EXHIBIT 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of
January 17, 1997
among
AMF Bowling Centers, Inc.,
Noah Acquisition Corp.
and
American Recreation Centers, Inc.
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1. The Merger................................. 2
SECTION 1.2. Closing.................................... 2
SECTION 1.3. Effective Time of the Merger............... 3
SECTION 1.4. Effects of the Merger...................... 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares....................... 3
SECTION 2.2. Surrender and Payment...................... 4
SECTION 2.3. Dissenting Shares.......................... 5
SECTION 2.4. Stock Options and Stock Plans.............. 6
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Incorporation.................. 8
SECTION 3.2. Bylaws..................................... 8
SECTION 3.3. Directors and Officers..................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties
of the Company........................... 9
(a) Organization, Standing and
Corporate Power.......................... 9
(b) Subsidiaries and Joint Ventures............ 10
(c) Capital Structure.......................... 10
(d) Authority; Noncontravention................ 11
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Page
(e) SEC Documents; Financial Statements;
No Undisclosed Liabilities............... 13
(f) Disclosure Documents....................... 13
(g) Licenses, Approvals, Etc................... 14
(h) Real Properties............................ 15
(i) Tangible Personal Property; Sufficiency
of Assets................................ 17
(j) Intellectual Property...................... 18
(k) Environmental Compliance................... 18
(l) Absence of Certain Changes or Events....... 20
(m) Litigation................................. 21
(n) Compliance with Laws....................... 22
(o) Absence of Changes in Stock or
Benefit Plans............................ 22
(p) ERISA Compliance........................... 23
(q) Taxes...................................... 25
(r) Contracts; Debt Instruments................ 27
(s) Insurance.................................. 29
(t) Interests of Officers and Directors........ 29
(u) State Takeover Statutes.................... 30
(v) Brokers.................................... 30
SECTION 4.2. Representations and Warranties of
Parent and Merger Subsidiary............. 30
(a) Organization, Standing and
Corporate Power.......................... 30
(b) Authority; Noncontravention................ 30
(c) Disclosure Documents....................... 31
(d) Brokers.................................... 32
(e) Financing.................................. 32
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Conduct of Business........................ 32
SECTION 5.2. Shareholder Meeting; Proxy Material........ 35
SECTION 5.3. Access to Information...................... 36
SECTION 5.4. No Solicitation............................ 36
SECTION 5.5. Fair Price Structure....................... 37
SECTION 5.6. Covenants Regarding Certain Benefit
Plans.................................... 37
SECTION 5.7. Cooperation in Arrangements with
Lenders.................................. 38
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Page
SECTION 5.8 Title Insurance............................ 38
ARTICLE VI
COVENANTS OF PARENT
SECTION 6.1. Confidentiality............................ 39
SECTION 6.2. Obligations of Merger Subsidiary........... 39
SECTION 6.3. Voting of Shares........................... 40
SECTION 6.4. Director and Officer Liability............. 40
SECTION 6.5. Employees.................................. 40
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
SECTION 7.1. HSR Act Filings; Reasonable
Efforts; Notification.................... 41
SECTION 7.2. Public Announcements....................... 44
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of
Each Party............................... 44
SECTION 8.2. Conditions to the Obligations of
Parent and Merger Subsidiary............. 44
SECTION 8.3. Conditions to the Obligations of
the Company.............................. 46
ARTICLE IX
TERMINATION
SECTION 9.1. Termination................................ 46
SECTION 9.2. Effect of Termination...................... 48
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices.................................... 48
SECTION 10.2. Survival of Representations
and Warranties........................... 49
SECTION 10.3. Amendments; No Waivers..................... 49
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Page
SECTION 10.4. Fees and Expenses.......................... 50
SECTION 10.5. Successors and Assigns;
Parties in Interest...................... 51
SECTION 10.6. Governing Law.............................. 51
SECTION 10.7. Counterparts; Effectiveness;
Interpretation........................... 51
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AGREEMENT AND PLAN OF MERGER (the "Agree-
ment"), dated as of January 17, 1997, among
American Recreation Centers, Inc., a Cali-
fornia corporation (the "Company"), AMF
Bowling Centers, Inc., a Xxxxxxxx xxxxxxx-
tion ("Parent"), and Noah Acquisition
Corp., a Delaware corporation and a wholly-
owned subsidiary of Parent ("Merger Subsid-
iary").
WHEREAS, the Board of Directors of the Company has
unanimously (i) determined that this Agreement and the transac-
tions contemplated hereby, including the Merger (as defined
herein), are fair to and in the best interests of the share-
holders of the Company, (ii) determined that the consideration
to be paid in the Merger is fair to and in the best interests
of the shareholders of the Company, (iii) approved this Agree-
ment and the transactions contemplated hereby, including the
Merger, and (iv) resolved to recommend approval and adoption of
this Agreement, the Merger and the other transactions contem-
plated hereby by such shareholders;
WHEREAS, the respective Boards of Directors of Par-
ent, Merger Subsidiary and the Company have approved the merger
of Merger Subsidiary into the Company as set forth below (the
"Merger"), upon the terms and subject to the conditions set
forth in this Agreement, the General Corporation Law of the
State of Delaware (the "DGCL") and the General Corporation Law
of the State of California (the "CGCL"), whereby each issued
and outstanding share of common stock, no par value per share,
of the Company (the "Shares") (excluding shares owned, directly
or indirectly, by the Company or any subsidiary of the Company
or by Parent, Merger Subsidiary or any other subsidiary of Par-
ent and Dissenting Shares (as defined herein)), shall be con-
verted into the right to receive the Merger Consideration (as
defined herein);
WHEREAS, simultaneously with the execution hereof,
Xxxx Xxxxxxxx has agreed to sell his entire interest in Tri-
angle Bowl Associates ("Triangle") to the Company concurrent
with the Effective Time (as defined herein) and, upon such ac-
quisition, the Company and its wholly-owned subsidiaries will
own all of the equity interests in Triangle;
WHEREAS, simultaneously with the execution hereof,
Xxxxxxx X. Xxxxxxxxxxx has agreed to sell his entire interest
in Mid-America Associates and American Red Carpet ("America and
Carpet") to a subsidiary of the Company concurrent with the
Effective Time, and upon such acquisition, the Company and its
wholly-owned subsidiaries will own all of the equity interests
in America and Carpet; and
WHEREAS, Parent, Merger Subsidiary and the Company
desire to make certain representations, warranties, covenants
and agreements in connection with the Merger and also to pre-
scribe various conditions to consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and
the mutual promises, representations, warranties, covenants and
agreements herein contained, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in accor-
dance with the DGCL and the CGCL, Merger Subsidiary shall be
merged with and into the Company at the Effective Time (as de-
fined herein). At the Effective Time, the separate corporate
existence of Merger Subsidiary shall cease, and the Company (i)
shall continue as the surviving corporation as a direct or in-
direct wholly-owned subsidiary of Parent (Merger Subsidiary and
the Company are sometimes hereinafter referred to as "Constitu-
ent Corporations" and, as the context requires, the Company,
after giving effect to the Merger, is sometimes hereinafter
referred to as the "Surviving Corporation"), (ii) shall succeed
to and assume all the rights and obligations of Merger Subsid-
iary in accordance with the DGCL and CGCL, (iii) shall continue
under the name "American Recreation Centers, Inc." and (iv)
shall be governed by the laws of the State of California.
SECTION 1.2. Closing. The closing of the Merger
(the "Closing") shall take place as soon as practicable, but in
any case on or prior to the third business day, after which all
of the conditions set forth in Article VIII hereof shall be
fulfilled or waived in accordance with this Agreement. At the
time of the Closing, the Company and Merger Subsidiary will
file a certificate of merger with the Secretary of State of the
State of Delaware and a copy of the merger agreement with an
officers' certificate of each Constituent Corporation, or a
certificate of ownership, as applicable, with the Secretary of
State of the State of California and make all other filings or
recordings required by the DGCL and the CGCL in connection with
the Merger.
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SECTION 1.3. Effective Time of the Merger. The
Merger shall, subject to the DGCL and the CGCL, become effec-
tive as of such time as the certificate of merger is duly filed
with the Secretary of State of the State of Delaware and a copy
of the merger agreement with an officers' certificate of each
Constituent Corporation is duly filed with the Secretary of
State of the State of California or at such later time as is
specified in the certificate of merger and the merger agreement
(the "Effective Time").
SECTION 1.4. Effects of the Merger. From and after
the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, powers and franchises and be subject to
all of the restrictions, disabilities and duties of the Company
and Merger Subsidiary, all as provided under the DGCL and the
CGCL. The Surviving Corporation may be served with process in
the State of Delaware in any proceeding for enforcement of any
obligation of Merger Subsidiary, as well as for enforcement of
any obligation of the Surviving Corporation arising from the
Merger, including any suit or other proceeding to enforce the
right of any shareholders as determined in appraisal proceed-
ings pursuant to the provisions of Section 262 of the DGCL or
Chapter 13 of the CGCL, as applicable, and irrevocably appoints
the Secretary of State of the State of Delaware as its agent to
accept service of process in any such suit or proceedings. The
address to which a copy of such process shall be mailed by such
Secretary of State is 0000 XXX Xxxxx, Xxxxxxxxxxxxxx, XX 00000,
Attn: Corporate Secretary.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares. At the Effective
Time, by virtue of the Merger and without any action on the
part of the holder of any Shares or any shares of capital stock
of Merger Subsidiary:
(a) each Share owned by the Company or owned by Par-
ent, Merger Subsidiary or any subsidiary of any of the
Company, Parent or Merger Subsidiary (which shall not in-
clude Shares owned by the Company's Employee Stock Owner-
ship Plan or Employee Stock Purchase Plan) immediately
prior to the Effective Time shall be canceled, and no pay-
ment shall be made with respect thereto;
(b) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall
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be converted into and become one fully paid and nonassess-
able share of common stock of the Surviving Corporation
and shall constitute the only outstanding shares of capi-
tal stock of the Surviving Corporation; and
(c) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Sec-
tion 2.1(a) or as provided in Section 2.3 with respect to
Dissenting Shares, be converted into the right to receive
$8.50 in cash without interest (the "Merger Consider-
ation").
SECTION 2.2. Surrender and Payment. (a) Prior to
the Effective Time, Parent shall appoint a bank or trust com-
pany (the "Exchange Agent") for the purpose of exchanging cer-
tificates representing Shares for the Merger Consideration.
Parent will, or will cause Merger Subsidiary to, make available
to the Exchange Agent, as needed, the Merger Consideration to
be paid in respect of the Shares (the "Exchange Fund"). For
purposes of determining the Merger Consideration to be made
available, Parent shall assume that no holder of Shares will
perfect his right to demand cash payment of the fair market
value of his Shares pursuant to Chapter 13 of the CGCL.
Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each holder of Shares at
the Effective Time a letter of transmittal for use in such ex-
change (which shall specify that the delivery shall be ef-
fected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing Shares to the Ex-
change Agent). The Exchange Agent shall, pursuant to irre-
vocable instructions, make the payments provided in this Sec-
tion 2.2. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.
(b) Each holder of Shares that have been converted
into a right to receive the Merger Consideration, upon sur-
render to the Exchange Agent of a certificate or certificates
representing such Shares, together with a properly completed
letter of transmittal covering such Shares and other customary
documentation, will be entitled to receive the Merger Consider-
ation payable in respect of such Shares. As of the Effective
Time, all such Shares shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to ex-
ist, and each holder of a certificate previously representing
any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration,
without interest, upon surrender of the certificates represent-
ing such Shares, as contemplated hereby.
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(c) If any portion of the Merger Consideration is to
be paid to a person other than the registered holder of the
Shares represented by the certificate or certificates surren-
dered in exchange therefor, it shall be a condition to such
payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a
result of such payment to a person other than the registered
holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
For purposes of this Agreement, "person" means an individual, a
corporation, a partnership, an association, a trust or any
other entity or organization, including a government or politi-
cal subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no fur-
ther registration of transfers of Shares. If, after the Effec-
tive Time, certificates representing Shares are presented to
the Surviving Corporation, they shall be canceled and exchanged
for the consideration provided for, and in accordance with the
procedures set forth, in this Article II.
(e) Any portion of the Exchange Fund made available
to the Exchange Agent pursuant to this Agreement that remains
unclaimed by the holders of Shares six months after the Effec-
tive Time shall be returned to Parent, upon Parent's demand,
and any such holder who has not exchanged his Shares for the
Merger Consideration in accordance with this Section 2.2 prior
to that time shall thereafter look only to Parent for payment
of the Merger Consideration in respect of his Shares. Notwith-
standing the foregoing, Parent shall not be liable to any
holder of Shares for any amount paid to a public official pur-
suant to and in accordance with the requirements of applicable
abandoned property, escheat or similar laws.
(f) Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 2.2(a) to
pay for Shares for which the right to a determination of fair
market value, as contemplated by Section 2.3, have been per-
fected shall be returned to Parent upon Parent's demand.
SECTION 2.3. Dissenting Shares. Notwithstanding
Section 2.1, Shares outstanding immediately prior to the Effec-
tive Time and held by a holder who is entitled to and has de-
manded cash payment of the fair market value for such Shares in
accordance with Section 1301 of the CGCL and submitted certifi-
xxxxx representing such Shares for endorsement in accordance
with Section 1302 of the CGCL (the "Dissenting Shares") shall
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not be converted into the right to receive the Merger Consider-
ation as provided in Section 2.1(c) of this Agreement, unless
and until such holder fails to perfect or withdraws or other-
wise loses his right to a determination of the fair market
value of the shares and payment under the CGCL. If, after the
Effective Time, any such holder fails to perfect or withdraws
or loses his right to a determination of the fair market value
of the Shares under the CGCL, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consider-
ation to which such holder is entitled, without interest
thereon. As soon as practicable after the approval of the
Merger by the Company's shareholders (including, without limi-
tation, by written consent thereto), to the extent required by
the CGCL, and in any event not later than ten (10) days follow-
ing such approval, Parent shall mail to each shareholder of the
Company who is entitled to such notice pursuant to Chapter 13
of the CGCL, a notice of such approval of the Merger, such no-
tification to include the information and materials required by
Section 1301(a) of the CGCL (including, without limitation, the
price determined by Parent to represent the fair market value
of any Dissenting Shares).
SECTION 2.4. Stock Options and Stock Plans. (a)
Parent and the Company shall take all actions necessary to pro-
vide that, as to those holders who so agree, at the Effective
Time, (i) each Company Option (defined below) so surrendered
for cash, shall be cancelled, and (ii) in consideration of such
cancellation, and except to the extent that Parent or Merger
Subsidiary and the holder of any such Company Option otherwise
agree, the Company shall pay to each such holder of Company
Options an amount in cash in respect thereof equal to the prod-
uct of (1) the excess, if any, of the Merger Consideration over
the per share exercise price thereof and (2) the number of
Shares subject thereto immediately prior to the Effective Time.
The Company represents that the Board of Directors of the Com-
pany has determined pursuant to the Company's 1988 Key Employee
Incentive Stock Option Plan (the "Employee Option Plan"), in
accordance with the first sentence of Section 12.1 thereof,
that holders of Company Options thereunder who do not elect to
surrender their Company Options for cancellation pursuant to
the first sentence of this Section 2.4(a), upon exercise of
such Company Options after the Effective Time, shall receive
upon such exercise and payment of the aggregate exercise price
contemplated thereby an amount in cash (subject to applicable
withholding taxes) equal to the product of (1) the Merger Con-
sideration and (2) the number of Shares subject thereto immedi-
ately prior to the Effective Time. "Company Option" means any
option granted, whether or not exercisable (it being understood
that all Company Options shall be deemed to be, and shall be
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treated under this Article II as though, such Company Options
were fully vested immediately prior to the Effective Time), and
not exercised or expired, to a current or former employee, xx-
xxxxxx or independent contractor of the Company or any of its
subsidiaries or any predecessor thereof to purchase Shares pur-
suant to the Employee Option Plan, the 1988 Stock Option Plan
for Non-Employee Directors (the "Director Formula Plan") or the
1996 Director Plan (the "Director Plan" and together with the
Employee Option Plan and the Director Formula Plan, collec-
tively, the "Option Plans").
(b) The Company represents that each director of the
Company who holds Company Options has agreed for the benefit of
Parent and Merger Subsidiary to exercise all of his Company Op-
tions prior to the Effective Time or to surrender such Company
Options in the manner prescribed by Section 2.4(a) and each
such director has agreed that he shall provide notice to the
Company of his decision to exercise or surrender his Company
Options prior to the Effective Time.
(c) Prior to the Effective Time, the Company shall
use its best efforts to (i) obtain any consents from holders of
Company Options and (ii) make any amendments to the terms of
such stock option or compensation plans or arrangements that,
in the case of either clauses (i) or (ii), are necessary to
give effect to the transactions contemplated by this Section
2.4.
(d) Pursuant to Section 10 of the Director Formula
Plan, the Company represents that the Plan Administrator there-
under has accelerated the expiration date of all Company Op-
tions thereunder to immediately prior to the Effective Time and
each of the holders of Company Options issued pursuant to the
Director Formula Plan has acknowledged and agreed to such ac-
celeration. Prior to the Effective Time, the Company shall
terminate the Option Plans.
(e) Prior to the Effective Time, the Board of Direc-
tors of the Company shall take all actions necessary to (i)
amend the Company's Employee Stock Purchase Plan ("ESPP") so
that immediately prior to the Effective Time, all Shares held
thereunder become aged and vested, (ii) allow the holders of
Shares in trust under the ESPP, whether or not their rights are
then vested, to vote such Shares at the Company Shareholder
Meeting (as defined herein) and (iii) provide that at the Ef-
fective Time, the ESPP shall be terminated and any cash there-
under will be distributed to the respective participants in the
ESPP, including any cash received in respect of any unvested
shares.
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(f) The Company represents that 83,000 options have
been granted under the Director Plan and prior to the Effective
Time the Company agrees that it shall not issue any additional
options under the Director Plan and that pursuant to Section
8.1 of the Director Plan the Board of Directors of the Company
shall terminate the Director Plan concurrent with the Effective
Time. The Company also represents that all Company Options
issued pursuant to the Director Plan shall expire by their
terms upon consummation of the Merger.
(g) The Board of Directors of the Company shall take
all actions necessary to terminate the Company's Investor Stock
Purchase Plan ("ISPP") effective concurrent with the Effective
Time.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Incorporation. The ar-
ticles of incorporation of the Company in effect at the Ef-
fective Time shall be the articles of incorporation of the Sur-
viving Corporation until amended in accordance with applicable
law, except that Article Fourth of the articles of incorpora-
tion of the Surviving Corporation shall be amended and restated
to read as follows:
FOURTH: The number of Directors of this Corporation
shall be as provided in the bylaws of the Corporation.
SECTION 3.2. Bylaws. The bylaws of the Company in
effect at the Effective Time shall be the bylaws of the Surviv-
ing Corporation until amended in accordance with applicable
law, except that Section 2 of Article III of the bylaws of the
Surviving Corporation shall be amended and restated to read as
follows:
NUMBER OF DIRECTORS. The number of directors of the
corporation shall be one (1), which number may be changed
from time to time, by a resolution duly adopted by the
shareholders.
SECTION 3.3. Directors and Officers. From and after
the Effective Time, until successors are duly elected or ap-
pointed and qualified in accordance with applicable law, the
officers and directors of Merger Subsidiary at the Effective
Time shall be the officers and directors of the Surviving Cor-
poration.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the
Company. The Company represents and warrants to Parent and
Merger Subsidiary, subject to the exceptions and qualifications
set forth in the Disclosure Schedule (as defined herein), as
follows (for purposes of this Section 4.1, references to the
"Knowledge of the Company" shall mean the actual knowledge of
the following individuals: Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxx,
Xxxx Xxxxxxxx and Xxxxxxx Xxxxxxxxxxx):
(a) Organization, Standing and Corporate Power.
Each of the Company and each of its Significant Subsidiaries
(as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdic-
tion in which it is incorporated and has the requisite corpo-
rate power and authority to carry on its business as now being
conducted. Each of the Company and, except as disclosed in
Section 4.1(a) of the Disclosure Schedule, each of its subsid-
iaries is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not reasonably be ex-
pected to (i) have a material adverse effect on the value, con-
dition (financial or otherwise), prospects, business, or re-
sults of operations of the Company and its subsidiaries taken
as a whole, (ii) impair the ability of any party hereto to per-
form its obligations under this Agreement or (iii) prevent or
materially delay consummation of any of the transactions con-
templated by this Agreement (a "Material Adverse Effect"). The
Company has delivered to Parent complete and correct copies of
its articles of incorporation and bylaws, the articles of in-
corporation and bylaws of its Significant Subsidiaries, and the
joint venture, partnership and other governing agreements and
documents ("Joint Venture Documents") of any such partnership,
joint venture or similar business or entity in which the Com-
pany, directly or indirectly has any ownership interests (the
"Joint Ventures"), in each case as amended to the date of this
Agreement. For purposes of this Agreement, a "subsidiary" of
any person means another person in which such first person, di-
rectly or indirectly, owns 50% or more of the equity interests
or has the right, through ownership of equity, contractually or
otherwise, to elect at least a majority of its Board of Di-
rectors or other governing body; and a "Significant Subsidiary"
means any subsidiary of a person that constitutes a significant
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subsidiary of such person within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the
"SEC").
(b) Subsidiaries and Joint Ventures. Section 4.1(b)
of the disclosure schedule delivered by the Company to Parent
and Merger Subsidiary prior to the execution of this Agreement
(the "Disclosure Schedule") lists each subsidiary of the Com-
pany, its form of organization, its respective jurisdiction of
incorporation or formation, if applicable, and the holders of
the outstanding capital stock or other equity interests of such
subsidiaries and indicates whether such subsidiary is a Sig-
nificant Subsidiary. Section 4.1(b) of the Disclosure Schedule
also lists all Joint Venture Documents to which the Company or
any of its subsidiaries is a party or otherwise governing any
such subsidiary. All the outstanding shares of capital stock
or other ownership interests of each such subsidiary of the
Company have been validly issued and are fully paid and non-
assessable and, all such shares or ownership interests indi-
cated as being owned by the Company or any of its subsidiaries
are owned by the Company, by another subsidiary of the Company
or by the Company and another such subsidiary, free and clear
of all Liens (as defined herein) and free of any other limita-
tion or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or equity
interests). Except for the capital stock of its subsidiaries,
the Company does not own, directly or indirectly, any capital
stock or other ownership interest, with a fair market value in
excess of $100,000, in any person. In addition, Section
4.1(b)(i) of the Disclosure Schedule lists all of the bowling
centers owned or leased by Triangle; Section 4.1(b)(ii) of the
Disclosure Schedule lists all of the bowling centers owned or
leased by America; and Section 4.1(b)(iii) lists all bowling
centers owned or leased by Carpet.
(c) Capital Structure. The authorized capital stock
of the Company consists of 21,484,375 Shares and 5,000,000
shares of Preferred Stock, no par value per share. As of De-
cember 31, 1996, (i) 4,606,199 Shares were issued and outstand-
ing, (ii) no Shares were held by the Company or by any of the
Company's subsidiaries, (iii) 633,450 Shares were reserved for
issuance pursuant to the outstanding Company Options, (iv) no
Shares were reserved for issuance pursuant to the ESPP and (v)
no shares of Preferred Stock were issued, reserved for issuance
or outstanding. Except as set forth above, no shares of capi-
tal stock or other equity or voting securities of the Company
are issued, reserved for issuance or outstanding, except for
Shares referred to in clause (iii) above which may be issued
upon exercise of the outstanding Company Options. All out-
standing shares of capital stock of the Company are, and all
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Shares which may be issued pursuant to the Option Plans will,
when issued, be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are
not any bonds, debentures, notes or other indebtedness or secu-
rities of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of the Company may vote.
Except as set forth above and in Section 4.1(c) of the Disclo-
sure Schedule, there are not any securities, options, warrants,
calls, rights, commitments, agreements, arrangements or under-
takings of any kind to which the Company or any of its subsid-
iaries is a party or by which any of them is bound obligating
the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of
the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are
no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire or dis-
pose of any shares of capital stock or other equity or voting
securities of the Company or any of its subsidiaries or any se-
curities of the type described in the two immediately preceding
sentences.
(d) Authority; Noncontravention. The Company has
the requisite corporate power and authority to enter into this
Agreement and, subject to the Company Shareholder Approval (as
defined below) required in connection with the consummation of
the Merger, to consummate the transactions contemplated by this
Agreement. The Merger requires the approval by the affirmative
vote of the holders of a majority of the outstanding Shares
(the "Company Shareholder Approval"), which approval is the
only vote of the holders of any class or series of the capital
stock of the Company necessary to approve the Merger and this
Agreement and the transactions contemplated hereby. The execu-
tion and delivery of this Agreement by the Company and the con-
summation by the Company of the transactions contemplated by
this Agreement have been duly authorized by all necessary cor-
porate action on the part of the Company, except for the Com-
pany Shareholder Approval in connection with the consummation
of the Merger. This Agreement has been duly executed and de-
livered by the Company and, assuming this Agreement constitutes
a valid and binding agreement of Parent and Merger Subsidiary,
constitutes a valid and binding obligation of the Company, en-
forceable against the Company in accordance with its terms.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement
-11-
and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, modification or
acceleration of any obligation or to a loss of a benefit under,
or result in the creation of any Lien upon any of the proper-
ties or assets of the Company or any of its subsidiaries under,
(i) the articles of incorporation or bylaws of the Company or
the comparable charter or organizational documents of any of
its subsidiaries, (ii) except for those consents listed in Sec-
tion 4.1(d) of the Disclosure Schedule, any loan or credit
agreement, note, bond, mortgage, indenture, lien, lease or any
other contract, agreement, instrument, permit, commitment, con-
cession, franchise or license applicable to the Company or any
of its subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters re-
ferred to in the following sentence, any judgment, order, xx-
xxxx, statute, law, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries or their respective
properties or assets other than, in the case of clauses (ii)
and (iii) above, any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate
could not reasonably be expected to have a Material Adverse
Effect. No consent, approval, franchise, order, license, per-
mit, waiver or authorization of, or registration, declaration
or filing with or exemption, notice, application, or certifica-
tion by or to (collectively, "Consents") any federal, state or
local government or any arbitral panel or any court, tribunal,
administrative or regulatory agency or commission or other gov-
ernmental authority, department, bureau, commission or agency,
domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transac-
tions contemplated by this Agreement, except for (i) the re-
quired consents listed on Section 4.1(d) of the Disclosure
Schedule, (ii) the filing of the documents referred to in Sec-
tion 1.3 hereof in accordance with the DGCL and CGCL and simi-
lar documents with the relevant authorities of other states in
which the Company is qualified to do business, (iii) the filing
of a premerger notification and report form by the Company un-
der the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (iv) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Ex-
change Act"), and (v) such other Consents as to which the fail-
ure to obtain or make could not reasonably be expected to have
a Material Adverse Effect.
-12-
(e) SEC Documents; Financial Statements; No Undis-
closed Liabilities. (i) The Company has filed, and delivered
to Parent true and complete copies of, all required reports,
schedules, forms, statements, exhibits and other documents
filed with the SEC since January 1, 1994 (the "SEC Documents").
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act
of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), or the Exchange Act, as the case may
be, applicable to such SEC Documents, and none of the SEC Docu-
ments contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not mislead-
ing.
(ii) The financial statements of the Company included
in the SEC Documents comply in all material respects with ap-
plicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared
in accordance with United States generally accepted accounting
principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent ba-
sis throughout the periods involved ("GAAP") (except as may be
indicated in the notes thereto) and fairly present the xxxxxxx-
dated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated re-
sults of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(iii) Except as set forth in the SEC Documents or in
Section 4.1(e) of the Disclosure Schedule, neither the Company
nor any of its subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or other-
wise), except for liabilities and obligations which, individu-
ally or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(f) Disclosure Documents. (i) The proxy statement
of the Company (the "Company Proxy Statement") to be filed with
the SEC in connection with the Merger, and any amendments or
supplements thereto will, when filed, comply in all material
respects with the applicable requirements of the Exchange Act.
(ii) At the time of filing the Company Proxy State-
ment with the SEC, at the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to share-
holders of the Company, at the time such shareholders vote on
-13-
adoption of this Agreement, and at the Effective Time, the Com-
pany Proxy Statement, as supplemented or amended, if ap-
plicable, will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circum-
stances under which they were made, not misleading. The repre-
sentations and warranties contained in this Section 4.1(f)(ii)
will not apply to statements or omissions included in the Com-
pany Proxy Statement based upon information furnished to the
Company in writing by Parent or Merger Subsidiary specifically
for use therein.
(g) Licenses, Approvals, etc. (i) Each of the Com-
pany and its subsidiaries possesses or has been granted all
registrations, filings, applications, certifications, notices,
consents, licenses, permits, approvals, certificates, xxxx-
chises, orders, qualifications, authorizations and waivers of
any Governmental Entity (federal, state and local) necessary to
entitle it to conduct its business in the manner in which it is
presently being conducted (the "Licenses"), except as set forth
in Section 4.1(g)(i)(A) of the Disclosure Schedule and except
those Licenses whose failure to possess or have granted, indi-
vidually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect or give rise to any material
fine or any criminal liability or any other material civil pen-
alties. Section 4.1(g)(i)(B) of the Disclosure Schedule lists
(i) all licenses to serve or sell alcoholic beverages which
have been granted to, or are used in the business of, the Com-
pany and its subsidiaries (the "Company Liquor Licenses") and
(ii) all gaming, lottery and gambling licenses which have been
granted to, or are used in the business of, the Company and its
subsidiaries ("Company Gaming Licenses"). Except as described
in Section 4.1(g)(i)(C) of the Disclosure Schedule, (A) all of
the Company Liquor Licenses and Company Gaming Licenses are in
full force and effect and (B) all of the Licenses (excluding
the Company Liquor Licenses and Company Gaming Licenses) are in
full force and effect except for those covered by this clause
(B) whose failure to be in full force and effect, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Except as described in Section
4.1(g)(i)(D) of the Disclosure Schedule, no Action (as defined
herein) is pending or, to the Knowledge of the Company, threat-
ened seeking the revocation or limitation of (A) any of the
Company Liquor Licenses or Company Gaming Licenses or (B) any
License (excluding the Company Liquor Licenses or Company Gam-
ing Licenses) that, in the case of Licenses covered by this
clause (B), individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
-14-
(ii) Section 4.1(g)(ii) of the Disclosure Schedule
lists all entities ("Concession Entities") other than the Com-
pany and its subsidiaries that hold licenses to serve or sell
alcoholic beverages in locations on the premises of or associ-
ated with or contiguous to the facilities operated by the Com-
pany and its subsidiaries in connection with the Business (as
defined herein). Section 4.1(g)(ii) of the Disclosure Schedule
also lists all management agreements, leases and other signifi-
cant agreements or arrangements relating to the relationships
between the Company and its subsidiaries, on the one hand, and
the Concession Entities, on the other hand (complete and cor-
rect copies of which (or descriptions of oral arrangements, to
the extent material) have been provided to Parent and Merger
Subsidiary). Except as disclosed on Section 4.1(g)(ii) of the
Disclosure Schedule, all such agreements are in full force and
effect, legal, valid and binding and enforceable against the
Company and its subsidiaries and, to the Knowledge of the Com-
pany, each other Concession Entity or other party thereto in
accordance with their terms, except where the failure to so be
in full force and effect, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect.
(h) Real Properties. (i) Section 4.1(h)(i) of the
Disclosure Schedule sets forth a list of all real property
owned in fee by the Company or any of the Company's subsidiar-
ies (individually, an "Owned Property" and, collectively, the
"Owned Properties"). To the Knowledge of the Company, except
as set forth on Section 4.1(h)(i) of the Disclosure Schedule,
the Company has good and marketable fee title to each Owned
Property, including the buildings, structures and other im-
provements located thereon, in each case free and clear of all
mortgages, liens, claims, charges, security interests, ease-
ments, restrictive covenants, rights-of-way, leases, purchase
agreements, options and other encumbrances and agreements
("Liens"), except (i) Liens which, individually or in the ag-
gregate, could not reasonably be expected to have a Material
Adverse Effect and (ii) Liens for taxes and other governmental
charges, assessments or fees which are not yet due and payable
(the items described in clauses (i) and (ii) are collectively
referred to herein as "Permitted Liens"). Except as disclosed
on Section 4.1(h)(i) of the Disclosure Schedule, to the Knowl-
edge of the Company, there are no condemnations or eminent do-
main (which term, as used herein, shall include other compul-
sory acquisitions or takings by Governmental Authorities) pro-
ceedings pending or, to the Knowledge of the Company, threat-
ened against any Owned Property or any material portion there-
of. To the Knowledge of the Company, except as disclosed in
Section 4.1(h)(i) of the Disclosure Schedule, the Company has
-15-
not received any notice from any city, village or other Gov-
ernmental Entity of any zoning, ordinance, land use, building,
fire or health code or other legal violation in respect of any
Owned Property, other than violations which have been corrected
or which, individually or in the aggregate, could not reason-
ably be expected to have a Material Adverse Effect. To the
Knowledge of the Company there are no structural defects re-
lating to the Owned Property, except for such structural de-
fects which, individually or in the aggregate, could not rea-
sonably be expected to have a Material Adverse Effect.
(ii) Section 4.1(h)(ii) of the Disclosure Schedule
lists all real property (including all land and buildings)
which is leased by the Company or any of its subsidiaries as
lessee or sublessee (the "Leased Real Estate"). The Company
has delivered or caused to be delivered to Parent and Merger
Subsidiary complete and accurate copies of the written leases
and subleases which are described in Section 4.1(h)(ii) of the
Disclosure Schedule. Except as disclosed in Section 4.1(h)(ii)
of the Disclosure Schedule, to the Knowledge of the Company,
the Company has not received written notice of condemnation or
eminent domain proceedings pending or threatened against any
Leased Real Estate property. Except as disclosed in Section
4.1(h)(ii) of the Disclosure Schedule, to the Knowledge of the
Company, the Company has not received any notice from any city,
village or other Governmental Entity of any zoning, ordinance,
building, fire or health code or other legal violation in re-
spect of any Leased Real Estate, other than violations which
have been corrected or which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect. To the Knowledge of the Company, there are no struc-
tural defects relating to any Leased Real Estate, except for
such structural defects which, individually or in the aggre-
gate, could not reasonably be expected to have a Material Ad-
verse Effect. To the Knowledge of the Company, other than for
exceptions to the following which are set forth in Section
4.1(h)(ii) of the Disclosure Schedule or which, individually or
in the aggregate, could not reasonably be expected to have a
Material Adverse Effect:
(A) the leases relating to the Leased Real Estate
(the "Leases") are in full force and effect and are valid,
binding and enforceable in accordance with their respec-
tive terms;
(B) no amount payable under any Lease is past due;
(C) the Company is in compliance in all material re-
spects with all commitments and obligations on its part to
be performed or observed under such Lease and is not aware
-16-
of the failure by any other party to such Leases to comply
in all material respects with all of its commitments and
obligations;
(D) the Company has not received any written notice
(1) of a default (which has not been cured), offset or
counterclaim under any Lease, or, any other communication
calling upon it to comply with any provision of any Lease
or asserting noncompliance, or asserting the Company has
waived or altered its rights thereunder, and no event or
condition has happened or presently exists which consti-
tutes a default or, after notice or lapse of time or both,
would constitute a default under any Lease on the part of
the Company or any other party, or (2) of any complaint,
claim, prosecution, indictment, action, suit, arbitration,
investigation or proceeding by or before any Governmental
Entity (an "Action") against any party under any Lease
which if adversely determined would result in such Lease
being terminated or cut off;
(E) the Company has not assigned, mortgaged, pledged
or otherwise encumbered its interest, if any, under any
Lease; and
(F) the Company has exercised within the time pre-
scribed in each Lease any option provided therein to ex-
tend or renew the term thereof.
(iii) The Owned Properties and the Leased Real Estate
constitute, in the aggregate, all of the real property used to
conduct the business of the Company and its subsidiaries (col-
lectively, the "Business") in the manner in which such business
was conducted during the fiscal year ending May 29, 1996 and
since such time.
(i) Tangible Personal Property; Sufficiency of As-
sets. (i) Except as disclosed in Section 4.1(i)(i) of the
Disclosure Schedule, to the Knowledge of the Company, the Com-
pany and its subsidiaries (1) have good and valid title to all
the tangible personal property material to the Business and
reflected in the latest audited financial statements included
in the SEC Documents as being owned by the Company and its sub-
sidiaries or acquired after the date thereof (except properties
sold or otherwise disposed of in the ordinary course of busi-
ness since the date thereof), free and clear of all Liens ex-
cept (A) statutory Liens securing payments not yet due and (B)
such imperfections or irregularities of title or Liens as do
not affect the use of the properties or assets subject thereto
or affected thereby or otherwise materially impair business
operations at such properties, in either case in such a manner
-17-
as to have a Material Adverse Effect, and (2) are collectively
the lessee of all tangible personal property material to the
Business and reflected as leased in the latest audited xxxxx-
cial statements included in the SEC Documents (or on the books
and records of the Company as of the date thereof) or acquired
after the date thereof (except for leases that have expired by
their terms) and are in possession of the properties purported
to be leased thereunder, and each such lease is valid and in
full force and effect without default thereunder by the lessee
or the lessor, other than defaults that would not have a Mate-
rial Adverse Effect. Each of the Company and each of its sub-
sidiaries, to the Knowledge of the Company, enjoys peaceful and
undisturbed possession under all such leases. Such owned and
leased tangible personal property is, to the Knowledge of the
Company, in good working order, reasonable wear and tear ex-
cepted, and is suitable for the use for which it is intended,
except that, which individually or in the aggregate, would not
have a Material Adverse Effect.
(ii) The tangible personal property of the Company
which is currently used or useful in the Business is, in the
aggregate, to the Knowledge of the Company, all of the tangible
personal property used to conduct such business in the manner
in which such business was conducted during the fiscal year
ending May 29, 1996 and since such time, except for additions
thereto and deletions therefrom in the ordinary course of busi-
ness which could not reasonably be expected to have a Material
Adverse Effect.
(j) Intellectual Property. The ownership, operation
and conduct by the Company and its subsidiaries of the Busi-
ness, as presently owned, operated, and conducted, does not, to
the Knowledge of the Company, infringe upon or conflict in any
respect with any patent, copyright, trademark, trade name, ser-
vice xxxx, brand name, any related regulations or other intel-
lectual property rights of any other person, and to the Knowl-
edge of the Company no other person is infringing upon any such
rights of the Company and its subsidiaries, in each case, ex-
cept as would not have a Material Adverse Effect.
(k) Environmental Compliance. (i) For purposes of
this Section 4.1(k), (A) "Hazardous Substance" means any pol-
lutant, contaminant, hazardous or toxic substance or waste,
solid waste, petroleum or any fraction thereof, or any other
chemical, substance or material listed or identified in or reg-
ulated by or under any Environmental Law; (B) "Environmental
Law" means the Comprehensive Environmental Response, Compensa-
tion and Liability Act, 42 U.S.C. Section 9601 et seq., the
Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
the Clean Water Act, 33
-18-
U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. Section 11001 et seq.,
the Occupational Safety and Health Act, 29 U.S.C. Section 651
et seq., the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq., the Oil Pollution Act, 33 U.S.C. Section
2701 et seq., in each case as amended from time to time and all
regulations promulgated thereunder, and any other statute, law,
regulation, ordinance, bylaw, rule, judgment, order, decree or
directive of any Governmental Entity dealing with the pollution
or protection of natural resources or the indoor or ambient en-
vironment or with the protection of human health or safety; and
(C) "RCRA Hazardous Waste" means a solid waste that is listed
or classified as a hazardous waste, as that term is defined in
or pursuant to the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.
(ii) Except as set forth on Section 4.1(k)(ii) of
the Disclosure Schedule, to the Knowledge of the Company, there
are no claims pending against the Company or any of its subsid-
iaries (the "Company Interests") relating to or arising out of
a Hazardous Substance nor are any such claims threatened
against Company Interests, nor have the Company or its subsid-
iaries received any notice, alleging or warning that any Owned
Property or Leased Real Estate or any real property previously
owned or operated by any Company Interests is, has been or may
be in violation of or in noncompliance with any Environmental
Law.
(iii) Except as set forth in Section 4.1(k)(iii) of
the Disclosure Schedule, to the Knowledge of the Company, no
Hazardous Substances are now present in amounts, concentrations
or conditions requiring removal, remediation or any other re-
sponse, action or corrective action under, or forming the basis
of a claim pursuant to, any Environmental Law, in, on, from or
under the Owned Property or Leased Real Estate or any real
property previously owned or operated by any Company Interests.
(iv) Except as set forth in Section 4.1(k)(iv) of
the Disclosure Schedule, to the Knowledge of the Company, the
Owned Property and Leased Real Estate are not being and have
not been during the period of time they have been owned or
leased by any Company Interests used in connection with the
business of manufacturing, storing or transporting Hazardous
Substances, and, to the Knowledge of the Company, no RCRA Haz-
ardous Wastes are being or have been during the period of time
owned or operated by any Company Interests treated, stored or
disposed of there in violation of any Environmental Law.
-19-
(v) Except as set forth in Section 4.1(k)(v) of the
Disclosure Schedule, to the Knowledge of the Company, there
neither are nor have been during the period of time they have
been owned or operated by any Company Interests any underground
storage tanks, lagoons or other containment facilities of any
kind which contain or contained any Hazardous Substances on the
Owned Property and Leased Real Estate.
(vi) The Company has made available to the Parent and
Merger Subsidiary, true and correct copies of, all environmen-
tal audits or assessments, analyses of soil, groundwater, in-
door and outdoor air, sediment, surface water and asbestos con-
taining materials conducted on or after January 1, 1993 relat-
ing in whole or in part to the Company and/or its subsidiaries
undertaken by or on behalf of any of the Company Interests, and
any written communications received by the Company since Janu-
ary 1, 1993 from any Governmental Authorities relating in whole
or in part to the existence of Hazardous Substances at any
Owned Property and Leased Real Estate or any real property pre-
viously owned or operated by any Company Interests or the com-
pliance of the owners, operators or lessees thereof with re-
spect to any Environmental Law.
(l) Absence of Certain Changes or Events. Except as
disclosed in Section 4.1(l) of the Disclosure Schedule, since
May 29, 1996, the Company and its subsidiaries have conducted
the Business only in the ordinary course consistent with past
practice, and there has not been (i) any event, occurrence or
development of a state of circumstances which has had or could
reasonably be expected to have a Material Adverse Effect, (ii)
any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock or any repur-
chase, redemption or other acquisition by the Company or any of
its subsidiaries of any outstanding shares of capital stock or
other securities of the Company or any of its subsidiaries,
(iii) any adjustment split, combination or reclassification of
any of its capital stock or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) (A)
any granting by the Company or any of its subsidiaries to any
current or former director, officer or employee of the Company
or any of its subsidiaries of any material increase in compen-
sation or benefits, except for grants to employees who are not
officers or directors in the ordinary course of business con-
sistent with past practice, (B) any granting by the Company or
any of its subsidiaries to any such director, officer or em-
ployee of any increase in severance or termination pay (in-
cluding the acceleration in the vesting of Shares (or other
property) or the provision of any tax gross-up), or (C) any
-20-
entry by the Company or any of its subsidiaries into any em-
ployment, deferred compensation, severance or termination
agreement or arrangement with or for the benefit of any such
current or former director, officer or employee, (v) any dam-
age, destruction or loss, whether or not covered by insurance,
that has had or could have a Material Adverse Effect, (vi) any
change in accounting methods, principles or practices by the
Company or any of its subsidiaries, (vii) any amendment, waiver
or modification of any material term of any outstanding secu-
rity of the Company or any of its subsidiaries or any of the
Joint Venture Documents (or any material change in the opera-
tions or financial arrangements relating to any of the Joint
Ventures), (viii) any incurrence, assumption or guarantee by
the Company or any of its subsidiaries of any material indebt-
edness for borrowed money or other material obligations, (ix)
any creation or assumption by the Company or any of its subsid-
iaries of any Lien on any asset other than in the ordinary
course of business consistent with past practice, but in no
event with respect to assets with a value of, or obligations in
an amount of, more than $100,000 for any one transaction or
$250,000 in the aggregate, (x) any making of any loan, advance
or capital contributions to or investment in any person other
than in the ordinary course of business consistent with past
practice, but in no event in the amount of more than $100,000
for any one transaction or $250,000 in the aggregate, and other
than investments in cash equivalents made in the ordinary
course of business consistent with past practice, (xi) any
transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relat-
ing to its assets or business on behalf of the Company or any
of its subsidiaries of more than $100,000 for any transaction
or $250,000 for any series of transactions, (xii) any acqui-
sition or disposition of any assets or any merger or consolida-
tion with any person on behalf of the Company or any of its
subsidiaries of more than $100,000 for any transaction or
$250,000 for any series of transactions, (xiii) any relinquish-
ment by the Company or any of its subsidiaries of any contract
or other right, in either case, material to the Company and its
subsidiaries taken as a whole, other than transactions and com-
mitments in the ordinary course of business consistent with
past practice and those contemplated by the Agreement, or (xiv)
any agreement, commitment, arrangement or undertaking by the
Company or any of its subsidiaries to perform any action de-
scribed in clauses (i) through (xiii).
(m) Litigation. Except as disclosed in Section
4.1(m) of the Disclosure Schedule, to the Knowledge of the Com-
pany, there is no Action or proceeding pending or threatened
against or affecting the Company or any of its subsidiaries
that, individually or in the aggregate, could reasonably be
-21-
expected to have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental
Entity outstanding against the Company or any of its subsid-
iaries which could reasonably be expected to have a Material
Adverse Effect.
(n) Compliance with Laws. Except as disclosed in
Section 4.1(n) of the Disclosure Schedule, to the Knowledge of
the Company, the conduct by the Company and its subsidiaries of
the Business is and has been in compliance with all statutes,
laws, regulations, ordinances, rules, judgments, orders or xx-
xxxxx, applicable thereto, except for violations or failures so
to comply, if any, that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect or give rise to material fines or other material civil
penalties or any criminal liabilities. To the Knowledge of the
Company, except as set forth on Section 4.1(n) of the Disclo-
sure Schedule, the Company has not received any notice or other
communications relating to any alleged violation of any stat-
ute, law, regulation, ordinance, rule, judgment, order or xx-
xxxx from any Governmental Entity, or of any investigation with
respect thereto, applicable to the Company or its subsidiaries
which has not been satisfactorily addressed except for xxxxx-
tions, if any, that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect
and could not reasonably be expected to give rise to material
fines or other material civil penalties or any criminal li-
abilities.
(o) Absence of Changes in Stock or Benefit Plans.
Except as disclosed in Section 4.1(o) of the Disclosure Sched-
ule or as required under this Agreement, since May 29, 1996,
there has not been (i) any acceleration, amendment or change of
the period of exercisability or vesting of any Company Options
under the Option Plans (including any discretionary accelera-
tion of the exercise periods or vesting by the Company's Board
of Directors or any committee thereof or any other persons ad-
ministering an Option Plan) or authorization of cash payments
in exchange for any Company Options under any of such Option
Plans, (ii) any adoption or material amendment by the Company
or any of its subsidiaries of any collective bargaining agree-
ment or any bonus, pension, profit sharing, deferred compensa-
tion, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, stock appreciation right, retire-
ment, vacation, severance, disability, death benefit, hospital-
ization, medical, worker's compensation, disability, supplemen-
tary unemployment benefits, or other plan, arrangement or un-
derstanding (whether or not legally binding) or any employment
agreement providing compensation or benefits to any current or
former employee, officer, director or independent contractor of
-22-
the Company or any of its subsidiaries or any beneficiary
thereof or entered into, maintained or contributed to, as the
case may be, by the Company or any of its subsidiaries (col-
lectively, "Benefit Plans"), or (iii) any adoption of, or
amendment to, or change in employee participation or coverage
under, any Benefit Plans which would increase materially the
expense of maintaining such Benefit Plans above the level of
the expense incurred in respect thereof for the fiscal year
ended on May 29, 1996.
(p) ERISA Compliance. (i) Section 4.1(p) of the
Disclosure Schedule contains a list of all "employee pension
benefit plans" (defined in Section 3(2) of the Employee Retire-
ment Income Security Act of 1974, as amended ("ERISA")), "em-
ployee welfare benefit plans" (defined in Section 3(l) of
ERISA) and all other Benefit Plans. With respect to each Ben-
efit Plan, the Company has delivered or made available to Par-
ent a true, correct and complete copy of: (A) each writing
constituting a part of such Benefit Plan, including without
limitation all plan documents, benefit schedules, trust agree-
ments, and insurance contracts and other funding vehicles; (B)
the most recent Annual Report (Form 5500 Series) and accompany-
ing schedule, if any; (C) the current summary plan description,
if any; (D) the most recent annual financial report, if any;
and (E) the most recent determination letter from the United
States Internal Revenue Service, if any.
(ii) Section 4.1(p) of the Disclosure Schedule iden-
tifies each Benefit Plan that is intended to be a "qualified
plan" within the meaning of Section 401(a) of the Code ("Quali-
fied Plans"). The Internal Revenue Service has issued a favor-
able determination letter with respect to each Qualified Plan
that has not been revoked, and there are no existing circum-
stances nor any events that have occurred that could adversely
affect the qualified status of any Qualified Plan or the re-
lated trust.
(iii) The Company and its subsidiaries have complied,
and are now in compliance, in all material respects with all
provisions of ERISA, the Internal Revenue Code of 1986, as
amended (the "Code"), and all laws and regulations applicable
to the Benefit Plans. Except as set forth in Section 4.1(p) of
the Disclosure Schedule, no prohibited transaction has occurred
with respect to any Benefit Plan. All contributions required
to be made to any Benefit Plan by applicable law or regulation
or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies
funding any Benefit Plan, for any period through the date
hereof have been timely made or paid in full or, to the extent
-23-
not required to be made or paid on or before the date hereof,
have been fully reflected in the SEC Documents.
(iv) No Benefit Plan is subject to Title IV or Sec-
tion 302 of ERISA or Section 412 or 4971 of the Code. None of
the Company, its subsidiaries and their respective ERISA Af-
filiates (as defined below) has at any time since September 2,
1974, contributed to or been obligated to contribute to any
"multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA or any plan with two or more contributing sponsors at
least two of whom are not under common control, within the
meaning of Section 4063 of ERISA. There does not now exist,
nor do any circumstances exist that could result in, any Con-
trolled Group Liability (as defined below) that would be a li-
ability of the Company or any of its subsidiaries following the
Closing. "ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is
a member of a group described in Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA that includes
the first entity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA. "Controlled Group
Liability" means any and all liabilities under (i) Title IV of
ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971
of the Code, (iv) the continuation coverage requirements of
Section 601 et seq. of ERISA and Section 4980B of the Code, and
(v) corresponding or similar provisions of foreign laws or
regulations, other than such liabilities that arise solely out
of, or relate solely to, the Benefit Plans.
(v) Except as set forth in the SEC Documents or in
Section 4.1(p)(v) of the Disclosure Schedule, neither the Com-
pany nor any of its subsidiaries has any liability for life,
health, medical or other welfare benefits to former employees
or beneficiaries or dependents thereof, except for health con-
tinuation coverage as required by Section 4980B of the Code or
Part 6 of Title I of ERISA and at no expense to the Company and
its subsidiaries.
(vi) Except as set forth in Section 4.1(p) of the
Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (either alone or in conjunction with any other
event) result in, cause the accelerated vesting or delivery of,
or increase the amount or value of, any payment or benefit to
any employee of the Company or any of its subsidiaries. With-
out limiting the generality of the foregoing, no amount paid or
payable by the Company or any of its subsidiaries in connection
with the transactions contemplated hereby (either solely as a
-24-
result thereof or as a result of such transactions in conjunc-
tion with any other event) will be an "excess parachute pay-
ment" within the meaning of Section 280G of the Code.
(vii) No labor organization or group of employees of
the Company or any of its subsidiaries has made a pending xx-
xxxx for recognition or certification, and there are no repre-
sentation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be
brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. There are no
organizing activities, strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances, or
other material labor disputes pending or threatened against or
involving the Company or any of its subsidiaries.
(viii) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the
Benefit Plans, any fiduciaries thereof with respect to their
duties to the Benefit Plans or the assets of any of the trusts
under any of the Benefit Plans which could reasonably be ex-
pected to result in any material liability of the Company or
any of its subsidiaries to the Pension Benefit Guaranty Corpo-
ration, the Department of Treasury, the Department of Labor or
any multiemployer Benefit Plan.
(q) Taxes. As used in this Agreement, "tax" or
"taxes" shall include all federal, state and local income,
property, sales, excise and other taxes, tariffs or govern-
mental charges or assessments of any nature whatsoever as well
as any interest, penalties and additions thereto. Except as
disclosed in Section 4.1(q) of the Disclosure Schedule:
(i) The Company and each of its subsidiaries have
timely filed all income tax returns, statements, reports
and forms and all other material tax returns (col-
lectively, "Returns") required to be filed with any tax
authority and in accordance with all applicable laws. All
such Returns are correct and complete in all material re-
spects. All material taxes owed by the Company and any of
its subsidiaries (whether or not shown on any tax return)
have been paid. There are no material Liens on any of the
assets of the Company or any of its subsidiaries that
arose in connection with any failure (or alleged failure)
to pay any tax.
(ii) The Company and each of its subsidiaries has
withheld and timely paid all material taxes required to
have been withheld and paid in connection with amounts
-25-
paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party.
(iii) Neither the Company nor any of its subsidiaries
expects any authority to assess any additional material
taxes against the Company or any of its subsidiaries for
any period for which tax returns have been filed. No dis-
pute or claim concerning any material tax liability of the
Company or any of its subsidiaries has been proposed or
claimed in writing by any authority.
(iv) Neither the Company nor any of its subsidiaries
has waived any statute of limitations in respect of mate-
rial taxes or agreed to any extension of time with respect
to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries
has filed a consent pursuant to Section 341(f) of the Code
concerning collapsible corporations. Neither the Company
nor any of its subsidiaries is a party to any tax alloca-
tion or sharing agreement. Neither the Company nor any of
its subsidiaries has any material liability for the taxes
of any person (other than the Company and any of its sub-
sidiaries that is currently a member of the Company's af-
filiated group filing a consolidated federal income tax
return) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a trans-
feree or successor, by contract, or otherwise.
(vi) Neither the Company nor any of its subsidiaries
is required to include in income any adjustment pursuant
to Section 481(a) of the Code (or similar provisions of
other law or regulations) in its current or in any future
taxable period by reason of a change in accounting method;
nor to the Knowledge of the Company or any of its subsid-
iaries has the Internal Revenue Service (or other taxing
authority) proposed or is considering proposing, any such
change in accounting method. Except as disclosed in Sec-
tion 4.1(q)(vi) of the Disclosure Schedule, neither the
Company nor any of its subsidiaries is a party to any
agreement, contract, or arrangement that, individually or
collectively, could give rise to the payment of any amount
(whether in cash or property, including Shares or other
equity interests) that would not be deductible pursuant to
the terms of Sections 162(a)(1), 162(m), 162(n) or 280G of
the Code.
-26-
(r) Contracts; Debt Instruments. (i) Except as
otherwise disclosed in Section 4.1(r) of the Disclosure Sched-
ule, neither the Company nor any of its subsidiaries is a party
to or subject to:
(A) any collective bargaining or other agreements
with labor unions, trade unions, employee representatives,
work committees, guilds or associations representing em-
ployees of the Company and its subsidiaries;
(B) any employment consulting, severance, termina-
tion, or indemnification agreement, contract or arrange-
ment, written or oral, with any current or former officer,
consultant, director or employee which (1) provides for
payments in excess of $75,000 per annum or (2) requires
aggregate payments over the life of such agreement, con-
tract or arrangement in excess of $150,000 or which in any
case is not terminable by the Company or its subsidiaries
on 60 days' notice or less without penalty or obligation
to make payments related to or after such termination;
(C) any joint venture contract or arrangement or any
other agreement which has involved or is expected to in-
volve a sharing of revenues of $100,000 per annum or more
with other persons;
(D) any lease for real or personal property in which
the amount of payments which the Company is required to
make, or is expected to receive, on an annual basis ex-
ceeds $50,000;
(E) any material agreement, contract, policy, Li-
cense, document, instrument, arrangement or commitment
which has not been terminated or performed in its entirety
and not renewed which may be, by its terms, terminated,
impaired or adversely affected by reason of the execution
of this Agreement, the closing of the Merger, or the con-
summation of the other transactions contemplated hereby;
(F) any agreement, contract, policy, License, docu-
ment, instrument, arrangement or commitment that materi-
ally limits the freedom of the Company or any of its sub-
sidiaries to compete in any line of business or with any
person or in any geographic area or which would so materi-
ally limit the freedom of the Company or any of its sub-
sidiaries or Parent, Merger Subsidiary or any of their
subsidiaries after the Effective Time;
(G) any agreement or contract relating to any out-
standing commitment for capital expenditures in excess of
-27-
$50,000 individually or $200,000 in the aggregate, or any
partially or fully executory agreement or contract relat-
ing to the acquisition or disposition of rights or assets
having a value of in excess of $50,000 individually or
$200,000 in the aggregate;
(H) any sale-leaseback, conditional sale, exclusive
dealing, brokerage, finder's fee or take-or-pay contract
or agreement; or
(I) any other agreement, contract, policy, License,
document, instrument, arrangement or commitment not made
in the ordinary course of business which is material to
the Company and its subsidiaries taken as a whole.
(ii) None of the Company, its subsidiaries and, to
the Knowledge of the Company, none of the other parties to any
of the contracts and agreements identified in Section 4.1(r)(i)
of the Disclosure Schedule or otherwise disclosed in the SEC
Documents is in default under or has terminated any such con-
tract or agreement, or in any way expressed an intent to mate-
rially reduce or terminate the amount of, its business with the
Company or any of its subsidiaries in the future.
(iii) Set forth in Section 4.1(r)(iii) of the Disclo-
sure Schedule is (A) a list of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of the Company
or any of its subsidiaries is outstanding or may be incurred
and (B) the respective principal amounts currently outstanding
thereunder. Except as set forth in Section 4.1(r)(iii) of the
Disclosure Schedule, all such indebtedness is prepayable at any
time without penalty, subject to the notice provisions of the
agreements governing such indebtedness (which, except as set
forth in Section 4.1(r)(iii) of the Disclosure Schedule, shall
not require a notice period of more than thirty days). For
purposes of this Section 4.1(r)(iii), "indebtedness" shall
mean, with respect to any person, without duplication, (A) all
obligations of such person for borrowed money, or with respect
to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures,
notes or similar instruments, (C) all obligations of such per-
son upon which interest charges are customarily paid, (D) all
obligations of such person under conditional sale or other
title retention agreements relating to property purchased by
such person, (E) all obligations of such person issued or as-
sumed as the deferred purchase price of property or services
(excluding obligations of such person to creditors for raw ma-
terials, inventory, services and supplies incurred in the ordi-
nary course of such person's business), (F) all capitalized
-28-
lease obligations of such person, (G) all obligations of others
secured by any Lien on property or assets owned or acquired by
such person, whether or not the obligations secured thereby
have been assumed, (H) all obligations of such person under
interest rate or currency swap transactions (valued at the ter-
mination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued
for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (J) all
obligations of such person to purchase securities (or other
property) which arises out of or in connection with the sale of
the same or substantially similar securities or property, and
(K) all guarantees and arrangements having the economic effect
of a guarantee of such person of any indebtedness of any other
person.
(s) Insurance. The Company and its subsidiaries are
covered by valid and currently effective insurance policies
issued in favor of the Company that are customary for companies
of similar size and financial condition. Except as set forth
on Section 4.1(s) of the Disclosure Schedule, to the Knowledge
of the Company, all such policies are in full force and effect,
all premiums due thereon have been paid and the Company has
complied with the provisions of such policies. Except as dis-
closed, the Company has not been advised of any defense to cov-
erage in connection with any claim to coverage asserted or no-
ticed by the Company under or in connection with any of its
extant insurance policies. The Company has not, to the Knowl-
edge of the Company, received any written notice from or on
behalf of any insurance carrier issuing policies or binders
relating to or covering the Company and its subsidiaries that
there will be a cancellation or non-renewal of existing poli-
cies or binders, or that alteration of any equipment or any
improvements to real estate occupied by or leased to or by the
Company or its subsidiaries, purchase of additional equipment,
or material modification of any of the methods of doing busi-
ness, will be required.
(t) Interests of Officers and Directors. None of
the Company's or any of its subsidiaries' officers or directors
has any interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of the Com-
pany or its subsidiaries, or any supplier, distributor or cus-
tomer of the Company or its subsidiaries, except for the normal
rights of a shareholder and rights under the Benefit Plans and
the Option Plans.
-29-
(u) State Takeover Statutes. No "fair price,"
"moratorium," "control share acquisition," or other anti-take-
over statute or similar statute or regulation, applies or pur-
ports to apply to the Merger, this Agreement or any of the
transactions contemplated hereby.
(v) Brokers. L.H. Friend, Weinreiss, Xxxxxxxx &
Xxxxxxx, Inc. ("L.H. Friend") has orally delivered to the
Company's Board of Directors its opinion that the consideration
to be paid in the Merger is fair to the holders of Shares from
a financial point of view, and shall deliver such opinion in
writing to the Company's Board of Directors prior to the date
the Company files the Company Proxy Statement with the SEC. In
addition, no broker, investment banker, financial advisor or
other person, other than L.H. Friend, the fees and expenses of
which will be paid by the Company (and copies of whose engage-
ment letters and a calculation of the fees that would be due
thereunder has been provided to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
the Company or any of its subsidiaries. No such engagement
letters obligate the Company to continue to use their services
or pay fees or expenses in connection with any future transac-
tion.
4.2. Representations and Warranties of Parent and
Merger Subsidiary. Parent and Merger Subsidiary represent and
warrant to the Company as follows:
(a) Organization, Standing and Corporate Power.
Each of Parent and Merger Subsidiary is a corporation duly or-
ganized, validly existing and in good standing under the laws
of its respective state of incorporation and has the requisite
corporate power and authority to carry on its business as now
being conducted.
(b) Authority; Noncontravention. Parent and Merger
Subsidiary have all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contem-
plated by this Agreement have been duly authorized by all nec-
xxxxxx corporate action on the part of Parent and Merger Sub-
sidiary. This Agreement has been duly executed and delivered
by Parent and Merger Subsidiary and, assuming this Agreement
-30-
constitutes a valid and binding agreement of the Company, con-
stitutes a valid and binding obligation of such party, enforce-
able against such party in accordance with its terms. The ex-
ecution and delivery of this Agreement do not, and the con-
summation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, modification or
acceleration of any obligation or to a loss of a material ben-
efit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries
under, (i) the certificate of incorporation or bylaws of Parent
or Merger Subsidiary, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or any other contract, agree-
ment, instrument, permit, concession, franchise or license ap-
plicable to Parent or Merger Subsidiary or their respective
properties or assets or (iii) subject to the governmental fil-
ings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, Merger Subsidiary or any other
subsidiary of Parent or their respective properties or assets,
other than, in the case of clause (ii) or (iii), any such con-
flicts, violations, defaults, rights, losses or Liens that in-
dividually or in the aggregate would not impair the ability of
Parent and Merger Subsidiary to perform their respective obli-
gations under this Agreement or prevent the consummation of any
of the transactions contemplated by this Agreement (a "Parent
Material Adverse Effect"). Other than those Consents referred
to in the Disclosure Schedule on the part of the Company, no
Consent of any Governmental Entity is required by or with re-
spect to Parent, Merger Subsidiary or any other subsidiary of
Parent in connection with the execution and delivery of this
Agreement or the consummation by Parent or Merger Subsidiary,
as the case may be, of any of the transactions contemplated by
this Agreement, except for (i) the filing of the documents re-
ferred to in Section 1.3 hereof in accordance with the DGCL and
the CGCL and similar documents with the relevant authorities of
other states in which the Company is qualified to do business,
(ii) the filing of a premerger notification and report form
under the HSR Act, (iii) compliance with any applicable re-
quirements of the Exchange Act, (iv) such Consents as may be
required under relevant state and local alcohol, lottery, gam-
ing and gambling licensing laws and (v) such other Consents as
to which the failure to obtain or make could not reasonably be
expected to have a Parent Material Adverse Effect.
(c) Disclosure Documents. (i) The information with
respect to Parent and its subsidiaries that Parent furnishes to
the Company in writing, specifically for use in the Company
-31-
Proxy Statement will not contain, any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading at the
time of filing the Company Proxy Statement with the SEC, at the
time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to shareholders of the Company, at the
time the shareholders vote on adoption of this Agreement and at
the Effective Time.
(d) Brokers. No broker, investment banker, xxxxx-
cial advisor or other person is entitled to any broker's, find-
er's, financial advisor's or other similar fee or commission
from the Company in connection with the transactions contem-
plated by this Agreement based upon arrangements made by or on
behalf of Parent or Merger Subsidiary.
(e) Financing. Parent will have available suf-
ficient financing and provide or cause to be provided to Merger
Subsidiary the funds necessary to consummate the Merger in ac-
cordance with their terms and the terms of this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. Conduct of Business. During the period
from the date of this Agreement to the Effective Time, the Com-
pany shall, and shall cause its subsidiaries to, carry on their
business in the ordinary course of business in substantially
the same manner as heretofore conducted and, to the extent con-
sistent therewith, use all reasonable efforts to preserve in-
tact their current business organizations, keep available the
services of their current officers and employees (as a group)
and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business
dealings with them. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to
the Effective Time, except as disclosed on Schedule 5.1 of the
Disclosure Schedule, the Company shall not, and shall not per-
mit any of its subsidiaries to, without the prior written ap-
proval of Parent:
(a) (i) declare, set aside or pay any dividends on,
or make any other distributions (whether in cash, stock or
property) in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly-
owned subsidiary of the Company to its parent; provided the
-32-
Company may continue to declare and pay its regular quarterly
cash dividends on the Shares in an amount not to exceed $.065
(six and one-half cents) per share per quarter, with its usual
record and payment dates for such dividends, in accordance with
the Company's past practice, (ii) adjust, split, combine or
reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (iii) pur-
chase, redeem or otherwise acquire any shares of capital stock
of the Company or any of its subsidiaries or any other securi-
ties thereof or any rights, warrants or options to acquire any
such shares or other securities (other than in connection with
the exercise of Company Options in accordance with the terms
thereof as in effect on the date hereof or as contemplated by
Section 2.4 hereof);
(b) issue, deliver, sell, pledge or otherwise encum-
ber any shares of its capital stock, any other voting securi-
ties or any securities convertible into, or any rights, war-
rants or options, including Company Options, to acquire, any
such shares, voting securities or convertible securities (other
than the issuance of Shares upon the exercise of Company Op-
tions outstanding as of the date hereof);
(c) amend its articles of incorporation, bylaws or
other comparable charter or organizational documents;
(d) amend, modify or waive any provision of any of
the Joint Venture Documents or make any material change to the
operations or financial arrangements relating to any of the
Joint Ventures;
(e) mortgage or otherwise encumber or subject to any
Lien or, except in the ordinary course of business consistent
with past practice and pursuant to existing contracts or com-
mitments, sell, lease, license, transfer or otherwise dispose
of any material properties or assets;
(f) amend, modify or waive any material term of any
outstanding security of the Company and its subsidiaries;
(g) incur, assume, guarantee or become obligated
with respect to any indebtedness (as defined in Section 4.1(r)
hereof), other than drawings on existing revolving credit fa-
cilities listed in Section 4.1(r) of the Disclosure Schedule,
in the ordinary course of business, consistent with past prac-
xxxx and in accordance with the terms thereof, or incur, as-
sume, guarantee or become obligated with respect to any other
material obligations other than in the ordinary course of busi-
ness and consistent with past practice;
-33-
(h) make or agree to make any new capital expendi-
tures or acquisitions of assets or property or other acquisi-
tions or commitments in excess of $50,000 individually or
$200,000 in the aggregate or otherwise acquire or agree to ac-
quire any material assets or property;
(i) make any material tax election or take any mate-
rial tax position (unless required by law) or change its fiscal
year or accounting methods, policies or practices (except as
required by changes in GAAP) or settle or compromise any mate-
rial income tax liability;
(j) make any loan, advance or capital contributions
to or investment in any person other than in the ordinary
course of business consistent with past practice, but in no
event in the amount of more than $50,000 for any one transac-
tion or $250,000 in the aggregate, and other than investments
in cash equivalents made in the ordinary course of business
consistent with past practice;
(k) pay, discharge or satisfy any claims, liabili-
ties or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction thereof, in the ordinary course of business con-
sistent with past practice and in accordance with their terms,
modify, amend or terminate any material contract or agreement
to which it is a party, or release or waive any material rights
or claims, or subject to the fiduciary duties of the Board of
Directors of the Company under the CGCL as determined by the
Board of Directors in accordance with the written advice of
Stradling, Yocca, Xxxxxxx & Xxxxx, counsel to the Company, and
upon prior written notice to Parent, waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsid-
iaries is a party;
(l) (i) grant to any current or former director,
officer or employee of the Company or any of its subsidiaries
any material increase in compensation or benefits, except for
employees who are not officers or directors in the ordinary
course of business consistent with past practice, (ii) grant to
any such director, officer, or employee any increase in sever-
ance or termination pay (including the acceleration in the ex-
ercisability of Company Options or in the vesting of Shares (or
other property) except for automatic acceleration in accordance
with the terms of the Option Plans, ESOP, or ESPP or the provi-
sion of any tax gross-up), or (iii) enter into any employment,
deferred compensation, severance or termination agreement or
arrangement with or for the benefit of any such current or
former director, officer, or employee;
-34-
(m) (i) take or agree or commit to take any action
that would make any representation or warranty of the Company
hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time or (ii) omit or agree or com-
mit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any mate-
rial respect at any such time; or
(n) authorize any of, or commit or agree to take any
of, the foregoing actions.
SECTION 5.2. Shareholder Meeting; Proxy Material.
The Company shall cause a meeting of its shareholders (the
"Company Shareholder Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on the
approval and adoption of this Agreement and the Merger. The
Directors of the Company shall, subject to their fiduciary du-
ties under the CGCL as determined by the Board of Directors in
accordance with the written advice of Stradling, Yocca, Xxxxxxx
& Xxxxx, counsel to the Company, recommend approval and adop-
tion of this Agreement and the Merger by the Company's share-
holders. In connection with such meeting, the Company (i) will
promptly prepare and file with the SEC, will use its best ef-
forts to have cleared by the SEC and will thereafter mail to
its shareholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for such meeting, (ii)
subject to the fiduciary duties of the Board of Directors of
the Company under the CGCL as determined by the Board of Direc-
tors in accordance with the written advice of Stradling, Yocca,
Xxxxxxx & Xxxxx, counsel to the Company, will use its best ef-
forts to obtain the necessary approvals by its shareholders of
this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply with all legal requirements ap-
plicable to such meeting. The Company has been advised that
all of its directors and executives currently intend to vote
all shares owned by them in favor of the Merger. The Company
will provide Parent with a copy of the preliminary proxy state-
ment and all modifications thereto prior to filing or delivery
to the SEC and will consult with Parent in connection there-
with. The Company will notify Parent promptly of the receipt
of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Com-
pany Proxy Statement or for additional information and will
supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the
SEC or its staff, on the other hand, with respect to the Com-
pany Proxy Statement or the Merger. If at any time prior to
the Company Shareholder Meeting there shall occur any event
that should be set forth in an amendment or supplement to the
Company Proxy Statement, the Company will promptly prepare and
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mail to its shareholders such an amendment or supplement. The
Company will not mail any Company Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably
objects.
SECTION 5.3. Access to Information. From the date
hereof until the Effective Time, the Company will give Parent,
its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, officers,
employees, accountants, auditors, counsel and other representa-
tives, books and records of the Company and its subsidiaries
(including to perform any environmental studies), will furnish
to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial, operating and prop-
erty related data and other information as such persons may
reasonably request, and will instruct the Company's and its
subsidiaries' employees, counsel and financial advisors to co-
operate with Parent in its investigation of the business of the
Company and the subsidiaries including without limitation, in
connection with Parent's obtaining title reports, surveys, en-
vironmental reports and similar reports or studies with respect
to the Owned Properties or the Leased Real Estate, and will
exercise all reasonable efforts to obtain from landlords such
estoppel certificates as Parent may request; provided that no
investigation pursuant to this Section 5.3 shall affect any
representation or warranty given by the Company hereunder.
SECTION 5.4. No Solicitation. The Company agrees
that neither the Company nor any of its subsidiaries nor any of
the respective officers and directors of the Company or its
subsidiaries shall, and the Company shall direct and use its
best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney
or accountant retained by the Company or any of its subsidi-
aries) not to, initiate, continue, solicit or encourage, di-
rectly or indirectly, any inquiries or the making of any pro-
posal or offer (including, without limitation, any proposal or
offer to shareholders of the Company) with respect to a merger,
consolidation or similar transaction involving, or any purchase
of all or any significant portion of the assets or any equity
securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisi-
tion Proposal") or, subject to the fiduciary duties of the
Board of Directors of the Company under the CGCL as determined
by the Board of Directors in accordance with the written advice
of Stradling, Yocca, Xxxxxxx & Xxxxx, counsel to the Company,
engage in any negotiations concerning, or provide any confiden-
tial information or data to, or have any discussions with, any
-36-
person relating to an Acquisition Proposal, or otherwise fa-
cilitate any effort or attempt to make or implement an Acquisi-
tion Proposal or, enter into any agreement or understanding
with any other person or entity with the intent to effect any
Acquisition Proposal. The Company will take all necessary
steps to inform the individuals or entities referred to in the
first sentence hereof of the obligations undertaken in this
Section 5.4. The Company will notify Parent immediately,
orally and in writing (including the names of any party making
and the principal terms of any such proposal), if any such in-
quiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company. Im-
mediately following the execution of this Agreement, the Com-
pany will request each person which has heretofore executed a
confidentiality agreement in connection with its consideration
of acquiring the Company or any portion thereof (the "Confiden-
tiality Agreements") to return all confidential information
heretofore furnished to such person by or on behalf of the Com-
pany. The Company will keep Parent fully informed of the sta-
tus and details (including amendments or proposed amendments)
of any such request, proposal or inquiry.
SECTION 5.5. Fair Price Structure. If any "fair
price," "control share acquisition" or "moratorium" statute or
other anti-takeover or similar statute or regulation or any
state "blue sky" statute shall become applicable to the trans-
actions contemplated hereby, the Company and the members of the
Board of Directors of the Company shall grant such approvals
and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly
as practicable on the terms contemplated hereby and thereby and
otherwise act to minimize the effects of such statute or regu-
lation on the transactions contemplated hereby or thereby.
5.6. Covenants Regarding Certain Benefit Plans. (a)
The Company shall take all steps necessary and appropriate so
that the Company's Employee Stock Ownership Plan (the "ESOP")
is amended as follows: (i) all participants in the ESOP shall
be fully vested in their account balances immediately prior to
the Effective Time, (ii) no further contributions shall be made
to the ESOP (except as set forth in Section 4.1(p) of the Dis-
closure Schedule), and (iii) the ESOP shall be terminated as of
the Effective Time and all participants thereunder shall re-
ceive distributions of their account balances as promptly as
reasonably practicable thereafter.
(b) If the Effective Time occurs during fiscal year
1997, then as of the Effective Time, the Company's Management
Incentive Bonus Plan, previously provided to Parent, for fiscal
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1997 shall terminate, and the participants therein shall be
entitled to receive, as soon as practicable thereafter, bonuses
under such plan to the extent earned, based upon the Company's
pretax earnings from the beginning of fiscal 1997 through the
Effective Time, but in any case not to exceed $200,000 in the
aggregate.
(c) If the Effective Time occurs during fiscal year
1997, then as of the Effective Time, the Cash Flow Incentive
Plans for America and Carpet, previously provided to Parent,
for fiscal 1997 shall terminate, and the participants thereun-
der shall be entitled to receive bonuses under such plans to
the extent earned, based upon such joint ventures' cash flow
from the beginning of fiscal 1997 through the Effective Time,
but in any case not to exceed $200,000 in the aggregate.
(d) If the Effective Time occurs during fiscal year
1997, then as of the Effective Time, the Triangle Bowl Bonus
Plan for fiscal 1997, previously provided to Parent, shall ter-
minate, and the participants thereunder shall be entitled to
receive bonuses under such plan to the extent earned, based
upon such partnership's operating profit, cash flow, revenue
and otherwise from the beginning of fiscal 1997 through the
Effective Time, but in any case not to exceed $200,000 in the
aggregate.
SECTION 5.7. Cooperation in Arrangements with Lend-
ers. The Company shall, and shall cause its subsidiaries to,
cooperate with and assist Parent and its professionals and ad-
visors in arranging for the prepayment at the Effective Time of
all indebtedness (as defined in Section 4.1(r)) of the Company
and its subsidiaries (the "Prepayment Debt") and shall provide
whatever other assistance and cooperation Parent and its pro-
fessionals and advisors might reasonably request in connection
therewith.
SECTION 5.8. Title Insurance. The Company shall
provide to Parent at or prior to the Effective Time such af-
fidavits and other documents as may be reasonably required by
Parent in order to obtain customary title insurance coverage
with respect to the Owned Properties and the Leased Real Es-
xxxx, including, without limitation, non-imputation endorse-
ments to the Company's existing title insurance policies and
the deletion of all standard exceptions from any title insur-
ance policies purchased at or prior to the Effective Time.
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ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1. Confidentiality. Prior to the Effec-
tive Time and after any termination of this Agreement, Parent
will hold, and will use its reasonable best efforts to cause
its officers, directors, employees, accountants, counsel, con-
sultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or
by other requirements of law, all confidential documents and
information concerning the Company and its subsidiaries fur-
nished to Parent in connection with the transactions contem-
plated by this Agreement except to the extent that such infor-
mation can be shown to have been (i) previously known on a non-
confidential basis by Parent, (ii) in the public domain through
no fault of Parent or (iii) later lawfully acquired by Parent
from sources other than the Company; provided that Parent may
disclose such information to its officers, directors, employ-
ees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement
and to its (and its parent entities') lenders and equity inves-
tors in connection with obtaining the financing for the trans-
actions contemplated by this Agreement so long as such persons
are informed by Parent of the confidential nature of such in-
formation and are directed by Parent to treat such information
confidentially. Parent's obligation to hold any such informa-
tion in confidence shall be satisfied if it exercises the same
care with respect to such information as it would take to pre-
serve the confidentiality of its own similar information. If
this Agreement is terminated, Parent will, and will use its
best efforts to cause its officers, directors, employees, ac-
countants, counsel, consultants, advisors and agents to, de-
liver to the Company, upon request, or, at the election of Par-
ent, destroy, all documents and other materials and all copies
thereof, obtained by Parent or on its behalf from the Company
in connection with this Agreement that are subject to such con-
fidentiality.
SECTION 6.2. Obligations of Merger Subsidiary. Par-
ent will take all action, and provide all financing, necessary
to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
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SECTION 6.3. Voting of Shares. Parent agrees to
vote all Shares beneficially owned by it, if any, in favor of
adoption of this Agreement at the Company Shareholder Meeting.
SECTION 6.4. Director and Officer Liability. (a)
For six years after the Effective Time, Parent will cause the
Surviving Corporation to indemnify and hold harmless the
present and former officers, directors, employees and agents of
the Company (the "Indemnified Parties") in respect of acts or
omissions occurring on or prior to the Effective Time or aris-
ing out of or pertaining to the transactions contemplated by
this Agreement to the extent provided under the Company's ar-
ticles of incorporation and bylaws in effect on the date
hereof; provided that such indemnification shall be subject to
any limitation imposed from time to time under applicable law.
Parent and Surviving Corporation shall not amend the articles
of incorporation or bylaws of the Surviving Corporation to
amend the indemnification provisions therein in a manner incon-
sistent with this Section 6.4 for the six year period referred
to above. For three years after the Effective Time, Parent
will cause the Surviving Corporation to use its best efforts to
provide officers' and directors' liability insurance in respect
of acts or omissions occurring on or prior to the Effective
Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy
on terms substantially similar to those of such policy in ef-
fect on the date hereof, provided that in satisfying its obli-
gation under this Section 6.4, Parent shall not be obligated to
cause the Surviving Corporation to pay premiums in excess of
150% of the amount per annum the Company paid in its last full
fiscal year, which amount has been disclosed to Parent, and if
the Surviving Corporation is unable to obtain the insurance
required by this Section 6.4, it shall obtain as much compa-
rable insurance as possible for an annual premium equal to such
maximum amount.
(b) After the Effective Time, Parent and the Surviv-
ing Corporation will fulfill and honor in all respects the ob-
ligations of the Company pursuant to the indemnification agree-
ments with the Company's officers, directors and key employees
listed on Section 6.4 of the Disclosure Schedule as is in ex-
istence on the date hereof. Such indemnification agreements
have been provided to Parent.
(c) The Indemnified Parties are intended third party
beneficiaries of this Section 6.4 to the extent such provisions
benefit any such Indemnified Party.
SECTION 6.5. Employees. (a) Parent agrees to honor
in accordance with their terms all Benefit Plans delivered to
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Parent prior to the date hereof and all accrued benefits vested
thereunder; it being understood and agreed that nothing in this
Section 6.5(a) shall prevent Parent from amending or terminat-
ing any such Benefit Plan in any manner permitted in accordance
with the terms thereof.
(b) Parent agrees for a period of six months follow-
ing the Effective Time to provide employees of the Company and
its subsidiaries retained by Parent with employee benefits in
the aggregate no less favorable than those benefits provided to
Parent's similarly situated employees; provided that Parent
shall be under no obligation to retain any employee or group of
employees of the Company or its subsidiaries.
(c) Parent and the Surviving Corporation shall make
severance payments to any employee of the Company set forth on
Section 6.5(c) of the Disclosure Schedule hereto, who is termi-
nated during the six month period following the Effective Time
for reasons other than cause or failure of performance. The
amount of such severance payments shall be in an amount equal
to (i) if such employee is listed on Section 6.5(c) of the Dis-
closure Schedule as an hourly employee, one (1) week of such
employee's current base pay for each year of service of the
employee with the Company or its affiliates ("Service"), or
(ii) if such employee is listed on Section 6.5(c) of the Dis-
closure Schedule as a salaried employee, two (2) weeks of such
employee's current base pay for each year of Service, in either
such case not to exceed an aggregate of (x) if such employee is
listed on Section 6.5(c) of the Disclosure Schedule as having
less than ten (10) years of Service, thirteen (13) weeks of
such severance, or (y) if such employee is listed on Section
6.5(c) of the Disclosure Schedule as having more than ten (10)
years of Service, twenty-six (26) weeks of such severance.
Each employee set forth in Section 6.5(c) of the Disclosure
Schedule hereto shall be entitled to enforce the provisions
hereof to the extent such employee becomes entitled to severe-
ance as described in this Section 6.5.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. HSR Act Filings; Reasonable Efforts;
Notification. (a) Each of Parent and the Company shall (i)
promptly make or cause to be made the filings required of such
party or any of its subsidiaries under the HSR Act with respect
to the transactions contemplated by this Agreement, (ii) comply
at the earliest practicable date with any request
-41-
under the HSR Act for additional information, documents, or
other material received by such party or any of its subsidiar-
ies from the Federal Trade Commission or the Department of Jus-
xxxx or any other Governmental Entity in respect of such fil-
ings or such transactions, and (iii) cooperate with the other
party in connection with any such filing, and in connection
with resolving any investigation or other inquiry of any such
agency or other Governmental Entity under the HSR Act, the
Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the Fed-
eral Trade Commission Act, as amended, and any other federal or
state statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade with
respect to any such filing or any such transaction. Each party
shall promptly inform the other party of any communication
with, and any proposed understanding, undertaking, or agreement
with, any Governmental Entity regarding any such filings or any
such transaction. Neither party shall participate in any meet-
ing, with any Governmental Entity in respect of any such fil-
ings, investigation, or other inquiry without giving the other
party notice of the meeting and, to the extent permitted by
such Governmental Entity, the opportunity to attend and par-
ticipate.
(b) Each of Parent and the Company shall use all
reasonable efforts to take such action as may be required to
cause the expiration of the notice periods under the HSR Act or
any state statutes, rules, regulations, orders or decrees that
are designed to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade
with respect to the transactions contemplated hereby as
promptly as possible after the execution of this Agreement.
(c) Subject to the fiduciary duties of the Board of
Directors of the Company, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper
or advisable to consummate and make effective, in the most ex-
peditious manner practicable the Merger and the other transac-
tions contemplated by this Agreement, including (i) the obtain-
ing of all other necessary actions or nonactions, waivers, con-
sents and approvals from Governmental Entities and the making
of all other necessary registrations and filings (including
other filings with Governmental Entities, if any), (ii) the
obtaining of all necessary consents, approvals or waivers from
third parties, (iii) the preparation of the Company Proxy
Statement, (iv) the repayment of all of the Company's indebted-
ness as contemplated by Section 5.7 hereof at the Effective
-42-
Time, and (v) the execution and delivery of any additional in-
struments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.
(d) Notwithstanding anything to the contrary in Sec-
tion 7.1(a), (b) or (c), (i) neither Parent nor any of its sub-
sidiaries shall be required to divest, or cause or permit the
Company or its subsidiaries or affiliates to divest, any of
their respective businesses, product lines or assets, or to
take or agree to take any other action or agree to any limita-
tion that could reasonably be expected to have a material ad-
verse effect on the value, condition (financial or otherwise),
prospects, business or results of operations or prospects of
Parent and its subsidiaries taken as a whole or of the Company
and its subsidiaries taken as a whole, or all such entities
taken together, and (ii) neither Parent nor Merger Subsidiary
shall be required to waive any of the conditions to the Merger
set forth in Article VIII.
(e) The Company shall give prompt notice to Parent
of (i) any representation or warranty made by it contained in
this Agreement becoming untrue or inaccurate in any respect or
(ii) the failure by it to comply with or satisfy in any respect
any covenant, condition or agreement to be compiled with or
satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warran-
ties, covenants or agreements of the parties or the conditions
to the obligations of the parties under this Agreement.
(f) The Company shall give prompt notice to Parent,
and Parent or Merger Subsidiary shall give prompt notice to the
Company, of:
(i) any notice or other communication from any per-
son alleging that the consent of such person is or may be
required in connection with the transactions contemplated
by this Agreement;
(ii) any notice or other communication from any Gov-
ernmental Entity in connection with the transactions con-
templated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge
threatened against, relating to or involving or otherwise
affecting it or any of its subsidiaries which, if pending
on the date of this Agreement would have been required to
have been disclosed pursuant to Section 4.1(l), 4.1(m),
4.1(n), 4.1(p) or 4.1(q) or which relate to the consumma-
tion of the transactions contemplated by this Agreement.
-43-
SECTION 7.2. Public Announcements. Parent and Merg-
er Subsidiary, on the one hand, and the Company, on the other
hand, will consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any
press release or other public statements with respect to the
transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may
be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities
exchange or with NASDAQ. The parties agree that the initial
press release to be issued with respect to the transactions
contemplated by this Agreement will be in the form previously
agreed to by the parties.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each
Party. The obligations of the Company, Parent and Merger Sub-
sidiary to consummate the Merger are subject to the satisfac-
tion of the following conditions:
(a) this Agreement shall have been approved and
adopted by the outstanding Shares of the Company within
the meaning and in accordance with the CGCL;
(b) any applicable waiting period under the HSR Act
relating to the Merger shall have expired; and
(c) no provision of any applicable law or regulation
and no judgment, injunction, order, decree or other legal
restraint shall prohibit the consummation of the Merger.
SECTION 8.2. Conditions to the Obligations of Parent
and Merger Subsidiary. The obligations of Parent and Merger
Subsidiary to consummate the Merger are further subject to the
satisfaction of the following conditions:
(a) there shall not be instituted or pending any
action by any Governmental Entity (i) challenging or seek-
ing to make illegal, to delay materially or otherwise di-
rectly or indirectly to restrain or prohibit the consumma-
tion by Parent or Merger Subsidiary of the Merger, seeking
to obtain material damages or imposing any material ad-
verse conditions in connection therewith or otherwise di-
rectly or indirectly relating to the transactions contem-
plated by this Agreement or the Merger, (ii) seeking to
-44-
restrain or prohibit Parent's or Merger Subsidiary's own-
ership or operation (or that of their respective subsid-
iaries or affiliates) of all or any portion of the busi-
ness or assets of the Company and its subsidiaries, or of
Parent and its subsidiaries or affiliates, or to compel
Parent or any of its subsidiaries or affiliates to dispose
of or hold separate all or any material portion of the
business or assets of the Company and its subsidiaries, or
of Parent and its subsidiaries and affiliates, (iii) seek-
ing to impose limitations on the ability of Parent or any
of its subsidiaries or affiliates effectively to exercise
full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned
by Parent or any of its subsidiaries or affiliates on all
matters properly presented to the Company's shareholders,
(iv) seeking to require divestiture by Parent or any of
its subsidiaries or affiliates of any Shares, or (v) that
otherwise, in the reasonable judgment of Parent, is likely
to materially adversely affect the value, condition (fi-
nancial or otherwise), prospects, business, or results of
operations of the Company and its subsidiaries, or Parent
and its subsidiaries;
(b) the Company shall have performed in all material
respects its covenants and agreements under this Agree-
ment, and the representations and warranties of the Com-
pany set forth in this Agreement that are qualified as to
materiality shall be true when made and at and as of the
Effective Time as if made at and as of such time, and the
representations and warranties set forth in this Agreement
that are not so qualified shall be true in all material
respects when made and at and as of the Effective Time as
if made at and as of such time; and Parent and Merger Sub-
sidiary shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to
that effect;
(c) no change shall have occurred or been threatened
(and no development shall have occurred or been threatened
involving a prospective change) that, in the reasonable
judgment of Parent, is or is likely to have a Material
Adverse Effect;
(d) other than the filing of the certificate of mer-
ger in accordance with DGCL and a copy of the merger
agreement with an officers' certificate of each Constitu-
ent Corporation in accordance with the CGCL, after making
reasonable efforts, Parent and its subsidiaries (including
Merger Subsidiary) shall not have obtained, all regulatory
approvals, licenses and other Consents including all such
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Consents and licenses, relating to the sale and service of
alcoholic beverages and any gaming or gambling activities
required to be obtained prior to the consummation of the
Merger and the transactions contemplated by this Agree-
ment; and
(e) Parent shall be reasonably satisfied that at or
prior to the Effective Time (x) all Prepayment Debt will
be prepaid in full and (y) the Company will be consummat-
ing the acquisitions of all remaining interests in Tri-
angle, America and Carpet in accordance with the joint
venture acquisition agreements referred to in the third
and fourth WHEREAS clauses of this Agreement.
SECTION 8.3. Conditions to the Obligations of the
Company. The obligations of the Company to consummate the
Merger are subject to the further satisfaction of the following
conditions:
Parent and Merger Subsidiary shall have per-
formed in all material respects their covenants and agree-
ments under this Agreement, and the representations and
warranties of Parent and Merger Subsidiary set forth in
this Agreement that are qualified as to materiality shall
be true when made at and as of the Effective Time as if
made and at and as of such time, and the representations
and warranties set forth in this Agreement that are not so
qualified shall be true in all material respects when made
and at and as of the Effective Time as if made at and as
of such time; and the Company shall have received cer-
tificates of the Chief Executive Officer or a Vice Presi-
dent of Parent and Merger Subsidiary to that effect.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time (notwithstanding any approval of this Agree-
ment by the shareholders of the Company):
(i) by mutual written consent of the Company and
Parent;
(ii) by either Parent or the Company, if at the Com-
pany Shareholder Meeting or any adjournment thereof at
which the Company Shareholder Approval is voted upon, the
Company Shareholder Approval shall not have been obtained;
-46-
(iii) by either the Company or Parent, if the Merger
has not been consummated by July 31, 1997, (provided that
the party seeking to terminate the Agreement shall not
have breached its obligations under this Agreement in any
material respect);
(iv) by either the Company or Parent, if there shall
be any law or regulation that makes consummation of the
Merger illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent or the Com-
pany from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final
and applicable;
(v) by Parent, at any time prior to the Effective
Time, by action of the Board of Directors of Parent, if
(x) the Company shall have failed to comply in any mate-
rial respect with any of the covenants or agreements con-
tained in this Agreement to be complied with or performed
by the Company at or prior to such date of termination or
(y) the Board of Directors of the Company shall have with-
drawn or modified in a manner adverse to Parent or Merger
Subsidiary its approval or recommendation of this Agree-
ment or the Merger, or shall have resolved to do any of
the foregoing; or
(vi) by the Company, at any time prior to the Effec-
tive Time, by action of the Board of Directors of the Com-
pany, (A) if Parent or Merger Subsidiary shall have failed
to comply in any material respect with any of the cov-
enants or agreements contained in this Agreement to be
complied with or performed by Parent or Merger Subsidiary
at or prior to such date of termination, or (B) the Com-
pany receives an Acquisition Proposal on terms the
Company's Board of Directors (after consultation with its
financial advisors) determines to be more favorable to the
Company's shareholders than the terms of the Merger, and
the Company's Board of Directors determines in accordance
with the written advice of Stradling, Yocca, Xxxxxxx &
Xxxxx, counsel to the Company, (x) that to continue to
recommend that holders of Shares vote in favor of the
Merger, notwithstanding the receipt of such offer with re-
spect to an Acquisition Proposal, would violate the fidu-
ciary duties of the Company's Board of Directors to the
Company's shareholders and (y) to accept such Acquisition
Proposal; provided, however, that the Company shall not be
permitted to terminate this Agreement pursuant to this
Section 9.1(vi)(B) unless it has provided Parent and
Merger Subsidiary with two business days prior written
-47-
notice of its intent to so terminate this Agreement to-
gether with a detailed summary of the terms and conditions
(including proposed financing, if any) of such Acquisition
Proposal; provided, further, that Parent shall receive the
fees set forth in Section 10.4(b) immediately prior to any
termination pursuant to this Section 9.1(vi)(B) by wire
transfer in same day funds.
SECTION 9.2. Effect of Termination. If this Agree-
ment is terminated pursuant to Section 9.1, this Agreement
shall become void and of no effect with no liability on the
part of any party hereto or their respective officers and di-
rectors, except that the agreements contained in Sections 6.1,
10.4 and 10.6 shall survive the termination hereof. Specifi-
cally, and without limiting the generality of the foregoing,
Parent and Merger Subsidiary agree that, except as expressly
provided in Section 10.4(b), termination of this Agreement
shall be their sole and exclusive remedy for any nonwillful
breach by the Company of its representations, warranties and
covenants under this Agreement and the Company agrees that ter-
mination of this Agreement shall be its sole and exclusive rem-
edy for any nonwillful breach by Parent or Merger Subsidiary of
their representations, warranties and covenants under this
Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and
other communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given,
if to Parent or Merger Subsidiary, to:
AMF Bowling Centers, Inc.
0000 XXX Xxxxx
Xxxxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. XxXxxxxxx
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxxxx
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if to the Company, to:
American Recreation Centers, Inc.
00000 Xxx Xxxxxx Xxxxx
Xxxxxx Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
with a copy to:
Stradling, Yocca, Xxxxxxx &
Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other par-
ties hereto. Each such notice, request or other communication
shall be effective when delivered at the address specified in
this Section.
SECTION 10.2. Survival of Representations and War-
ranties. The representations and warranties and agreements
contained herein and in any certificate or other writing deliv-
ered pursuant hereto shall not survive the Effective Time or
the termination of this Agreement except for the representa-
tions, warranties and agreements set forth in Sections 6.1,
10.4 and 10.6.
SECTION 10.3. Amendments; No Waivers. (a) Any pro-
vision of this Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Com-
pany, Parent and Merger Subsidiary or in the case of a waiver,
by the party against whom the waiver is to be effective; pro-
vided that after the adoption of this Agreement by the share-
holders of the Company, no such amendment or waiver shall,
without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received
in exchange for any shares of capital stock of the Company, or
(ii) any of the principal terms of the Merger.
(b) No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise
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of any other right, power or privilege. The rights and rem-
edies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 10.4. Fees and Expenses. (a) Except as
otherwise provided in this Section, all costs and expenses in-
curred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
(b) If (w)(i) after the date hereof any person or
group (as contemplated by Section 13(d)(3) of the Exchange Act)
other than Parent or Merger Subsidiary or any of their respec-
tive subsidiaries or affiliates (collectively, an "Acquiring
Person") shall have become the beneficial owner of 10% or more
of the outstanding Shares (or any person or group already ben-
eficially owning 10% or more of the outstanding Shares in-
creases such ownership by more than 5% of the Shares such per-
son or group theretofore owned), or any Acquiring Person shall
have commenced, or shall have publicly announced an intention
to commence, a tender offer or exchange offer for or an inten-
tion to acquire (by merger, consolidation, recapitalization or
otherwise) 10% or more of the outstanding Shares or all or sub-
stantially all of the assets of the Company, and (ii) any Ac-
xxxxxxx Person shall have become the beneficial owner of a ma-
jority of the outstanding Shares, or (x) Parent shall have ter-
minated this Agreement pursuant to Section 9.1(v)(y), or (y)
the Company shall have terminated this Agreement pursuant to
Section 9.1(vi)(B), then the Company shall promptly, but in no
event later than two days after the date of any request there-
for, reimburse Parent up to $650,000 for the documented fees
and expenses of Parent and Merger Subsidiary related to this
Agreement, the transactions contemplated hereby and any related
financing and an additional fee of $2,000,000 which amounts
shall be payable in same day funds; provided, however, that if
the Company shall have terminated this Agreement pursuant to
Section 9.1(vi)(B), such amounts shall be paid in accordance
with the provisions of such Section. The Company acknowledges
that the agreements contained in this Section 10.4(b) are an
integral part of the transactions contemplated in this Agree-
ment, and that, without these agreements, Parent and Merger
Subsidiary would not enter into this Agreement; accordingly, if
the Company fails to pay promptly the amounts due pursuant to
this Section 10.4(b), and, in order to obtain such payments,
Parent or Merger Subsidiary commences a suit against the Com-
pany for the fees set forth in this paragraph (b), the prevail-
ing party shall pay to the other party or parties their costs
and expenses (including attorneys' fees and expenses) in con-
nection with such suit, together with interest on the amount
thereof at the prime rate of the Citibank, N.A. on the date
such payment was required to be made.
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SECTION 10.5. Successors and Assigns; Parties in
Interest. The provisions of this Agreement shall be binding,
upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may
assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the
other parties hereto except that Merger Subsidiary may transfer
or assign, in whole or from time to time in part, to one or
more of Parent or any of its wholly-owned subsidiaries, any or
all of its rights or obligations, but any such transfer or as-
signment will not relieve Merger Subsidiary of its obligations
under this Agreement. Except as expressly set forth herein
nothing in this Agreement, express or implied, is intended to
or shall confer upon any person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including to confer third party beneficiary
rights.
SECTION 10.6. Governing Law. This Agreement shall
be construed in accordance with and governed by the law of the
State of Delaware, except that the consummation and effective-
ness of the Merger shall be governed by, and construed in ac-
cordance with, the DGCL and the CGCL, as applicable.
SECTION 10.7. Counterparts; Effectiveness; Interpre-
tation. This Agreement may be signed in any number of counter-
parts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same in-
strument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by
all of the other parties hereto. When a reference is made in
this Agreement to a Section, such reference shall be to a Sec-
tion of this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the
words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation".
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The parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the
day and year first above written.
AMERICAN RECREATION CENTERS, INC.
By /s/ Xxxxxx X. Xxxxx
Title: Chief Executive Officer and
President
AMF BOWLING CENTERS, INC.
By /s/ Xxxxxxx X. Xxxxxxx
Title: President
NOAH ACQUISITION CORP.
By /s/ Xxxxxxx X. Xxxxxxx
Title: President
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