Exhibit (c)(1)
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
HFS INCORPORATED,
HJ ACQUISITION CORP.
and
XXXXXXX XXXXXX INC.
dated as of
November 19, 1997
__________________________________________________
Index of Defined Terms
----------------------
Defined Term Section No.
------------ -----------
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Acquisition Proposal. . . . . . . . . . . . . . . . . . . . 5.4
Appointment Date. . . . . . . . . . . . . . . . . . . . . . 5.1
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Articles of Incorporation . . . . . . . . . . . . . . . . . 1.4
Certificates. . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Chief Scientist . . . . . . . . . . . . . . . . . . . . . . 3.10(p)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . 1.6
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Company Agreements. . . . . . . . . . . . . . . . . . . . . 3.4
Company Options . . . . . . . . . . . . . . . . . . . . . . 2.5(b)
Company SEC Documents . . . . . . . . . . . . . . . . . . . 3.5
Confidentiality Agreement . . . . . . . . . . . . . . . . . 5.2
Copyrights. . . . . . . . . . . . . . . . . . . . . . . . . 3.12(l)
Dissenting Shareholders . . . . . . . . . . . . . . . . . . 2.1(c)
D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . 5.10(b)
Effective Time. . . . . . . . . . . . . . . . . . . . . . . 1.5
Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Financial Statements. . . . . . . . . . . . . . . . . . . . 3.5
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Governmental Entity . . . . . . . . . . . . . . . . . . . . 3.4
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Indemnified Party . . . . . . . . . . . . . . . . . . . . . 5.9(a)
Intellectual Property . . . . . . . . . . . . . . . . . . . 3.12
Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(l)
Mask Works. . . . . . . . . . . . . . . . . . . . . . . . . 3.12(l)
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Merger Consideration. . . . . . . . . . . . . . . . . . . . 2.1(c)
Minimum Condition . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Offer Documents . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Offer Price . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Offer to Purchase . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Option Exchange Ratio . . . . . . . . . . . . . . . . . . . 2.5(a)
Option Plan . . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)
Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Parent Common Stock . . . . . . . . . . . . . . . . . . . . 2.5(a)
Parent Option . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)
Parent Option Plan. . . . . . . . . . . . . . . . . . . . . 2.5(a)
i
Defined Term Section No.
------------ -----------
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(l)
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 1.8(a)
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Purchaser Common Stock. . . . . . . . . . . . . . . . . . . 2.1
Schedule 14D-1. . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
Schedule 14D-9. . . . . . . . . . . . . . . . . . . . . . . 1.2(b)
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
SEC Documents . . . . . . . . . . . . . . . . . . . . . . . 3.5
Secretary of State. . . . . . . . . . . . . . . . . . . . . 1.5
Securities Act. . . . . . . . . . . . . . . . . . . . . . . 3.5
Service . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(g)
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
Special Meeting . . . . . . . . . . . . . . . . . . . . . . 1.8(a)
Stockholder Agreement . . . . . . . . . . . . . . . . . . . 1.2(a)
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Surviving Corporation . . . . . . . . . . . . . . . . . . . 1.4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10(r)
Tax Return. . . . . . . . . . . . . . . . . . . . . . . . . 3.10(r)
Trademarks. . . . . . . . . . . . . . . . . . . . . . . . . 3.12(l)
Transactions. . . . . . . . . . . . . . . . . . . . . . . . 1.2(a)
Unvested Company Option . . . . . . . . . . . . . . . . . . 2.5(a)
Vested Company Option . . . . . . . . . . . . . . . . . . . 2.5(b)
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
ii
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I THE OFFER AND MERGER.......................................... 2
Section 1.1 The Offer..................................................... 2
Section 1.2 Company Actions............................................... 4
Section 1.3 Directors..................................................... 6
Section 1.4 The Merger.................................................... 7
Section 1.5 Effective Time................................................ 8
Section 1.6 Closing....................................................... 8
Section 1.7 Directors and Officers of the
Surviving Corporation......................................... 8
Section 1.8 Shareholders' Meeting......................................... 8
Section 1.9 Merger Without Meeting of Shareholders........................ 9
ARTICLE II CONVERSION OF SECURITIES...................................... 10
Section 2.1 Conversion of Capital Stock................................... 10
Section 2.2 Exchange of Certificates...................................... 11
Section 2.3 Transfer of Shares After the
Effective Time................................................ 12
Section 2.4 Company Plans................................................. 12
Section 2.5 Certain Adjustments........................................... 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY....................................................... 15
Section 3.1 Organization.................................................. 15
Section 3.2 Capitalization................................................ 16
Section 3.3 Authorization; Validity of Agreement;
Company Action................................................ 17
Section 3.4 Consents and Approvals; No Violations......................... 18
Section 3.5 SEC Reports and Financial Statements.......................... 19
Section 3.6 Absence of Certain Changes.................................... 20
Section 3.7 No Undisclosed Liabilities.................................... 20
Section 3.8 Litigation.................................................... 20
Section 3.9 Employee Benefit Plans; ERISA................................. 21
Section 3.10 Tax Matters................................................... 23
Section 3.11 Title and Condition of Properties............................. 26
Section 3.12 Intellectual Property......................................... 27
Section 3.13 Compliance with Laws.......................................... 29
Section 3.14 Contracts..................................................... 30
Section 3.15 Relationships with Franchisees................................ 31
Section 3.16 Potential Conflicts of Interest............................... 31
Section 3.17 Information in Proxy Statement................................ 32
Section 3.18 Opinion of Financial Advisor.................................. 32
Section 3.19 Brokers or Finders............................................ 32
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER................................... 33
Section 4.1 Organization.................................................. 33
Section 4.2 Authorization; Validity of Agreement;
Necessary Action.............................................. 33
Section 4.3 Consents and Approvals; No Violations......................... 34
Section 4.4 Information in Proxy Statement................................ 35
i
Page
----
Section 4.5 Sec Reports and Financial Statements...........................35
ARTICLE V COVENANTS..................................................... 36
Section 5.1 Interim Operations of the Company............................. 36
Section 5.2 Access; Confidentiality....................................... 39
Section 5.3 Consents and Approvals........................................ 39
Section 5.4 No Solicitation............................................... 40
Section 5.5 Additional Agreements......................................... 42
Section 5.6 Publicity..................................................... 42
Section 5.7 Notification of Certain Matters............................... 42
Section 5.8 Directors' and Officers' Insurance and
Indemnification............................................... 43
ARTICLE VI CONDITIONS.................................................... 44
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger.......................................... 44
Section 6.2 Conditions to Parent's and the Purchaser's
Obligations to Effect the Merger.............................. 44
ARTICLE VII TERMINATION................................................... 45
Section 7.1 Termination................................................... 45
Section 7.2 Effect of Termination......................................... 47
ARTICLE VIII MISCELLANEOUS................................................. 47
Section 8.1 Fees and Expenses............................................. 47
Section 8.2 Amendment and Modification.................................... 48
Section 8.3 Nonsurvival of Representations and
Warranties.................................................... 48
Section 8.4 Notices....................................................... 48
Section 8.5 Interpretation................................................ 49
Section 8.6 Counterparts.................................................. 50
Section 8.7 Entire Agreement; No Third Party
Beneficiaries................................................. 50
Section 8.8 Severability.................................................. 50
Section 8.9 Governing Law................................................. 50
Section 8.10 Assignment.................................................... 51
Section 8.11 Company's Knowledge........................................... 51
Certain Conditions of the Offer..........................................Annex A
ii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated as of November 19, 1997, by and among HFS Incorporated, a
Delaware corporation ("Parent"), JH Acquisition Corp., a Virginia corporation
and a wholly owned subsidiary of Parent (the "Purchaser"), and Xxxxxxx Xxxxxx
Inc., a Virginia corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and the Purchaser to enter into this Agreement, the Company
has entered into a Stock Option Agreement with Parent and the Purchaser (the
"Stock Option Agreement"), pursuant to which the Company has granted to the
Purchaser an option to purchase Shares (as hereinafter defined) upon the terms
and subject to the conditions set forth in the Stock Option Agreement;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and the Purchaser to enter into this Agreement, certain
shareholders of the Company have entered into a Shareholder Agreement, dated as
of the date hereof (the "Shareholder Agreement"), among Parent, the Purchaser
and the shareholders named therein providing, among other things, that each such
shareholder will tender its Shares pursuant to the Offer (as hereinafter
defined), will vote in favor of the Merger, and will grant a proxy to Parent for
that purpose;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 THE OFFER.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), the
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (the
"Offer") for all of the outstanding shares of Common Stock, par value $.02 per
share (the "Shares"), of the Company at a price of $68.00 per Share, net to the
seller in cash (such price, or such other price per Share as may be paid in the
Offer, being referred to herein as the "Offer Price"), subject to there being
validly tendered and not withdrawn prior to the expiration of the Offer, that
number of Shares which represents more than two-thirds of the Shares outstanding
on a fully diluted basis (without giving effect to any Shares issuable pursuant
to the Stock Option Agreement) (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto. The obligations of the Purchaser to
commence the Offer and to accept for payment and to pay for any Shares validly
tendered on or prior to the expiration of the Offer and not withdrawn shall be
subject only to the Minimum Condition and the other conditions set forth in
Annex A hereto. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement, the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Purchaser shall not decrease the Offer Price or decrease the number of Shares
sought, or amend any other condition of the Offer in any manner adverse to the
holders of the Shares (other than with respect to insignificant changes or
amendments and subject to the last sentence of this Section 1.1(a)) without the
written consent of the Company (such consent to be authorized by the Board of
Directors of the Company or a duly authorized committee thereof); PROVIDED,
HOWEVER, that if on the initial scheduled expiration date of the Offer which
shall be January 5, 1998 and which may not be accelerated without the Company's
prior written approval, all conditions to the Offer shall not have been
satisfied or waived, the Purchaser may, from time to time, in its sole
discretion,
2
extend the expiration date for one or more periods not to exceed an aggregate of
40 business days. The Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law as long as such date is on or after January 5, 1998; PROVIDED,
HOWEVER, that if, immediately prior to the initial expiration date of the Offer
(as it may be extended), the Shares tendered and not withdrawn pursuant to the
Offer equal less than 90% of the outstanding Shares, the Purchaser may extend
the Offer for one or more periods not to exceed an aggregate of thirty business
days, notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's shareholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
furnished by the Company for inclusion in the Offer Documents. The information
supplied in writing by the Company for inclusion in the Offer Documents and by
Parent or the Purchaser for inclusion in the Schedule 14D-9 (as hereinafter
defined) will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of Parent and the Purchaser will take all steps
necessary to cause the
3
Offer Documents to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and the Purchaser, on the one hand, and the
Company, on the other hand, will promptly correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have become
false and misleading in any material respect and the Purchaser will take all
steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. The Company and its
counsel shall be given the opportunity to review the Schedule 14D-1 before it is
filed with the SEC. In addition, Parent and the Purchaser will provide the
Company and its counsel in writing with any comments, whether written or oral,
Parent, the Purchaser or their counsel may receive from time to time from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has
(i) unanimously determined that each of the Agreement, the Offer and the Merger
(as defined in Section 1.4) are fair to and in the best interests of the
shareholders of the Company, (ii) approved this Agreement, the Stock Option
Agreement, the Shareholders Agreement, and the transactions contemplated hereby
and thereby, including the Offer and the Merger (collectively, the
"Transactions"), and such approval constitutes approval of the Offer, the Stock
Option, this Agreement, the Stock Option Agreement, the Shareholders Agreement
and the Transactions, for purposes of Sections 13.1-727 and Sections 13.1-728.1
ET SEQ. of the Virginia Stock Corporation Act (the "VSCA") (iii) resolved to
recommend that the shareholders of the Company accept the Offer, tender their
Shares thereunder to the Purchaser and approve and adopt this Agreement and the
Merger; PROVIDED, THAT such recommendation may be withdrawn, modified or amended
if, in the opinion of the Board of Directors, only after receipt of (x) a
written opinion from the Company's investment banking firm that the Acquisition
Proposal (as defined in Section 5.4(a))
4
is superior, from a financial point of view, to the Offer and the Merger and (y)
advice from independent legal counsel to the Company to the effect that the
failure to withdraw, modify or amend such recommendation would be likely to
result in the Board of Directors violating its fiduciary duties to the Company's
shareholders under applicable law. The Company represents that the actions set
forth in this Section 1.2(a) and all other actions it has taken in connection
therewith are sufficient to render the relevant provisions of Sections
13.1-725.1, 13.1-726 and 13.1-728.3 of the VSCA inapplicable to the
Transactions.
(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the provisions
of Section 5.4(b), contain the recommendation referred to in clause (iii) of
Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information furnished by Parent or the Purchaser for inclusion
in the Schedule 14D-9. The Company further agrees to take all steps necessary
to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of the Company, on the one hand, and Parent and
the Purchaser, on the other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false and misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of the Shares, in
each case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given the opportunity to review the Schedule
14D-9 before
5
it is filed with the SEC. In addition, the Company agrees to provide Parent,
the Purchaser and their counsel with any comments, whether written or oral, that
the Company or its counsel may receive from time to time from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments or other communications.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of all recordholders of the Shares as of a recent date, and
shall furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.
Section 1.3 DIRECTORS. Promptly upon the purchase of and payment
for any Shares by Parent or any of its subsidiaries which represents at least
two-thirds of the outstanding Shares (on a fully diluted basis), Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors on such Board (giving effect to the directors
designated by Parent pursuant to this sentence) multiplied by the percentage
that the number of Shares so accepted for payment bears to the total number of
Shares then outstanding. In furtherance thereof, the Company shall, upon
request of the Purchaser, use its best efforts promptly to secure the
resignations of such number of its incumbent directors as is necessary to enable
Parent's designees to be
6
so elected to the Company's Board, and shall take all actions available to the
Company to cause Parent's designees to be so elected. At such time, the Company
shall also cause persons designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company's Board of
Directors of (i) each committee of the Company's Board of Directors, (ii) each
board of directors (or similar body) of each Subsidiary (as defined in Section
3.1) of the Company and (iii) each committee (or similar body) of each such
board. The Company shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.3, including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or the Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3 are in addition to and shall not limit any rights which the Purchaser,
Parent or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise.
Section 1.4 THE MERGER. Subject to the terms and conditions of
this Agreement and in accordance with the applicable provisions of the VSCA, at
the Effective Time (as defined in Section 1.5), the Company and the Purchaser
shall consummate a merger (the "Merger") pursuant to which (a) the Purchaser
shall be merged with and into the Company and the separate corporate existence
of the Purchaser shall thereupon cease, (b) the Company shall be the successor
or surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Virginia, and (c) the separate corporate existence of the Company with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth in this Section 1.4. Pursuant to
the Merger, (x) the Articles of Incorporation of the Purchaser (the "Articles of
Incorporation"), as in effect immediately prior to the Effective Time, shall be
the articles of incorporation of the Surviving Corporation until thereafter
amended as
7
provided by law and such Articles of Incorporation, and (y) the Bylaws of the
Purchaser (the "Bylaws"), as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by law, by the Articles of Incorporation or by such Bylaws. The Merger
shall have the effects specified in the VSCA.
Section 1.5 EFFECTIVE TIME. On the date of the Closing (as defined
in Section 1.6) (or on such other date as Parent and the Company may agree)
Parent, the Purchaser and the Company will cause Articles of Merger with respect
to the Merger to be executed and filed with the Virginia State Corporation
Commission as provided in the VSCA. The Merger shall become effective upon the
issuance by the State Corporation Commission of a certificate of merger, such
time being hereinafter referred to as the "Effective Time".
Section 1.6 CLOSING. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.7 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
The directors and officers of the Purchaser at the Effective Time shall, from
and after the Effective Time, be the directors and officers, respectively, of
the Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and the Bylaws.
Section 1.8 SHAREHOLDERS' MEETING.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
8
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as promptly as
practicable following the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use its
best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and,
after consultation with Parent, to respond promptly to any comments made by
the SEC with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment
or supplement thereto (the "Proxy Statement") to be mailed to its
shareholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and
its counsel and (y) to obtain the necessary approvals of the Merger and
this Agreement by its shareholders; and
(iii) subject to the provisions of Section 5.4(b), include in
the Proxy Statement the recommendation of the Board that shareholders of
the Company vote in favor of the approval of the Merger and the adoption of
this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the adoption of this Agreement.
Section 1.9 MERGER WITHOUT MEETING OF SHAREHOLDERS.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser or
any other subsidiary of Parent shall acquire at least 90% of the outstanding
shares of each class of capital stock of the Company, pursuant to the Offer or
otherwise, the parties hereto shall, at the request of Parent and subject to
Article VI hereof, take all necessary and appropriate action to
9
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Company, in accordance
with Section 13.1-719 of the VSCA.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holders of any
Shares or holders of common stock, par value $.01 per share, of the Purchaser
(the "Purchaser Common Stock"):
(a) PURCHASER COMMON STOCK. Each issued and outstanding share
of the Purchaser Common Stock shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. All
Shares that are owned by the Company as treasury stock and any Shares owned by
Parent, the Purchaser or any other wholly owned Subsidiary of Parent shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) EXCHANGE OF SHARES. Each issued and outstanding Share
(other than Shares to be cancelled in accordance with Section 2.1(b)) shall be
converted into the right to receive the Offer Price, payable to the holder
thereof, without interest (the "Merger Consideration"), upon surrender of the
certificate formerly representing such Share in the manner provided in Section
2.2. All such Shares, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest.
10
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Parent shall designate a bank or trust
company to act as agent for the holders of the Shares in connection with the
Merger (the "Paying Agent") to receive the funds to which holders of the Shares
shall become entitled pursuant to Section 2.1(c). Such funds shall be invested
by the Paying Agent as directed by Parent or the Surviving Corporation.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were converted
pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent, and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each Share formerly represented by such Certificate
and the Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive
11
the Merger Consideration in cash as contemplated by this Section 2.2.
(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE SHARES.
At the Effective Time, the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of transfers of the Shares
on the records of the Company. From and after the Effective Time, the holders
of Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article
II.
(d) TERMINATION OF FUND; NO LIABILITY. At any time following
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.3 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No
transfer of Shares shall be made on the stock transfer books of the Surviving
Corporation at or after the Effective Time.
Section 2.4 COMPANY PLANS.
(a) Except with respect to any Roll-Over Option (as defined in
Section 2.4(b), the Company shall take such actions as are appropriate to
provide that, immediately prior to the Effective Time, (i) all options ("Company
Options") outstanding under any of the
12
Company's 1994 Long Term Incentive Plan and the Non-Employee Director Stock
Option Plan (together, the "Option Plans"), whether or not then exercisable or
vested, shall become fully exercisable and vested, (ii) each Company Option that
is then outstanding shall be cancelled and (iii) in consideration of such
cancellation and in full satisfaction of all rights of the holder under the
Company Options, Parent shall pay, or shall cause the Purchaser to pay, at the
Effective Time, to the holder of each Company Option an amount in cash in
respect thereof equal to the product of (A) the excess of the Merger
Consideration over the exercise price per Share of such Company Option,
multiplied by (B) the number of Shares subject to such Company Option (such
payment to be net of applicable withholding taxes).
(b) With respect to each Company Option (a "Roll-Over Option") as
to which the holder thereof, no later than five days prior to the Effective
Time, shall have delivered to Parent his or her written election to have such
Roll-Over Options treated as provided in this Section 2.4(b), Parent and the
Company shall, effective as of the Effective Time, cause each outstanding
Roll-Over Option to be assumed by Parent and converted into a fully vested
option (or a new substitute option shall be granted) (a "Parent Option"),
exercisable throughout the period specified in the original option award
agreement, to purchase shares of common stock, par value $.01 per share, of
Parent ("Parent Common Stock") issued under and pursuant to the terms and
conditions of Parent's 1993 Amended and Restated Stock Option Plan (or such
surviving plan as may result from the anticipated merger of Parent with and into
CUC International Inc. ("CUC") pursuant to the Agreement and Plan of Merger,
dated as of May 27, 1997, between CUC and Parent), or any other similar stock
option plan of Parent adopted specifically for employees of the Company in order
to issue Parent Options as provided in this Section 2.4(b) (the "Parent Option
Plan"). The parties agree that (i) the number of shares of Parent Common Stock
subject to such Parent Option will be determined by multiplying the number of
Shares subject to the Roll-Over Option to be cancelled by the Option Exchange
Ratio (as hereinafter defined), rounding any fractional share down to the
nearest whole share, and (ii) the exercise price per share of such Parent Option
will be determined by dividing the exercise price per share under the Roll-Over
Option in effect immediately prior to the
13
Effective Time by the Option Exchange Ratio, and rounding the exercise price
thus determined up to the nearest whole cent, subject to appropriate adjustments
for stock splits and other similar events. Except as provided above, the
converted or substituted Parent Options shall be subject to the same terms and
conditions (including, without limitation, expiration date, vesting and exercise
provisions) as were applicable to the Roll-Over Options immediately prior to the
Effective Time. The Company and Parent shall take all necessary action to
facilitate and effect the substitution described in this Section 2.4(b). For
purposes of this Agreement, the "Option Exchange Ratio" shall be (x) the Offer
Price divided by (y) the average of the closing prices of the Parent Common
Stock on the New York Stock Exchange during the five trading days preceding the
fifth trading day prior to the Closing Date.
(c) Except as may be otherwise agreed to by Parent or the
Purchaser and the Company, the Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any of its Subsidiaries shall be deleted as of the Effective Time
and no holder of Company Options or any participant in the Option Plans or any
other plans, programs or arrangements shall have any right thereunder to acquire
any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof.
Section 2.5 CERTAIN ADJUSTMENTS. If after the date hereof and on
or prior to the Effective Time the Shares shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, or
any similar event shall occur (any such action, an "Adjustment Event"), the
terms of this Agreement shall be adjusted accordingly, to provide to the holders
of such Shares the same economic effect as contemplated by this Agreement prior
to such reclassification, recapitalization, split-up, combination, exchange or
dividend or similar event.
14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that
all of the statements contained in this Article III are true and correct as of
the date of this Agreement (or, if made as of a specified date, as of such
date), except as set forth in the applicable section of the schedule attached to
this Agreement (the "Company Disclosure Schedule") or as specifically set forth
in the Company SEC Documents (as defined in Section 3.5) that are listed on
Schedule B of the Company Disclosure Schedule.
Section 3.1 ORGANIZATION. Each of the Company and its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority, and governmental approvals would
not have a material adverse effect on the Company and its Subsidiaries, taken as
a whole. As used in this Agreement, the term "Subsidiary" shall mean all
corporations or other entities in which the Company or the Parent, as the case
may be, owns a majority of the issued and outstanding capital stock or similar
interests. As used in this Agreement, any reference to any event, change or
effect being material or having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means such event, change or
effect as is materially adverse to (i) the consolidated financial condition,
businesses, results of operations or prospects of such entity (or, if used with
respect thereto, of such group of entities taken as a whole) or (ii) the ability
of such entity (or group) to consummate the transactions contemplated hereby.
The Company and each of its Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not
15
individually or in the aggregate have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. Except as set forth on Section 3.1 of
the Company Disclosure Schedule, the Company does not own, directly or
indirectly, (i) any equity interest in any corporation or other entity or (ii)
marketable securities.
Section 3.2 CAPITALIZATION. (a) The authorized capital stock of
the Company consists of 30 million Shares and 1 million shares of preferred
stock, without par value (the "Preferred Stock"). As of the date hereof, (i)
6,664,982 Shares are issued and outstanding, (ii) no Shares are issued and held
in the treasury of the Company, (iii) no shares of Preferred Stock are issued
and outstanding, and (iv) 440,984 Shares are reserved for issuance upon exercise
of Company Options under the Option Plans. All the outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Company Options will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth on Section 3.2 of the Company Disclosure
Schedule, there are no bonds, debentures, notes or other indebtedness having
general voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except for (x) the warrants to purchase 10,000 Shares (the
"Warrants") issued pursuant to the Warrant Purchase Agreement, dated as of June
7, 1996 between the Company and NationsBank, N.A., (y) the 440,984 Company
Options, and (z) the transactions contemplated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right,
16
agreement, arrangement or commitment and (iii) there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares, or the capital stock of the Company, or
any Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) Except as set forth on Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding shares of capital stock of each of
the Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, claims or encumbrances ("Encumbrances").
(c) Except for the Shareholders Agreement, there are no voting
trusts or other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of the Subsidiaries.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION.
(a) The Company has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement and the
Stock Option Agreement, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by its Board of
Directors and, except for obtaining the approval of more than two-thirds of its
shareholders of the Merger Agreement in accordance with Section 13.1-718 of the
VSCA as contemplated by Section 1.8 hereof, no other corporate action on the
part of the Company is necessary to authorize the execution and delivery by the
Company of this Agreement or the Stock Option Agreement and the consummation by
it of the transactions contemplated hereby and thereby. Each of this Agreement
and the Stock Option Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery hereof
and thereof by Parent and the Purchaser, is a valid and binding obligation of
the Company enforceable against the Company in accordance
17
with its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly
unanimously approved the Transactions, including the Stock Option, the Offer,
the acquisition of Shares pursuant to the Offer, the Shareholders Agreement and
the Merger, for the purposes of Article 14 and Article 14.1 of the VSCA such
that the provisions of Article 14 and Article 14.1 of the VSCA will not apply to
the transactions contemplated by this Agreement, such approval occurring prior
to the time the Purchaser became an "interested shareholder", as that term is
defined in Section 13.1-725 of the VSCA.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the
filings set forth in Section 3.4 of the Company Disclosure Schedule and the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state securities or blue sky laws, and the VSCA, none of the execution,
delivery or performance of this Agreement by the Company, the consummation by
the Company of the transactions contemplated hereby or compliance by the Company
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the Articles of Incorporation, the Bylaws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or
18
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (the
"Company Agreements") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, other than, in the case of clause (iii),
for such violations, breaches or defaults that individually or in the aggregate
would not (x) have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or (y) reasonably be expected to impair the
ability of the Company to perform its obligations under this Agreement. The
affirmative vote of the holders of more than two-thirds of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the SEC, and has heretofore made available to Parent, true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since April 30, 1995 under the Exchange Act
or the Securities Act of 1933, as amended (the "Securities Act") (as such
documents have been amended since the time of their filing, collectively, the
"Company SEC Documents"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. None of the
Company's Subsidiaries is required to file any forms, reports or other documents
with the SEC. The financial statements of the Company included in the Company
SEC Documents (the "Financial Statements") have been prepared from, and are in
accordance with, the books and records of the Company and its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
19
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") (except in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated Subsidiaries as of the
times and for the periods referred to therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 3.6 ABSENCE OF CERTAIN CHANGES.
Except as disclosed in Section 3.6 of the Company Disclosure Schedule, and
except for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, since April 30, 1997, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course and (i) there have not occurred any events or changes (including
the incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) having or reasonably likely to have, individually or in
the aggregate, a material adverse effect on the Company and its Subsidiaries,
taken as a whole, and (ii) the Company has not taken any action which would have
been prohibited under Section 5.1 hereof.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except (a) as disclosed in
the Financial Statements and (b) for liabilities and obligations (x) incurred in
the ordinary course of business and consistent with past practice (y) pursuant
to the terms of this Agreement or (z) as set forth in Section 3.7 of the Company
Disclosure Schedule, since April 30, 1997 neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that have, or would be reasonably
likely to have, a material adverse effect on the Company and its Subsidiaries,
taken as a whole, or would be required by GAAP to be reflected on a consolidated
balance sheet of the Company and its Subsidiaries (including the notes thereto).
Section 3.8 LITIGATION. (a) Except as set forth in Section 3.8 of
the Company Disclosure Schedule,
20
as of the date hereof, there are no suits, claims, actions, proceedings,
including, without limitation, arbitration proceedings or alternative dispute
resolution proceedings, or investigations pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries before any
Governmental Entity. Except as disclosed in Section 3.8 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject
to any outstanding order, writ, injunction or decree.
(b) Except as set forth in Section 3.8 of the Company Disclosure
Schedule, there are no suits, claims, actions, proceedings, including, without
limitation, arbitration proceedings or alternative dispute resolution
proceedings, or investigations pending, or to the Company's knowledge,
threatened against the Company or any of its Subsidiaries, or, to the knowledge
of the Company, any person acting as an agent or franchisee of the Company,
before any Governmental Entity, relating to any claims of unlawful
discrimination by any customers, potential customers, franchisees, potential
franchisees, employees or potential employees or others.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 3.9(a) of the Company Disclosure Schedule sets forth
a true and complete list (or, in the case of an unwritten plan, a description)
of all material employee benefit plans, arrangements, contracts or agreements
(including employment agreements, severance agreements and managers' insurance
plans) of any type, statutory or otherwise, (including but not limited to plans
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained by the Company, any of its Subsidiaries
or any trade or business, whether or not incorporated (an "ERISA Affiliate"),
which together with the Company would be deemed a "single employer" within the
meaning of Section 414(b), 414(c) or 414(m) of the Internal Revenue Code of
1986, as amended (the "Code"), or the regulations, issued under Section 414(o)
of the Code ("Benefit Plans").
(b) With respect to each Benefit Plan: (i) if intended to
qualify under Section 401(a) of the Code, such plan so qualifies, and its trust
is exempt from taxation under Section 501(a) of the Code, no condi-
21
tion exists that would reasonably be expected to affect such qualification, and
except as set forth on Section 3.9(b) of the Company Disclosure Schedule, there
have been no amendments to any such Benefit Plan which are not the subject of a
favorable determination letter; (ii) such plan has been administered in all
material respects in accordance with its terms and U.S. federal, state or local,
statutes, orders or governmental rules or regulations, including but not limited
to ERISA and the Code, no notice has been issued by any Governmental Entity
questioning or challenging such compliance, and no condition exists that would
be expected to affect such compliance; (iii) no breaches of fiduciary duty have
occurred which might reasonably be expected to give rise to material liability
on the part of the Company; (iv) no disputes are pending, or, to the Company's
knowledge, threatened that might reasonably be expected to give rise to material
liability on the part of the Company; (v) no prohibited transaction (within the
meaning of Section 406 of ERISA) has occurred that would give rise to material
liability on the part of the Company, any ERISA Affiliate or any of their
employees, shareholders or directors; and (vi) all contributions and premiums
due as of the date hereof in respect of any Benefit Plan (taking into account
any extensions for such contributions and premiums) have been made in full or
accrued on the Company's balance sheet forming part of the Financial Statements.
(c) Except as set forth in Section 3.9(c) of the Company
Disclosure Schedule, neither the Company nor any ERISA Affiliate (i) has
incurred an accumulated funding deficiency, as defined in the Code and ERISA, or
(ii) has incurred any material liability under Title IV of ERISA with respect to
any employee benefit plan that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan"
(as defined in section 3(1) of ERISA), except as disclosed in Section 3.9(d) of
the Company Disclosure Schedule, no such plan provides medical or death benefits
with respect to current or former employees of the Company or any of its
Subsidiaries beyond their termination of employment, other than as required by
law.
(e) Except as set forth in Section 3.9(e) of the Company
Disclosure Schedule, neither the execution
22
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) entitle any individual to severance pay or accelerate the time of
payment or vesting, or increase the amount, of compensation or benefits due to
any individual.
(f) There is no Benefit Plan that is a "multiemployer plan," as
such term is defined in Section 3(37) of ERISA.
(g) With respect to each Benefit Plan, the Company has
previously delivered to Parent or its representatives accurate and complete
copies of all plan documents, summary plan descriptions, summary of material
modifications, trust agreements and other related agreements, including all
amendments to the foregoing; the most recent annual report; the annual and
periodic accounting of plan assets in respect of the two most recent plan years;
the most recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the actuarial valuation, to the extent any
of the foregoing may be applicable to a particular Benefit Plan, in respect of
the two most recent plan years.
Section 3.10 TAX MATTERS.
(a)Except as set forth in Section 3.10(a) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have filed all Tax
Returns (as hereinafter defined) that are required to be filed and have paid or
caused to be paid all Taxes (as hereinafter defined) shown on such Tax Returns
or otherwise due or claimed to be due by any taxing authority. All such Tax
Returns are correct and complete in all material respects and accurately reflect
all liability for Taxes for the periods covered thereby. All Taxes owed and due
by the Company and each of its Subsidiaries for results of operations through
April 30, 1997 (whether or not shown on any Tax Return) have been paid or have
been adequately reflected on the Company's balance sheet as of April 30, 1997
included in the Financial Statements (the "Balance Sheet"). Since April 30,
1997 the Company has not incurred liability for any Taxes other than in the
ordinary course of business. Neither the Company nor any of its Subsidiaries
has received notice of any claim made by an authority in a jurisdiction where
neither the Company nor
23
any of its Subsidiaries file Tax Returns, that the Company is or may be subject
to taxation by that jurisdiction.
(b) Neither the Company nor any of its Subsidiaries has violated
any applicable law of any jurisdiction relating to the payment and withholding
of Taxes, including, without limitation, (x) withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code and (y) withholding of Taxes in respect of
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. The Company and each of its Subsidiaries have, in the manner
prescribed by law, withheld and paid when due all Taxes required to have been
withheld and paid under all applicable laws.
(c) There are no Encumbrances upon the Shares or any of the
assets or properties of the Company or any of its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax when due.
(d) Except as set forth in Section 3.10(d) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has waived
any statute of limitations in any jurisdiction in respect of Taxes or Tax
Returns or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Except as set forth in Section 3.10(e) of the Company
Disclosure Schedule, no federal, state, local or foreign audits, examinations or
other administrative proceedings have been commenced or are pending with regard
to any Taxes or Tax Returns of the Company or of any of its Subsidiaries. No
notification has been received by the Company or by any of its Subsidiaries that
such an audit, examination or other proceeding is pending or threatened with
respect to any Taxes due from or with respect to or attributable to the Company
or any of its Subsidiaries or any Tax Return filed by or with respect to the
Company or any of its Subsidiaries.
(f) During their most recent five taxable years respectively,
neither the Company nor any of its Subsidiaries has made a change in accounting
methods (nor has any taxing authority proposed in writing any such adjustment or
change of accounting method), received a ruling from any taxing authority or
signed an agreement
24
with any taxing authority which could have a material adverse effect on the
Company or any of its Subsidiaries, or has entered into any closing or similar
agreement with any taxing authority.
(g) Neither the Company nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement.
(h) No power of attorney with respect to any matter relating to
Taxes or Tax Returns has been granted by or with respect to the Company or any
of its Subsidiaries.
(i) Neither the Company nor any of its Subsidiaries is a party
to any agreement, plan, contract or arrangement that could result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code or the payment of any amount that is not
deductible by reason of Section 162(m) of the Code.
(j) Neither the Company nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor provision)
concerning collapsible corporations, or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a "subsection (f) asset" (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
Subsidiaries.
(k) None of the Subsidiaries of the Company is a controlled
foreign corporation within the meaning of Section 957 of the Code or a passive
foreign investment company within the meaning of Section 1296 of the Code.
(l) The Company has delivered to Parent complete and accurate
copies of each of: (A) all audit, examination and similar reports and all letter
rulings and technical advice memoranda relating to United States federal, state,
local, and foreign Taxes due from or with respect to the Company and its
Subsidiaries; (B) all United States federal, state and local, and foreign Tax
Returns, Tax examination reports and similar documents filed by the Company and
its Subsidiaries; and (C) all
25
closing agreements entered into by the Company and its Subsidiaries with any
taxing authority and all statements of Tax deficiencies assessed against or
agreed to by the Company and its Subsidiaries. The Company will deliver to the
Purchaser all materials with respect to the foregoing for all matters arising
after the date hereof.
(m) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, penalties or other assessments imposed by any federal,
state, local or foreign governmental authority, including, but not limited
to, income, gross receipts, excise, property, sales, gain, use, license,
custom duty, unemployment, capital stock, transfer, franchise, payroll,
withholding, social security, minimum estimated, and other taxes, and shall
include interest, penalties or additions attributable thereto; and
(ii) "Tax Return" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
Section 3.11 TITLE AND CONDITION OF PROPERTIES. Except as set forth
on Section 3.11 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries own any real property. The Company and its Subsidiaries own
good and marketable title, free and clear of all Encumbrances, to all of the
personal property and assets shown on the Balance Sheet or acquired after April
30, 1997 except for (A) assets which have been disposed of to nonaffiliated
third parties since April 30, 1997 in the ordinary course of business, (B)
Encumbrances reflected in the Balance Sheet, (C) Encumbrances or imperfections
of title which are not, individually or in the aggregate, material in character,
amount or extent and which do not materially detract from the value or
materially interfere with the present or presently contemplated use of the
assets subject thereto or affected thereby, and (D) Encumbrances for current
Taxes not yet due and payable. All of the equipment (including computer
hardware) and other tangible personal
26
property and assets owned or used by the Company and its Subsidiaries are in
good condition and repair, except for ordinary wear and tear not caused by
neglect, and are useable in the ordinary course of business. The personal
property and assets reflected on the Balance Sheet or acquired after April 30,
1997, the rights under the Company Agreements and the Intellectual Property (as
defined in Section 3.12) owned or used by the Company under valid license,
collectively include all assets necessary to provide, produce, franchise, sell
and license the services and products currently provided, produced, franchised,
sold and licensed by the Company and its Subsidiaries and to conduct the
business of the Company and its Subsidiaries as presently conducted or as
currently contemplated to be conducted.
Section 3.12 INTELLECTUAL PROPERTY.
(a) As used in this Agreement, "Intellectual Property" means all of
the following, in which the Company holds or owns any rights which are necessary
to conduct the business of the Company and its Subsidiaries as presently
conducted or as currently proposed to be conducted: (i) trademarks, trade
dress, service marks, logos, trade names, corporate names and all registrations
and applications to register the same; (ii) patents and pending patent
applications, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extensions thereof; (iii) copyrights, rights of
publicity, rights in any semi-conductor chip product works or "mask works" and
all registrations and applications to register the same; (iv) all computer
software programs, including without limitation, all source code and object
code; databases and compilations, including all data and compilations of data;
all descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing; and all documentation, including user
manuals and training materials relating to the foregoing (collectively,
"Computer Software"); (v) all technology, know-how, trade secrets and
proprietary processes and formulae; and (vi) all licenses and agreements to
which the Company or any of the Subsidiaries is a party which relate to any of
the foregoing, including but not limited to Computer Software licenses other
than shrink-wrap licenses for off-the-shelf applications ("Licenses").
27
(b) Except as otherwise set forth on Section 3.12(b) of the Company
Disclosure Schedule, the Company or its Subsidiaries owns or has the right to
use, sell or license all Intellectual Property, free and clear of all
Encumbrances. Section 3.12(b) of the Company Disclosure Schedule contains a
true and complete list of all of the following Intellectual Property: (i)
copyright registrations and applications and material unregistered copyrights;
(ii) trademark and service xxxx registrations and applications and material
unregistered trademarks, service marks and trade names; (iii) patents and patent
applications; (iv) Computer Software; and (v) material Licenses.
(c) Except as set forth in Section 3.12(c) of the Company Disclosure
Schedule, all Computer Software (i) was developed (x) by employees of the
Company or its Subsidiaries within the scope of their employment or (y) as
"works-made-for-hire" as that term is defined under Section 101 of the United
States copyright laws, pursuant to a written agreement; (ii) was assigned to the
Company or its Subsidiaries pursuant to a written agreement; (iii) is used in
accordance with rights granted to the Company or its Subsidiaries pursuant to a
written License; or (iv) is in the public domain. Except as set forth in
Section 3.12(c) of the Company Disclosure Schedule, no former or present
employees, officers or directors of the Company hold any right, title or
interest directly or indirectly, in whole or in part, in or to any Computer
Software or any other Intellectual Property.
(d) No breach or default (or event which with notice or lapse of time
or both would result in an event of default) by the Company or any of its
Subsidiaries exists or has occurred under any of the Licenses, and the
consummation of the transactions contemplated by this Agreement will not violate
or conflict with or constitute such a default, result in a forfeiture under, or
constitute a basis for termination of any such License.
(e) Except as set forth in Section 3.12(e) of the Company Disclosure
Schedule, to the Company's knowledge the conduct of the Company's and its
Subsidiaries' business and the use of the Intellectual Property do not infringe,
violate or misuse any intellectual property rights or any other proprietary
right of any person or give rise to any obligations to any person as a result of
28
co-authorship, or co-inventorship. Neither the Company nor any of the
Subsidiaries have received any notice of any claims or threats that the
Company's and its Subsidiaries' use of any of the Intellectual Property
infringes, violates or misuses, or is otherwise in conflict with any
Intellectual Property or proprietary rights of any third party or that any of
the Intellectual Property is invalid or unenforceable, nor to the Company's
knowledge, is there a basis for such a claim. Except as set forth in Section
3.12(e) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has sent to any other person any notice or claim of any present or
threatened infringement, violation or misuse by any other person of any of the
Intellectual Property and, to the Company's knowledge, there are no such
infringements, violations or misuses.
(f) The Company and its Subsidiaries have used reasonable efforts to
maintain the confidentiality of its trade secrets and other confidential
Intellectual Property.
Section 3.13 COMPLIANCE WITH LAWS. (a) The Company and its
Subsidiaries are in compliance with, and have not violated any applicable law,
rule or regulation of any United States federal, state, local or foreign
government or agency thereof which materially affects the business, properties
or assets of the Company and its Subsidiaries, including without limitation all
laws, rules or regulations relating to Taxes and the preparation and electronic
filing of Tax Returns, and no notice, charge, claim, action or assertion has
been received by the Company or any of its Subsidiaries or has been filed,
commenced or, to the Company's knowledge, threatened against the Company or any
of its Subsidiaries alleging any such violation. All licenses, permits and
approvals required under such laws, rules and regulations are in full force and
effect, except where the failure to have such licenses, permits and approvals
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(b)The terms and conditions of (i) the accelerated check
requests, refund anticipation loans and other financial products offered from
time to time by the Company, its Subsidiaries and franchisees (collectively, the
"Bank Products"), and (ii) all franchise arrangements
29
entered into, including the form of Franchise Agreement attached from time to
time to the Company's Franchise Offering Circular, currently comply, and have at
all times in the past complied, with all applicable laws, rules or regulations
of any United States federal, state, local or foreign government or agency
thereof, including without limitation all laws, rules or regulations relating to
Taxes.
(c) Except as set forth in Section 3.13 of the Company
Disclosure Schedule, the procedures utilized by, and the practices of, the
Company and each of its Subsidiaries for the preparation and electronic filing
of Tax Returns currently comply, and have at all times in the past complied,
with all applicable laws, rules or regulations of any United States federal,
state, local or foreign government or agency thereof, including without
limitation all laws, rules or regulations relating to Taxes and the preparation
and electronic filing of Tax Returns.
(d) Except as set forth in Section 3.13 of the Company
Disclosure Schedule, the Company and its Subsidiaries and, to the knowledge of
the Company, each person acting as an agent or franchisee of the Company, is in
compliance with all laws, rules and regulations having the purpose or effect of
prohibiting unlawful discrimination against customers, potential customers,
franchisees, potential franchisees, present and former employees, applicants for
employment or others and, to the knowledge of the Company, the Company has
received no complaints from any person that the Company or any agent or
franchisee has engaged in any unlawful discrimination.
Section 3.14 CONTRACTS. (a) Each material Company Agreement is
legally valid and binding and in full force and effect. The Company has
previously made available for inspection by Parent or the Purchaser or their
representatives all material Company Agreements.
(b) Each contract, agreement or arrangement between the Company and
any bank or financial institution with respect to Bank Products (the "Bank
Product Agreements") is legally valid and binding and in full force and effect.
The Company is not in default, nor to the Company's knowledge is any third party
in default, under any Bank Product Agreement. The Company has previously
30
made available for inspection by Parent or the Purchaser or their
representatives complete and accurate copies of all Bank Product Agreements.
Section 3.15 RELATIONSHIPS WITH FRANCHISEES. Except as set forth in
Section 3.15 of the Company Disclosure Schedule, since April 30, 1997, no
franchisee of the Company or any of its Subsidiaries has cancelled or otherwise
modified its relationship with the Company or its subsidiaries and (i) to the
Company's knowledge, no such person has threatened or has any intention to do
so, and (ii) to the Company's knowledge, the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 3.15 of the Company Disclosure Schedule sets forth a complete list of
all franchisees of the Company as of the date hereof. No more than 25% of such
franchise agreements with the Company differ from the form of Franchise
Agreement attached to the Company's Franchise Offering Circular dated July 1,
1997 (the "Form"), and none of such differences from the Form are material.
Section 3.16 POTENTIAL CONFLICTS OF INTEREST. Except as set forth
in Section 3.16 of the Company Disclosure Schedule or in the Company SEC
Reports, no officer of the Company or any of its Subsidiaries owns, directly or
indirectly, any interest in (excepting not more than 1% stock holdings for
investment purposes in securities of publicly held and traded companies) or is
an officer, director, employee or consultant of any person which is a
competitor, lessor, lessee, franchisee, customer or supplier of the Company or
any of its Subsidiaries; and no officer or director of the Company or any of its
Subsidiaries (i) owns, directly or indirectly, in whole or in part, any
Intellectual Property which the Company or any of its Subsidiaries is using or
the use of which is necessary for the business of the Company or any of its
Subsidiaries; (ii) has any claim, charge, action or cause of action against the
Company or any of its Subsidiaries, except for claims for accrued vacation pay,
accrued benefits under the Benefit Plans and similar matters and agreements
existing on the date hereof; (iii) has made, on behalf of the Company or any of
its Subsidiaries, any payment or commitment to pay any commission, fee or other
amount to, or to purchase or obtain or otherwise contract to purchase or obtain
any goods or services from, any other person of which any officer or
31
director of the Company, or, to the Company's knowledge, a relative of any of
the foregoing, is a partner or stockholder (except stock holdings solely for
investment purposes in securities of publicly held and traded companies); (iv)
owes any money to the Company or any of its Subsidiaries; (v) is owed any money
by the Company or any of its Subsidiaries; or (vi) is a party to any
transaction, agreement, arrangement or understanding with the Company or any of
its Subsidiaries other than items arising out of the ordinary course of
employment with the Company.
Section 3.17 INFORMATION IN PROXY STATEMENT. The Proxy Statement, if
any (or any amendment thereof or supplement thereto), will, at the date mailed
to Company shareholders and at the time of the meeting of Company shareholders
to be held in connection with the Merger, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.18 OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Xxxxxx Xxxxxxxxxx Xxxxx Inc. dated the date hereof, to the effect
that, as of such date, the consideration to be received in the Offer and the
Merger by the Company's shareholders is fair to the Company's shareholders from
a financial point of view, a copy of which opinion has been delivered to Parent
and the Purchaser, it being understood and agreed by Parent and the Purchaser
that such opinion is for the benefit of the Board of Directors of the Company
and may not be relied upon by the Parent or Purchaser or their affiliates or
stockholders.
Section 3.19 BROKERS OR FINDERS. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commis-
32
sion or similar fee in connection with any of the transactions contemplated by
this Agreement except for Xxxxxx Xxxxxxxxxx Xxxxx Inc., whose engagement letter
has previously been provided to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company that the
statements contained in this Article IV are true and correct as of the date of
this Agreement and, subject to modification as appropriate to effect the
anticipated merger of Parent with and into CUC pursuant to the Agreement and
Plan of Merger, dated as of May 27, 1997, between CUC and Parent, will be true
and correct as of the Closing Date as though made on the Closing Date.
Section 4.1 ORGANIZATION. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries, taken
as a whole.
Section 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the
33
transactions contemplated hereby. The execution, delivery and performance by
Parent and the Purchaser of this Agreement, and the consummation of the Merger
and of the transactions contemplated hereby have been duly authorized by the
Board of Directors of Parent and the Purchaser and by Parent as the sole
stockholder of the Purchaser and no other corporate action on the part of Parent
and the Purchaser is necessary to authorize the execution and delivery by Parent
and the Purchaser of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and the Purchaser, as the case may be, and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth in Section 4.3 of the schedule attached to this Agreement setting forth
exceptions to Parent's representations and warranties set forth herein and
except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act, the HSR
Act, state securities or blue sky laws, and the VSCA and the DGCL, none of the
execution, delivery or performance of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the transactions contemplated
hereby or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or by-laws of Parent or the Purchaser,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond,
34
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent, or any of its Subsidiaries or the Purchaser is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent, any of its Subsidiaries or any of their
properties or assets.
Section 4.4 INFORMATION IN PROXY STATEMENT. None of the
information supplied by Parent or the Purchaser specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date mailed to
shareholders and at the time of the meeting of shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has filed
with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since April 30, 1995 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Parent SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, the Parent SEC
Documents, including, without limitation, any financial statements or schedules
included therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder.
The financial statements of Parent included in the Parent SEC Documents (the
"Parent Financial Statements") have been prepared from, and are in accordance
with, the books and records of Parent and its consolidated subsidiaries, comply
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with
35
United States generally accepted accounting principles ("GAAP") (except in the
case of unaudited statements, as permitted by Form 10-Q under the Exchange Act)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position and the consolidated results of operations and cash flows (and changes
in financial position, if any) of Parent and its consolidated subsidiaries as of
the times and for the periods referred to therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure Schedule,
or (iii) as consented to in writing by Parent, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, and prior to the time the directors of the
Purchaser have been elected to, and shall constitute two-thirds of, the Board of
Directors of the Company pursuant to Section 1.3 (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries shall be
conducted only in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, and each of the Company and its
Subsidiaries shall use its best efforts to preserve its business organization
intact, keep available the services of its current officers and employees and
maintain its existing relations with franchisees, customers, suppliers,
creditors, business partners and others having business dealings with it, to the
end that its goodwill and ongoing business shall be unimpaired at the Effective
Time of the Merger in any material respect;
(b) the Company will not, directly or indirectly, (i) sell,
transfer or pledge or agree to sell, transfer or pledge any of the shares,
preferred stock or capital stock of any of its Subsidiaries beneficially owned
by it, (ii) amend its Articles of Incorpora-
36
tion or Bylaws or similar organizational documents; or (iii) split, combine or
reclassify the outstanding Shares or Preferred Stock or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock; (ii) except pursuant to the
Stock Option Agreement, issue, sell, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or its Subsidiaries, other than Shares reserved for
issuance on the date hereof pursuant to the exercise of Company Options
outstanding on the date hereof; (iii) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any material assets other than in the ordinary
and usual course of business and consistent with past practice, or incur or
modify any material indebtedness or other liability, other than in the ordinary
and usual course of business and consistent with past practice; or (iv) redeem,
purchase or otherwise acquire directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i)
grant any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its executive officers or key
employees or (ii)(A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become payable
under any existing, bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan agreement or arrangement; or (iii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of its material contracts or waive, release or
assign any mate-
37
rial rights or claims, except in the ordinary course of business and consistent
with past practice;
(f) neither the Company nor any of its Subsidiaries shall permit
any material insurance policy naming it as a beneficiary or a loss payable payee
to be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not consistent
with past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person, except in the ordinary course of business and consistent
with past practice; (iii) make any loans, advances or capital contributions to,
or investments in, any other person (other than to wholly owned Subsidiaries of
the Company); or (iv) enter into any material commitment or transaction
(including, but not limited to, any borrowing, capital expenditure or purchase,
sale or lease of assets or real estate);
(h) neither the Company nor any of its Subsidiaries shall change
any of the accounting methods used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice, of claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the consolidated financial statements (or the
notes thereto) of the Company and its consolidated Subsidiaries;
(j) neither the Company nor any of its Subsidiaries will adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
38
(k) neither the Company nor any of its Subsidiaries will take,
or agree to commit to take, any action that would or is reasonably likely to
result in any of the conditions to the Merger set forth in Article VI not being
satisfied, or that would make any representation or warranty of the Company
contained herein inaccurate in any respect at, or as of any time prior to, the
Effective Time, or that would impair the ability of the Company to consummate
the Merger in accordance with the terms hereof or delay such consummation; and
(l) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.
Section 5.2 ACCESS; CONFIDENTIALITY. Upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, full access to all its properties, books, contracts,
commitments and records and the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. Unless otherwise required by law and until the
Appointment Date, Parent will hold any such information which is nonpublic in
confidence in accordance with the provisions of a letter agreement dated
September 22, 1997, between the Company and the Parent (the "Confidentiality
Agreement").
Section 5.3 CONSENTS AND APPROVALS. (a) Each of the Company, Parent
and the Purchaser will take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on it with respect to this
Agreement and the transactions contemplated hereby (which actions shall include,
without limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of
39
their Subsidiaries in connection with this Agreement and the transactions
contemplated hereby. Each of the Company, Parent and the Purchaser will, and
will cause its Subsidiaries to, take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, the
Purchaser, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 5.4 NO SOLICITATION. (a) Neither the Company nor any of
its Subsidiaries or affiliates shall (and the Company shall cause its officers,
directors, employees, representatives and agents, including, but not limited to,
investment bankers, attorneys and accountants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any corporation, partnership, person or other
entity or group (other than Parent, any of its affiliates or representatives)
concerning any merger, tender offer, exchange offer, sale of assets, sale of
shares of capital stock or debt securities or similar transactions involving the
Company or any Subsidiary (an "Acquisition Proposal"). The Company will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
Notwithstanding the foregoing, the Company may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal if (x) such entity or
40
group has on an unsolicited basis submitted a bona fide written proposal to the
Board of Directors of the Company relating to any such transaction which the
Board determines in good faith, represents a superior transaction to the Offer
and the Merger and which is not subject to the receipt of any necessary
financing and (y) in the opinion of the Board of Directors of the Company, only
after receipt of (i) a written opinion from the Company's investment banking
firm that the Acquisition Proposal is superior, from a financial point of view,
to the Offer and the Merger, and (ii) advice from independent legal counsel to
the Company to the effect that the failure to provide such information or access
or to engage in such discussions or negotiations would be likely to cause the
Board of Directors to violate its fiduciary duties to the Company's shareholders
under applicable law (an Acquisition Proposal which satisfies clauses (x) and
(y) being referred to herein as a "Superior Proposal"). The Company will
promptly communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
Company in connection with such proposal, discussion negotiation, or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
(b) Except as set forth herein, neither the Board of Directors
of the Company nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or the Purchaser,
the approval or recommendation by such Board of Directors or any such committee
of the Offer, this Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) enter into
any agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, prior to the time of acceptance for payment of Shares in the Offer,
the Board of Directors of the Company may (subject to the terms of this and the
following sentence) withdraw or modify its approval or recommendation of the
Offer, this Agreement or the Merger, approve or recommend a Superior Proposal,
or enter into an agreement with respect to a Superior Proposal, PROVIDED, that
the Company shall promptly advise Parent orally and in writing of any Superior
Proposal or any inquiry which could lead to a Superior Proposal, shall specify
the material terms and conditions of such Superior Proposal and identify the
41
person making such Superior Proposal; PROVIDED, FURTHER, that the Company shall
not enter into an agreement with respect to a Superior Proposal unless the
Company shall have furnished Parent with written notice not later than 12:00
noon 2 days in advance of any date that it intends to enter into such agreement.
In addition, if the Company enters into an agreement with respect to any
Acquisition Proposal, it shall concurrently with entering into such agreement
pay, or cause to be paid, to Parent the Termination Fee (as defined in Section
8.1(b)).
Section 5.5 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the Company and
Parent shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
Section 5.6 PUBLICITY. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 5.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the
42
Company or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 5.8
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.8 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) For five years after the Effective Time, the Surviving Corporation (or any
successor to the Surviving Corporation) shall indemnify, defend and hold
harmless the present and former officers and directors of the Company and its
Subsidiaries (each an "Indemnified Party") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the written
consent of the Parent or the Surviving Corporation)) arising out of actions or
omissions occurring at or prior to the Effective Time to the full extent
permitted under Virginia law (provided that such actions or omissions were in
compliance with the standards set forth under Virginia law, the Articles of
Incorporation or the Bylaws), subject to the terms of the Articles of
Incorporation and the Bylaws, all as in effect at the date hereof; PROVIDED
THAT, in the event any claim or claims are asserted or made within such five
year period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims; PROVIDED,
FURTHER, that nothing herein shall impair any rights or obligations of any
present or former directors or officers of the Company.
(b) Parent or the Surviving Corporation shall maintain the
Company's existing officers' and directors' liability insurance ("D&O
Insurance") for a period of not less than five years after the Effective Date;
PROVIDED, that the Parent may substitute therefor policies of substantially
similar coverage and amounts containing terms no less favorable to such former
directors or officers; PROVIDED, FURTHER, that in no event shall the Company be
required to pay aggregate premiums for insurance under this Section in excess of
200% of the aggregate premiums paid by the Company in 1997 on an annualized
basis for such purpose.
43
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the Shares, if
required by applicable law, in order to consummate the Merger;
(b) STATUTES; CONSENTS. No law, statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction which declares this Agreement invalid or unenforceable in
any material respect or which prohibits consummation of the Merger and all
governmental consents, orders and approvals required for the consummation of the
Merger and the other transactions contemplated hereby shall have been obtained
and shall be in effect at the Effective Time;
(c) PURCHASE OF SHARES IN OFFER. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer; and
(d) HSR APPROVAL. The applicable waiting period under the HSR
Act shall have expired or been terminated.
Section 6.2 CONDITIONS TO PARENT'S AND THE PURCHASER'S OBLIGATIONS
TO EFFECT THE MERGER. The obligations of Parent and the Purchaser to consummate
the Merger shall be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions, any and all of which may be waived in whole
or in part by the Parent and the Purchaser, to the extent permitted by
applicable law.
44
(a) COMPLIANCE WITH OBLIGATIONS. All actions contemplated by Section
2.4 hereof shall have been taken;
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in Article III hereof shall be true in all
material respects; and
(c) COVENANTS. The Company shall have complied in all material
respects with its obligations under the terms of this Agreement.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. This Agreement may be terminated and the
transaction contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) By the mutual written consent of the Board of Directors of
Parent or the Purchaser and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the
Board of Directors of Parent or the Purchaser:
(i) if the Offer shall have expired without any Shares being
purchased therein; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of Parent or the Purchaser, as the
case may be, to purchase the Shares pursuant to the Offer on or prior to
such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their best efforts to lift),
which permanently restrains, enjoins or otherwise prohibits the acceptance
for payment
45
of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company:
(i) if Parent, the Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(i) if the Company is in material breach of its
obligations under this Agreement;
(ii) in connection with entering into a definitive agreement in
accordance with Section 5.4(b), provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to Parent or the Purchaser, as applicable, except, in any case, for
such breaches which are not, in Parent's opinion, reasonably likely to
affect adversely Parent's or the Purchaser's ability to complete the Offer
or the Merger.
(d) By the Board of Directors of Parent or the Purchaser:
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser, or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer;
46
(ii) if prior to the purchase of Shares pursuant to the Offer,
the Company shall have breached any representation, warranty, covenant or
other agreement contained in this Agreement which (A) would give rise to
the failure of a condition set forth in paragraph (f) or (g) of Annex A
hereto and (B) cannot be or has not been cured within 30 days after the
giving of written notice to the Company; or
(iii) if either Parent or the Purchaser is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(e) of Annex A hereto.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, and there shall be no liability on the part of the Parent
or the Company except (A) for fraud or for breach of this Agreement and (B) as
set forth in Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. (a) Except as contemplated by this
Agreement, including Section 8.1(b) hereof, all costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) If (x) the Board of Directors of the Company shall terminate
this Agreement pursuant to Section 7.1(c)(ii), (y) the Board of Directors of
Parent or the Purchaser shall terminate this Agreement pursuant to Section
7.1(d)(iii) hereof, or (z) prior to the termination of this Agreement (other
than by the Board of Directors of the Company pursuant to Section 7.1(c)(i) or
7.1(c)(iii)), an Acquisition Proposal shall have been made and within 12 months
of such termination, the same or another Acquisition Proposal from the same or
another
47
party shall be accepted and the related transaction consummated pursuant to a
definitive agreement or otherwise, the Company shall pay to Parent (concurrently
with such termination, in the case of clauses (x) or (y) above, and not later
than two business days after the Company takes any such action with respect to
an Acquisition Proposal, in the case of clause (z) above) an amount equal to
$13,650,000 plus an amount equal to the fees and expenses incurred by Parent and
the Purchaser in connection with the Offer, the Merger, this Agreement and the
consummation of the transactions contemplated hereby (the portion of such fees
and expenses payable hereunder not to exceed $750,000) (the "Termination Fee").
Section 8.2 AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto (by action taken
by their respective Boards of Directors), at any time prior to the Closing Date
with respect to any of the terms contained herein; PROVIDED, HOWEVER, that after
the approval of this Agreement by the shareholders of the Company, no such
amendment, modification or supplement shall reduce the amount or change the form
of the Merger Consideration.
Section 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 8.4 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
48
HFS Incorporated
0 Xxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.:
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and
(b) if to the Company, to:
Xxxxxxx Xxxxxx Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Paris, Jr., Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Section 8.5 INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". As used in this Agreement, (a) the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Exchange
Act, and (b) the term "Company's knowledge" means the knowledge that the
directors and officers of the Company and its Subsidiaries and the employees of
the
49
Company and its Subsidiaries having responsibility for the particular subject
matter at issue would possess after reasonable investigation and inquiry.
Section 8.6 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 8.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein): (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Section 5.8 is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8.8 SEVERABILITY. Any term or provision of this Agreement
that is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof; PROVIDED, however, that
the laws of the respective jurisdictions of
50
incorporation of each of the parties shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
board of directors.
Section 8.10 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent provided, however, that nothing herein shall limit the right of Parent to
effect the consummation of its merger with and into CUC pursuant to the
Agreement and Plan of Merger, dated as of May 27, 1997, between CUC and Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 8.11 COMPANY'S KNOWLEDGE. For purposes of Article III of
this Agreement, the term "knowledge of the Company" shall mean the actual
knowledge of the directors and executive officers of the Company identified on
Schedule B of the Company Disclosure Schedule, without independent
investigation.
51
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HFS INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman and Chief Financial Officer
HJ ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman and Chief Financial Officer
XXXXXXX XXXXXX INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman, President and Chief
Executive Officer
52
ANNEX A
-------
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole discretion (subject
to the provisions of the Merger Agreement), the Purchaser shall not be required
to accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate or amend the Offer as to any Shares not then paid for,
if (i) any applicable waiting period under the HSR Act has not expired or
terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any
time on or after the date of the Merger Agreement and before the time of payment
for any such Shares, any of the following events shall occur or shall be
determined by the Purchaser to have occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (i) seeking to prohibit or impose any
material limitations on Parent's or the Purchaser's ownership or operation (or
that of any of their respective Subsidiaries or affiliates) of all or a material
portion of their or the Company's businesses or assets, or to compel Parent or
the Purchaser or their respective Subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of the Company or
Parent and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the purchaser of any Shares under the
Offer or pursuant to the Stock Option Agreement or the Shareholders Agreement,
seeking to restrain or prohibit the making or consummation of the Offer or the
Merger or the performance of any of the other transactions contemplated by this
Agreement, the Stock Option Agreement or the Shareholders Agreement, or seeking
to obtain from the Company, Parent or the Purchaser any damages that are
material in relation to the Company and its Subsidiaries taken as a whole, (iii)
seeking to impose material limitations on the ability of the Purchaser, or
rendering the Purchaser unable, to accept for payment, pay for
1
or purchase some or all of the Shares pursuant to the Offer and the Merger, (iv)
seeking to impose material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders, or (v) which otherwise is
reasonably likely to have a material adverse affect on the consolidated
financial condition, businesses or results of operations of the Company and its
Subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange or in the NASDAQ National Market System, for a period in excess of two
days (excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any United States or foreign governmental authority on the
extension of credit by banks or other financial institutions, (v) any decline in
either the Dow Xxxxx Industrial Average or the Standard & Poor's Index of 500
Industrial Companies by an amount in excess of 20% measured from the close of
business on the date of this Agreement for a period of at least five consecutive
trading days; PROVIDED, HOWEVER, in the event that there shall have occurred a
decline in either the Dow Xxxxx Industrial Average or the Standard & Poor's
Index of 500 Industrial Companies by an amount in excess of 20% measured from
the close of business on the date of this Agreement and which remains in effect
on the scheduled expiration date of the Offer but which decline shall not have
existed for a period of at least five consecutive trad-
2
ing days, the Purchaser shall extend the Offer for up to five business days in
order to enable the Purchaser to determine whether such decline continues for a
period of at least five consecutive trading days; PROVIDED, FURTHER, that the
Purchaser shall be required to notify the Company of its determination to
terminate the Offer as a result of the occurrence of a decline contemplated in
this paragraph (c)(v) within three days following the occurrence thereof, unless
the scheduled expiration date of the Offer (as it may be extended pursuant to
the Merger Agreement or the immediately preceding proviso) is to occur within
such three day period, in which event the Purchaser shall be required to notify
the Company of such determination by 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date, or (vi) a change in
general financial bank or capital market conditions which materially or
adversely affects the ability of financial institutions in the United States to
extend credit or syndicate loans;
(d) there shall have occurred any material adverse change (or
any development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the consolidated financial
condition, businesses, results of operations or prospects of the Company and its
Subsidiaries, taken as a whole;
(e)(i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Acquisition Proposal or (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.4(b) of this Agreement;
(f) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case as
of the date of this Agreement and as of the scheduled expiration of the Offer;
(g) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect with any
material agreement or cove-
3
nant of the Company to be performed or complied with by it under this Agreement;
(h) this Agreement shall have been terminated in accordance with
its terms;
(i) all of the Warrants shall have been exercised in full and
the Shares issuable upon the exercise thereof shall have been issued; or
(j) the Company shall have received written resignations,
conditioned upon and to be effective only upon the purchase of and payment for
by Parent or any of its subsidiaries of Shares which represent at least a
majority of the outstanding Shares (on a fully diluted basis), of that number of
directors of the Company as Parent is entitled to designate pursuant to Section
1.3 of this Agreement, such that Parent may exercise its rights pursuant to the
first sentence of such Section;
which in the reasonable judgment of Parent or the Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be waived by Parent or the Purchaser, in whole or in part, at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
4
