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EXHIBIT 2.1
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
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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.
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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.
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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.
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EXHIBITS
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EXHIBIT A CONDITIONS TO THE OFFER
EXHIBIT B CERTIFICATE OF MERGER
SCHEDULES
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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
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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
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to the terms and conditions set forth herein and in Exhibit A attached hereto;
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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
"1 Major Stockholder"), concurrently herewith is entering into that certain
Tender and Option Agreement (the "1 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:
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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
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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
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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
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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
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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
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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
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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
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reasonable under the circumstances, with the parties acknowledging that 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
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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
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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
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Newco. 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
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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
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terminated, will promptly deliver to the Company all copies of such information
then in their 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
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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
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set forth in Section 8.1(a), which may not be waived), Newco and the Company
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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
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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
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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
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forth in Section 8.1(a), which may not be waived).
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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.
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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
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3.1. The Company shall give the Acquiror (i) prompt notice of any written
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demands for appraisal, withdrawals of demands for appraisal and any other
instrument served pursuant to Section 262 of the General Corporation
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Law received by the 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
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shall be canceled and exchanged for cash as provided in Section 3.1(a), subject
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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
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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
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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
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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).
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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
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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
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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
8
price of such Option 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
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
10
of 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.
11
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 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
12
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 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
13
binding obligation of the Company, enforceable against the Company 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.
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,
14
commenced or, to the Company's knowledge, threatened against the Company or the
Subsidiary alleging any such material conflict, default or violation.
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.")
15
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
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 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,
16
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
17
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 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").
18
(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; (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. (S)9601 et seq.
-- ---
("CERCLA"); the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et
--
seq. ("RCRA"), and any amendments thereto; the Hazardous Materials
---
Transportation Act, 49 U.S.C. (S)(S)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.
19
(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 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,
20
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 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
-------------
21
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.
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
22
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 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
23
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.
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
24
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
-----------
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;
25
(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 (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;
26
(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 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;
27
(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 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
28
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 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 "1 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
29
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.
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 "1 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
30
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 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
31
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.
(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
32
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 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
33
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.
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
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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
34
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 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.
35
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, 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
36
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.
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 VII
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
37
(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.
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, with the FTC or DOJ and any other Governmental
Authority that may have asserted that consummation of the Offer and the Merger
would violate the Antitrust Laws authorizing consummation of the Offer and the
Merger. 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
38
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 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;
39
(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;
(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
40
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.
(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.
41
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
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 "1 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
42
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.
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
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 0/xx/ 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.
44
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.
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
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
EXHIBIT A
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CONDITIONS TO THE OFFER
Certain Conditions of the Offer. The Offer shall be conditioned upon a
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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
(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 90/th/ 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;
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2
(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 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
EXHIBIT B
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CERTIFICATE OF MERGER
MERGING
LOCOMOTIVE ACQUISITION CORP.
WITH AND INTO
XXXXXXX FOOD AND DRUG STORES COMPANY
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Pursuant to Section 251 of the
General Corporation Law of the State of Delaware
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Xxxxxxx Food and Drug Stores Company, a Delaware corporation ("Xxxxxxx"),
does hereby certify to the following facts relating to the merger ("Merger") of
Locomotive Acquisition Corp., a Delaware corporation ("Newco") and a wholly-
owned subsidiary of Xxxxxxxxx'x, Inc., a Delaware corporation ("Acquiror"), with
and into Xxxxxxx, Xxxxxxx remaining as the surviving corporation (the "Surviving
Corporation"):
FIRST: Newco is incorporated pursuant to the General Corporation Law of
the State of Delaware (the "DGCL"). Xxxxxxx is incorporated pursuant to the
DGCL. Acquiror is incorporated pursuant to the DGCL.
SECOND: The Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with Section 251 of the DGCL.
THIRD: Xxxxxxx shall be the name of the Surviving Corporation.
FOURTH: The Certificate of Incorporation of Xxxxxxx shall be the
Certificate of Incorporation of Surviving Corporation.
FIFTH: The executed Agreement and Plan of Merger is on file at the
office of the Surviving Corporation, 000 Xxxxxxxxxx Xxxxxxxxx, X.X. Xxx 00,
Xxxxx, Xxxxx 00000.
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
any constituent corporation.
IN WITNESS WHEREOF, Xxxxxxx has caused this Certificate of Merger to be
signed by its duly authorized officer, this _____ day of __________, 1998.
XXXXXXX FOOD AND DRUG STORES COMPANY
By: ____________________________________
Name:
Title:
