall advise the Acquiror, promptly in
respect of any understandings, undertakings or agreements (oral or written)
which it proposes to make or enter into with the FTC, the DOJ or any other
governmental authority in connection with the transactions contemplated hereby.
Except as otherwise provided in this Section 7.11, the Acquiror agrees to
resolve any objections as may be asserted with respect to the transactions
contemplated hereby under the Antitrust Laws (as defined hereafter) by the
applicable government or governmental authority (including, without limitation,
the Antitrust Division of the DOJ or the FTC). Except as otherwise provided in
this Section 7.11, if any suit is threatened or instituted challenging any of
the transactions contemplated hereby as violative of any Antitrust Law, the
Acquiror shall take such action (including, without limitation, agreeing to
hold separate or to divest any of the businesses, stores, products or assets of
the Acquiror or any of its affiliates or of the Company or the Subsidiary) as
may be required (i) by the applicable government or governmental authority
(including, without limitation, the Antitrust Division of the DOJ or the FTC)
in order to resolve such objections as such government or governmental
authority may have to such transactions under such Antitrust Law, or (ii) by
any court or similar tribunal, in any suit brought by a private party or
governmental authority challenging the transactions contemplated hereby as
violative of any Antitrust Law, in order to avoid the entry of, or to effect
the dissolution of, any injunction, temporary restraining order or other order
that has the effect of preventing the consummation of any of such transactions.
The entry by a court, in any suit brought by a private party or governmental
authority challenging the transactions contemplated hereby as violative of any
Antitrust Law, of an order or decree permitting the transactions contemplated
hereby, but requiring that any of the businesses, product lines or assets of
the Acquiror or any of its affiliates or of the Company or the Subsidiary be
divested or held separate by the Acquiror, or that would otherwise limit the
Acquiror's freedom of action with respect to, or its ability to retain, the
Company and the Subsidiary or any portion thereof or any of the Acquiror's or
its affiliates' other assets or businesses, shall not be deemed a failure to
satisfy
34.
40
the conditions specified in Section 8.1 or Exhibit A of this Agreement or give
rise to a right of termination under Section 9.1. Notwithstanding anything
contained in this Agreement to the contrary, the Company shall in no event
prior to the date on which the Offer is consummated be required to divest or
hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, the Subsidiary or
any portion thereof, or any of its other assets, stores, businesses or
products.
(b) For purposes of this Agreement, "Antitrust Laws" shall
mean and include the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the
HSR Act, the Federal Trade Commission Act, as amended, and all other Federal
and state statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade.
7.12 Notices of Certain Events. The Company and the Acquiror shall,
upon obtaining knowledge of any of the following, promptly notify the other of
(i) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the Offer and the
Merger; (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Offer and the Merger;
(iii) any actions, suits, claims, investigations or other judicial proceedings
commenced or threatened against the Company or the Subsidiary which, if pending
on the date of this Agreement, would have been required to have been disclosed
pursuant to Section 6.7 or which relates to the consummation of the Offer or
the Merger; (iv) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would cause any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect at or
prior to the Effective Date; and (v) any material failure of the Company, the
Acquiror or Newco, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
7.12 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.13 Stockholder Litigation. The Company shall give the Acquiror the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement; provided, however, that no such
settlement shall be agreed to without the Acquiror's consent.
7.14 Consents and Approvals. Subject to the provisions of Section
7.11, each of the Company, the Acquiror and Newco shall take all reasonable
actions necessary to comply promptly with all legal requirements that may be
imposed on it with respect to this Agreement and the transactions contemplated
hereby (which requirements shall include, without limitation, those identified
in Schedule 6.5,) and shall promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their subsidiaries in connection with this Agreement and the
transactions contemplated hereby. Subject to the provisions of Section 7.11,
each of the Company, the Acquiror and Newco shall, and shall cause its
subsidiaries to, take all reasonable actions necessary to obtain (and shall
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by,
35.
41
any Governmental Authority (as defined below) or other public or private third
party required to be obtained or made by the Acquiror, Newco, the Company or
any of their subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
7.15 Certain Supplier Agreements. The Company shall use its
reasonable best efforts to assist the Acquiror in obtaining modifications
desired by the Acquiror to any arrangements with the principal suppliers of the
Company and the Subsidiary, such modifications to take effect from and after
the Effective Date or the acceptance of shares of Common Stock for payment
pursuant to the Offer, whichever occurs first.
7.16 Year 2000 Services. When the Company has determined the
particular management information services and software it requires in order
to address the "year 2000 problem" it will provide written notice (the
"Notice") to Acquiror describing the services and software it requires and the
cost and payment schedule for such services and software. Within thirty (30)
days of receipt of such Notice (but Acquiror shall not be required to respond
prior to sixty (60) days from the date hereof), Acquiror shall permit the
Company to purchase such services and software without violation of any
representation, warranty or covenant under this Agreement or, at Acquiror's
election, Acquiror and the Company will enter into a services agreement in form
and substance reasonably satisfactory to Acquiror and the Company under which
the Acquiror will provide management information services and software to
address the "year 2000 problem" to (i) acquire inventory, (ii) ensure that
stores may transmit orders and receive inventory, (iii) provide necessary
interfaces between Acquiror's systems and the Company's and the Subsidiary's
general ledger software and such other interfaces as are necessary to permit
operation of the Company's and the Subsidiary's business as historically
conducted. Acquiror will provide such services at its cost and expense while
the Merger Agreement is in force and effect (but not for less than one hundred
eighty (180) days from the date hereof) and shall continue such services after
termination of the Merger Agreement until the Company and the Subsidiary are
able to obtain and implement a fully operational system to provide the software
and systems necessary to address year 2000 problems and permit operation of the
Company's and the Subsidiary's business as historically conducted. After the
termination of the Merger Agreement but not before one hundred eighty (180)
days from the date hereof, the Company and the Subsidiary shall pay a
reasonable fee for the services provided by Acquiror which shall be mutually
agreed upon by the parties. In the event that Acquiror is unable to provide
the services described hereunder within 60 days of the date of the Notice (but
not before ninety (90) days from the date hereof) or provide reasonable
assurances that it will be able to provide such services in accordance with the
timetable required by the Company, the Company and the Subsidiary shall be free
to purchase the services and software described in the Notice to address year
2000 problems and permit operation of the Company and the Subsidiary's business
as historically conducted without violating any representation, warranty or
covenant under this Agreement. The parties will cooperate in good faith to
implement the intent and purpose of this Section and to establish security
procedures to protect the integrity of the data and preserve its
confidentiality.
36.
42
7.17 Recovery of Certain Amounts Owed. Prior to the Effective Date,
the Company shall use its reasonable best efforts to cause all amounts payable
under those certain promissory notes of Xxxxxx Xxxxxxxxx in favor of the
Company described on Schedule 6.10 to be repaid in full.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the Merger contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of the
outstanding shares of Common Stock of the Company entitled to vote thereon at
the Meeting, unless Newco shall have acquired 90% or more of the outstanding
shares of each class of capital stock of the Company;
(b) No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction (collectively, "Governmental Authority") shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation, final
non-appealable injunction or other final non-appealable order which is in
effect and has the effect of making the acquisition of Common Stock by Newco
illegal or otherwise prohibiting consummation of the transactions contemplated
by this Agreement; provided however, that this condition shall not modify
Acquiror's obligation to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary or required by the FTC or the DOJ in
connection with the expiration or termination of the waiting period under the
HSR Act, or by any private party or Governmental Authority or other tribunal
under the Antitrust Laws or in a suit by a private party or governmental
authority as a result of the transactions contemplated by this Agreement, all
as further specified in and subject to Section 1.1 and Section 7.11 of this
Agreement;
(c) Any waiting period applicable to the Offer and the
Merger under the HSR Act shall have expired or been terminated;
(d) Newco shall have commenced the Offer pursuant to
Article I hereof, and Newco shall have purchased, pursuant to the terms and
conditions of such Offer, all shares of Common Stock duly tendered and not
withdrawn; and
(e) The Acquiror, Newco or their affiliates shall have
purchased a majority of the outstanding shares of Common Stock, except that
this condition shall not apply if the Acquiror, Newco or their affiliates shall
have failed to purchase shares of Common Stock pursuant to the Offer in breach
of their obligations under this Agreement.
37.
43
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Date, whether before or
after approval by the stockholders of the Company:
(a) by the mutual written consent of the Acquiror and the
Company, pursuant to action by their respective Boards of Directors;
(b) by the Acquiror if, without any material breach by the
Acquiror or Newco of their obligations under this Agreement, the purchase of
shares of Common Stock pursuant to the Offer will not have occurred within 30
days after the later of (i) the expiration or termination of the waiting period
under the HSR Act and (ii) the lifting, rescission or termination of any order,
decree, ruling or other action of or agreement with a Governmental Authority
theretofore in effect that has the effect of prohibiting, enjoining,
restraining or delaying the consummation of the Offer or the Merger or imposes
material limitations on the ability of Newco to acquire shares of Common Stock;
provided that Acquiror may not terminate under this clause (b) unless it has
reached an agreement authorizing consummation of the Offer and the Merger with
the FTC or DOJ and any other Governmental Authority that may have asserted that
consummation of the Offer would violate the Antitrust Laws and any injunction
or order prohibiting or limiting consummation of the Offer or the Merger has
become final and non-appealable;
(c) by the Company on or after July 19, 1998, if (i) the
Company is not then in material breach of any of its obligations hereunder;
(ii) the Company gives written notice to Acquiror (the "Termination Notice") of
its intention to terminate this Agreement; (iii) Acquiror has not accepted a
majority of the shares of Common Stock for payment pursuant to the terms of the
Offer; and (iv) Acquiror does not, within five Business Days of receipt of the
Company's Termination Notice, give the Company a notice of its intention to
continue this Agreement in effect (a "No Termination Notice"). A No
Termination Notice may not be given by the Acquiror unless the waiting period
under the HSR Act has expired or been terminated and all other obligations
under the Antitrust Laws necessary to consummate the Offer have been satisfied,
including reaching an agreement, if necessary, authorizing consummation of the
Offer and the Merger with the FTC or DOJ and any other Governmental Authority
that may have asserted that consummation of the Offer would violate the
Antitrust Laws. A No Termination Notice shall not be effective (i) at any time
when Acquiror is not using best efforts to lift, rescind or terminate a
temporary, preliminary or appealable injunction or order (which does not relate
to the Antitrust Laws) of the type described in clause (a) of Exhibit A, or
(ii) if such notice does not contain a binding, unconditional undertaking by
Acquiror to accept shares of Common Stock pursuant to the terms of the Offer at
the earliest practicable date after such injunction or order has been lifted,
rescinded or terminated, without regard to the satisfaction of any other
conditions to the Offer set forth in Exhibit A or any termination event set
forth in Section 9.1.
(d) by the Company, by action of its Board of Directors, if
(i) the Acquiror or Newco shall have failed to comply with any of the covenants
or agreements contained in this Agreement to be complied with or performed by
the Acquiror or Newco at or prior to such date
38.
44
of termination, which failure is material in the context of the transactions
contemplated by this Agreement and is not reasonably capable of being cured or
has not been cured within ten Business Days after the giving of written notice
to the Acquiror or Newco, or (ii) any representation or warranty of the
Acquiror or Newco in this Agreement which is qualified as to materiality shall
not be true and correct, or any such representation or warranty that is not so
qualified shall not be true and correct in any material respect, in either
event is not reasonably capable of being cured by the Acquiror or Newco, or has
not been cured as the case may be, within ten Business Days of notice, in each
case as if such representation or warranty was made as of such time on or after
the date of the Agreement (unless such representation speaks as of an earlier
date, in which case it shall be deemed to have been made as of such earlier
date);
(e) by the Company, prior to the purchase by Newco of at
least the Minimum Shares pursuant to the Offer, in order to permit the Company
to enter into, pursuant to Section 7.5, an agreement with respect to a Superior
Proposal that the Board of Directors of the Company has determined is more
favorable to the stockholders of the Company than the Offer and the Merger,
provided that (i) the Company has complied with all provisions of said Section
7.5, including the notice provision set forth therein, and (ii) the Company
makes simultaneous payment to the Acquiror of the Termination Fee;
(f) by the Acquiror, at any time prior to the purchase of
shares of Common Stock pursuant to the Offer, if (i) the Board of Directors of
the Company shall have withdrawn, modified, or changed its recommendation or
approval in respect of this Agreement or the Offer in a manner adverse to
Newco, (ii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company any proposal relating to a Third Party Transaction,
(iii) the Company shall have exercised a right with respect to a Third Party
Transaction referenced in Section 7.5 and has, directly or through its
representatives, continued discussions with any Third Party concerning such a
proposal relating to a Third Party Transaction for more than ten Business Days
after the date of receipt of such proposal or (iv) a proposal relating to a
Third Party Transaction that is publicly disclosed shall have been commenced,
publicly proposed or communicated to the Company which contains a proposal as
to price (without regard to whether such proposal specifies a specific price or
a range of potential prices) and the Company will not have rejected such
proposal within ten Business Days of its receipt or, if sooner, the date its
existence first becomes publicly disclosed; provided, further, that nothing
contained in this Section 9.1(f) or any other provision hereof shall give rise
to a right of termination solely as a result of the Company or the Board of
Directors of the Company issuing to its stockholders a communication that
contains only the statements permitted by Rule 14d-9e promulgated under the
Exchange Act and within five Business Days of issuing such communication the
Company publicly reconfirms its approval and recommendation of the Offer;
(g) by the Company, by action of its Board of Directors, if
Newco shall have failed to commence the Offer on or before that date which is
five Business Days from the date hereof; provided, that the Company may not
terminate this Agreement pursuant to this Section 9.1(g) if the Company is at
such time in material breach of its obligations under this Agreement;
39.
45
(h) by the Acquiror or the Company if any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, final non-appealable injunction or other final
non-appealable order which is in effect and has the effect of making the
acquisition of Common Stock by Newco illegal or otherwise prohibiting
consummation of the transactions contemplated by this Agreement (provided,
however, that this termination event shall not modify Acquiror's obligation to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or required by the FTC or the DOJ in connection with the
expiration or termination of the waiting period under the HSR Act, or by any
Governmental Authority, under the Antitrust Laws or in a suit by a private
party under the Antitrust Laws as a result of the transactions contemplated by
this Agreement, all as further specified in and subject to Section 7.11 of this
Agreement and subject to Section 1.1);
(i) by the Acquiror, by action of its Board of Directors,
if prior to the purchase of shares of Common Stock pursuant to the Offer, (i)
the Company shall have failed to comply with any of the covenants or agreements
contained in this Agreement to be complied with or performed by the Company
prior to the date of such termination, which failure singly or in the aggregate
would have or is reasonably likely to have a material adverse effect on the
business, operations, properties (including intangible properties), condition
(financial or otherwise), results of operations, assets or liabilities of the
Company and the Subsidiary taken as a whole and is not reasonably capable of
being cured or has not been cured within ten Business Days after the giving of
written notice to the Company or (ii) (A) any of the representations or
warranties set forth in Sections 6.2, 6.3, 6.4 and 6.25 shall not be true and
correct in all material respects or (B) any other representations or warranties
of the Company in this Agreement shall not be true and correct which inaccuracy
singly or in the aggregate would have or is reasonably likely to have a
material adverse effect on the business, operations, properties (including
intangible properties), condition (financial or otherwise), results of
operations, assets or liabilities of the Company and the Subsidiary taken as a
whole, in either case which is not reasonably capable of being cured by the
Company or has not been cured, as the case may be, within ten Business Days
after the giving of written notice to the Company; and
(j) by the Acquiror prior to the purchase of shares of
Common Stock pursuant to the Offer, if, since the date of this Agreement, there
shall have been any material adverse change in the business, operations,
properties (including intangible properties), condition (financial or
otherwise), results of operations, assets or liabilities of the Company and the
Subsidiary, taken as a whole, excluding any such change occurring at any time
after the date of this Agreement caused by (a) a general change in the economy
(including any such change caused by a general change in the markets served by
the Company and the Subsidiary) or (b) the institution or threat of any suit,
arbitration, mediation, action, proceeding, complaint or grievance which
challenges any of the transactions contemplated by this Agreement or any action
required in connection with the resolution of matters relating to the Antitrust
Laws and excluding any such change occurring on or after the 90th day following
the execution of this Agreement caused by the voluntary termination of
employment by employees of the Company or the Subsidiary or a closure of, or
any labor disruption, slowdown or strike relating to, the Company's principal
distribution center located in Great Falls, Montana.
40.
46
(k) by the Company, beginning 90 days after the date of
this Agreement, if since the date of this Agreement there has been a material
adverse change in the business, operations, properties (including intangible
properties), condition (financial or otherwise), results of operations, assets
or liabilities of the Company and the Subsidiary, taken as a whole. In order
to exercise its right to terminate this Agreement pursuant to this Section
9.1(k) (the "Company MAC Right"), the Company shall first deliver to Acquiror a
certificate (the "MAC Certificate") executed by the Company's Chief Executive
Officer or Chief Financial Officer describing in detail the conditions, events
and occurrences causing or contributing to the material adverse change (the
"Termination Conditions") and asserting the Company's intention to terminate
this Agreement pursuant to this Section 9.1(k). Acquiror shall not be required
to respond to a MAC Certificate until the No MAC Deadline. As used herein, the
"No MAC Deadline" shall mean the later of the 91st day after the date of this
Agreement or five Business Days after Acquiror's receipt of the MAC
Certificate. If the Acquiror confirms in writing (a "No MAC Certificate") on
or prior to the No MAC Deadline that it is electing not to have the Company
terminate the Agreement pursuant to this Section 9.1(k) with respect to the MAC
Conditions set forth in the MAC Certificate, the Company shall not be entitled
to so terminate this Agreement. If the Acquiror exercises this right to
prevent the Company's termination of this Agreement, the Acquiror shall not
thereafter be entitled, as a result of any of the conditions, events or
occurrences described in such MAC Certificate, to assert that a material
adverse change has occurred pursuant to Section 9.1(j), or that the condition
of subparagraph (d) of Exhibit A has not been satisfied, or to assert that a
representation, warranty or covenant of the Company under this Agreement has
been breached unless the adverse impact on the business, operations, properties
(including intangible properties), condition (financial or otherwise), results
of operations, assets or liabilities of the Company or the Subsidiary, taken as
a whole, of such conditions, events or occurrences described in the MAC
Certificate increases substantially after the date of such MAC Certificate. In
determining whether the adverse impact of a condition, event or occurrence
described in any MAC Certificate on the Company and the Subsidiary taken as a
whole has increased substantially the adverse impact resulting from the passage
of time and from the impact of the condition, event or occurrence at up to the
same level and in substantially the same manner as described in such MAC
Certificate shall not be taken into account. The Company may present a new MAC
Certificate to the Acquiror any time (i) if a material adverse change has
occurred as a result of a condition, event or occurrence not described in a
prior MAC Certificate or (ii) if the adverse impact of any condition, event or
occurrence described in the prior MAC Certificate has increased substantially
after the date of the prior MAC Certificate. If the Company presents a new MAC
Certificate the procedures and affect on the Acquiror's rights described in
this Section 9.1(k) shall apply with respect to the conditions, events or
occurrences described in the new MAC Certificate. If the Company delivers a
MAC Certificate to the Acquiror and Acquiror does not deliver a No MAC
Certificate to the Company on or prior to the No MAC Deadline, this Agreement
shall terminate on the day immediately following the No MAC Deadline.
Subject to the terms and conditions of this Agreement, in the
event of such termination and abandonment, written notice thereof shall
forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and no party hereto (or any of its directors or
officers) shall have any liability or further obligation to any other party to
this Agreement except
41.
47
as provided in Sections 7.9, 9.2 or 10.2 and except that nothing herein will
relieve any party from liability for any wilful breach of this Agreement prior
to such termination or abandonment.
9.2 Termination Fee.
(a) If (i) the Acquiror shall have terminated this
Agreement pursuant to Section 9.1(f), or (ii) the Company shall have terminated
this Agreement pursuant to Section 9.1(e), then in any such case the Company
shall pay simultaneously with such termination, if pursuant to Section 9.1(e),
and promptly, but in no event later than two Business Days thereafter if
pursuant to Section 9.1(f), to the Acquiror a termination fee (the "Termination
Fee") equal to 3% of the amount equal to (A) $15.50 multiplied by (B) the
number of shares of Common Stock outstanding on the date of termination, plus
an amount (which shall not in any event exceed $1 million) equal to the
Acquiror's and Newco's actual and reasonable documented out-of-pocket expenses
incurred by the Acquiror and Newco in connection with the Offer, the Merger and
this Agreement. The Termination Fee shall be payable by wire transfer to such
account as the Acquiror may designate in writing to the Company.
(b) For purposes of this Agreement, "Third Party
Transaction" shall mean the occurrence of any of the following events: (i) the
acquisition of the Company by merger, tender offer, exchange offer,
consolidation or otherwise by any person other than the Acquiror, Newco or any
affiliate thereof (a "Third Party"); (ii) the acquisition by any Third Party of
all or substantially all of the total assets of the Company and the Subsidiary,
taken as a whole; (iii) the acquisition by a Third Party of 50% or more of the
outstanding shares of Common Stock of the Company; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or the Subsidiary
of 50% or more of the outstanding shares of Common Stock of the Company.
9.3 Amendment. Subject to the applicable provisions of the General
Corporation Law, this Agreement may be amended by the parties hereto solely by
action taken by their respective Boards of Directors, but no amendment shall be
made which decreases the amount of cash into which shares of Common Stock of
the Company are to be converted as provided in Section 3.1(a) hereof or which
in any way materially and adversely affects the rights of such stockholders
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.4 Waiver. At any time prior to the Effective Date, the parties
hereto, by action taken by their respective Boards of Directors, may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any documents delivered
pursuant hereto, and (iii) waive compliance by the other party with any of the
agreements or conditions herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
42.
48
ARTICLE X
MISCELLANEOUS
10.1 Survival. All representations, warranties and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate and be extinguished at the Effective Date or the
earlier date of termination of this Agreement pursuant to Section 9.1, as the
case may be, except that the agreements set forth in Article I, Article II and
in Sections 3.4, 7.7, 7.8 and 7.9 will survive the Effective Date indefinitely,
and those set forth in Sections 9.2 and 10.5 will survive the termination of
this Agreement indefinitely, and other than any covenant the breach of which
has resulted in the termination of this Agreement.
10.2 Expenses and Fees. If the Offer is consummated, all reasonable
fees and expenses incurred in connection with the Agreement, the Offer and the
Merger and the transactions contemplated thereby will be paid by the party
incurring such fees and expenses of the Company and may be paid by the
Surviving Corporation at the closing of the Offer. Notwithstanding the
foregoing, the Company agrees to pay, no later than on the Effective Date, all
reasonable fees, expenses and disbursements of counsel to the Company incurred
in connection with the Merger.
10.3 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally or sent by regular mail or by
telecopier to the parties at the following addresses:
(a) if to Newco or the Acquiror, to:
Xxxxxxxxx'x, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
X.X. Xxx 00
Xxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Chairman
Telephone: 000-000-0000
Telecopy: 000-000-0000
with a copy to:
Xxxxxxxxx'x, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
X.X. Xxx 00
Xxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Telecopy: 000-000-0000
43.
49
with copies to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
Four Embarcadero Center, Suite 3800
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Telecopy: 000-000-0000
(b) if to the Company or the Subsidiary, to:
Xxxxxxx Food and Drug Stores Company
000 0xx Xxxxxx X.X.
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
with copies to:
Xxxxxxx & XxXxxxxx
000 X. Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Telecopy: 000-000-0000
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date so delivered or mailed.
10.4 Headings. The headings contained in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
10.5 Publicity. The parties hereto shall not, and shall cause their
affiliates not to, issue or cause the publication of any press release or other
announcement with respect to the Offer, the Merger or this Agreement without
consulting with all other parties and their respective counsel.
10.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations shall be assigned by any of the parties
hereto without the prior written consent of the other parties. This Agreement
is not intended to confer upon any other person any rights or remedies
hereunder.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
44.
50
10.8 Invalidity, Etc. In the event that any provision of this
Agreement shall be deemed contrary to law or invalid or unenforceable in any
respect by a court of competent jurisdiction, the remaining provisions shall
remain in full force and effect to the extent that such provisions can still
reasonably be given effect in accordance with the intentions of the parties,
and the invalid and unenforceable provisions shall be deemed, without further
action on the part of the parties, modified, amended and limited solely to the
extent necessary to render the same valid and enforceable.
10.9 Specific Performance. Each of the parties hereto acknowledges
and agrees that the other parties hereto would be irreparably damaged in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and conditions hereof in any
action instituted in any court of the United States or any state having
competent jurisdiction, in addition to any other remedy to which such party may
be entitled, at law or in equity.
10.10 Governing Law. The validity and interpretation of this
Agreement shall be governed by the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
10.11 Definition. For purposes of this Agreement, "knowledge of the
Company or of the Subsidiary" or words of similar import shall mean the actual
knowledge of the officers and directors of the Company on Schedule 10.11.
45.
51
IN WITNESS WHEREOF, the Acquiror, Newco and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ACQUIROR:
XXXXXXXXX'X, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President
NEWCO:
LOCOMOTIVE ACQUISITION CORP.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
COMPANY:
XXXXXXX FOOD AND DRUG STORES COMPANY
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
Xxxxxxxxx'x, Inc. ("Acquiror"), hereby guarantees the due performance of
any and all obligations and/or liabilities of Newco under or arising out of
this Agreement and the transactions contemplated hereby during the period up to
and including the Effective Date.
ACQUIROR:
XXXXXXXXX'X, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President
46.
52
EXHIBIT A
CONDITIONS TO THE OFFER
Certain Conditions of the Offer. The Offer shall be conditioned upon a
minimum of a majority of the total issued and outstanding shares of Common
Stock, as defined in the Agreement, on the date such shares are purchased
pursuant to the Offer (the "Minimum Shares") being validly tendered and not
withdrawn prior to 12:01 A.M., New York City time, [twenty Business Days after
the date the Offer is commenced] or such later date as the Offer may be
extended by an amendment to this Agreement in accordance with the provisions of
Section 1.1 or as the Offer shall be extended as provided in the Agreement.
Moreover, notwithstanding any other provision of the Offer, and subject to the
terms and conditions of the Agreement, Newco shall not be obligated to accept
for payment any shares of Common Stock until expiration of all applicable
waiting periods under the HSR Act, and Newco shall not be required to accept
for payment, purchase or pay for, and may delay the acceptance for payment of
or payment for, any shares of Common Stock tendered in the Offer, or if the
Minimum Shares shall not have been validly tendered pursuant to the Offer and
not withdrawn, may terminate or amend the Offer, subject to the terms and
conditions of the Agreement and Newco's obligation to extend the Offer pursuant
to Section 1.1 if, prior to the time of acceptance for payment of any such
shares of Common Stock (whether or not any other shares of Common Stock have
theretofore been accepted for payment or paid for pursuant to the Offer), any
of the following shall occur and remain in effect:
(a) a United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order which is in effect and has
the effect of making the acquisition of Common Stock by Newco illegal or
imposes material limitations on the ability of Newco to acquire shares of
Common Stock or otherwise prohibiting consummation of the transactions
contemplated by this Agreement, subject to Acquiror's and Newco's obligations
pursuant to Sections 1.1 and 7.11 of the Agreement and Acquiror's agreement not
to terminate the Offer as long as any such injunction or order has not become
final and non-appealable;
(b) there shall have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on the NYSE, and such
event shall have continued to exist for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation by any United States
governmental authority on the extension of credit generally by banks or other
financial institutions or (iv) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or worsening
thereof;
1.
53
(c) either (i) (A) any of the representations or warranties
of the Company in the Agreement set forth in Sections 6.2, 6.3, 6.4 and 6.25
shall not be true and correct in all material respects or (B) any other
representations or warranties of the Company in the Agreement shall not be true
and correct which inaccuracy singly or in the aggregate would have or be
reasonably likely to have a material adverse effect on the business,
operations, properties (including intangible properties), condition (financial
or otherwise), results of operations, assets or liabilities of the Company and
the Subsidiary taken as a whole and in either case are not reasonably capable
of being cured by the Company or have not been cured within ten Business Days
after the giving of written notice to the Company in each case as if such
representations or warranties were made as of such time on or after the date of
the Agreement (unless a representation speaks as of an earlier date, in which
case it shall be deemed to have been made as of such earlier date); or (ii) the
Company shall have failed to perform any obligation or to comply with any
agreement or covenant of the Company to be performed or complied with by it
under the Agreement, which failure singly or in the aggregate would have or be
reasonably likely to have a material adverse effect on the business,
operations, properties (including intangible properties), condition (financial
or otherwise), results of operations, assets or liabilities of the Company and
the Subsidiary taken as a whole and is not reasonably capable of being cured
by the Company or has not been cured within ten Business Days after the giving
of written notice to the Company; and the Chief Executive Officer of the
Company shall have provided a certificate to the effect that the conditions set
forth in clauses (i) or (ii) have not occurred on the date shares are to be
accepted for payment pursuant to the Offer;
(d) since the date of this Agreement and subject to Section
9.1(k) of the Agreement, there shall have been any material adverse change in
the business, operations, properties (including intangible properties),
condition (financial or otherwise), results of operations, assets or
liabilities of the Company and the Subsidiary, taken as a whole, excluding any
such change occurring at any time after the date of this Agreement caused by
(i) a general change in the economy (including any such change caused by a
general change in the markets served by the Company and the Subsidiary) or (ii)
the institution or threat of any suit, arbitration, mediation, action,
proceeding, complaint or grievance which challenges any of the transactions
contemplated by this Agreement or any action required in connection with the
resolution of matters relating to the Antitrust Laws, and excluding any such
change occurring after the 90th day following the execution of this Agreement
caused by the voluntary termination of employment by employees of the Company
or the Subsidiary or a closure of, or any labor disruption, slowdown or strike
relating to, the Company's principal distribution center located in Great
Falls, Montana;
(e) the Board of Directors of the Company (i) shall have
amended, modified or withdrawn its recommendation of the Offer or the Merger,
subject to Sections 7.5 and 9.1(e), (ii) shall have endorsed, approved or
recommended any Superior Proposal in accordance with Section 7.5 or (iii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 7.5;
(f) any person or group (as defined in Section 13(d)(3) of
the Exchange Act), other than the Acquiror or Newco or any of their respective
subsidiaries or affiliates, shall have
2.
54
become the beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding shares of Common Stock
(either on a primary or a fully diluted basis); provided, however, that this
provision shall not apply to any person that beneficially owns more than 25% of
the outstanding shares of Common Stock on the date hereof so long as such
person does not further increase its beneficial ownership beyond the number of
shares of Common Stock such person beneficially owns on the date of the
Agreement; or
(g) the Agreement shall have been terminated by the Company
or the Acquiror pursuant to its terms;
which, in the reasonable judgment of the Acquiror and Newco, in any such case,
and regardless of the circumstances (including any action or inaction by the
Acquiror or Newco) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment
for shares of Common Stock. The foregoing conditions are for the sole benefit
of the Acquiror and Newco and may be asserted by the Acquiror and Newco
regardless of the circumstances giving rise to such condition or may be waived
by the Acquiror and Newco in whole or in part at any time and from time to
time. The failure by the Acquiror or Newco at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
3.
