EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 3, 1996 (the
"Agreement"), between KCLC Acquisition Corp., a Delaware corporation ("Newco"),
and KinderCare Learning Centers, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company and Newco
have determined that the merger of Newco with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair to and in the best interests of their respective
stockholders, and such Boards of Directors have approved such Merger, pursuant
to which each share of common stock, par value $.01 per share (the "Company
Common Stock"), issued and outstanding immediately prior to the Effective Time
(as defined in Section 1.3) will be converted into either (A) the right to
retain at the election of the holder thereof and subject to the terms hereof,
common stock, par value $.01 per share, of the Company or (B) the right to
receive cash, other than (a) shares of Company Common Stock owned, directly or
indirectly, by the Company or any subsidiary (as defined in Section 9.3) of the
Company or by Newco or any subsidiary of Newco and (b) Dissenting Shares (as
defined in Section 2.2);
WHEREAS, the Merger and this Agreement require the vote of a majority
of the shares of the Company Common Stock for the approval thereof (the
"Company Stockholder Approval");
WHEREAS, Newco is a newly formed corporation organized at the
direction of Kohlberg Kravis Xxxxxxx & Co. L.P.;
WHEREAS, as a condition to Newco's willingness to enter into this
Agreement and consummate the transactions contemplated hereby, Newco has
required that the Stockholder and the Funds (each as defined in the Voting
Agreement (as defined herein)) agree, among other things, to vote shares of
Company Common Stock beneficially owned by them in accordance with the Voting
Agreement (including without limitation shares of Company Common Stock issued
upon conversion of warrants of the Company beneficially owned by the
Stockholder) and comply with the other provisions of such Voting Agreement; and
in order to induce Newco to enter into this Agreement, the Stockholder and the
Funds have executed and delivered the Voting Agreement, dated as of the date
hereof, between Newco, on the one hand, and the Stockholder and the Funds, on
the other hand (the "Voting Agreement");
WHEREAS, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware ("DGCL"), at the Effective Time (as defined in Section
1.3), Newco shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Newco shall cease and the Company
shall survive the Merger.
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1 and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the closing of the Merger (the "Closing")
will take place at 10:00 a.m. on the second business day after satisfaction or
waiver of the conditions set forth in Article 7 (the "Closing Date"), at the
offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless another date, time or place is agreed to in writing by the
parties hereto.
SECTION 1.3 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article 7, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by and executed in
accordance with the relevant provisions of the DGCL (the date and time of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or such later time as is specified in the Certificate of Merger)
being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing and subject thereto, at the Effective Time all
the property, rights, privileges, immunities, powers and franchises of the
Company and Newco shall vest in the Company following the Merger, and all
debts, liabilities and duties of the Company and Newco shall become the debts,
liabilities and duties of the Company following the Merger.
SECTION 1.5 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Newco, the certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended so as to read in its
entirety in the form set forth as Exhibit A hereto, and, as so amended, until
thereafter further amended as provided therein and under the DGCL, it shall be
the certificate of incorporation of the Company following the Merger.
(b) At the Effective Time and without any further action on the part
of the Company and Newco, the by-laws of Newco shall be the by-laws of the
Company following the Merger and thereafter may be amended or repealed in
accordance with their terms or the certificate of incorporation of the Company
following the Merger and as provided under the DGCL.
SECTION 1.6 Directors and Officers. Subject to Section 6.12, the
directors of Newco immediately prior to the Effective Time shall be the initial
directors of the Company following the Merger, each to hold office in
accordance with the certificate of incorporation and by-laws of the Company
following the Merger, and the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Company following the
Merger, in each case until their respective successors are duly elected or
appointed (as the case may be) and qualified.
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company, Newco
or any holder of any shares of Company Common Stock or any shares of capital
stock of Newco:
(a) Common Stock of Newco. Each share of common stock of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into a number of shares of the common stock, par value $.01 per
share, of the Company following the Merger equal to the quotient of (i)
7,345,679 divided by (ii) the number of shares of common stock of Newco
outstanding immediately prior to the Effective Time.
(b) Cancellation of Treasury Stock and Newco-Owned Company Common
Stock. Each share of Company Common Stock that is owned by the Company or
by any subsidiary of the Company, and each share of Company Common Stock
that is owned by Newco or any subsidiary of Newco shall automatically be
cancelled and retired and shall cease to exist, and no cash, Company
Common Stock or other consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion (or Retention) of Company Common Stock. Except as
otherwise provided herein and subject to Section 2.4, each issued and
outstanding share of Company Common Stock (other than any such shares to
be cancelled pursuant to Section 2.1(b) and any Dissenting Shares (as
defined in Section 2.2)) shall be converted into the following (the
"Merger Consideration"):
(i) for each such share of Company Common Stock with respect to
which an election to retain Company Common Stock has been effectively
made and not revoked or lost, pursuant to Sections 2.3(c), (d) and
(e) ("Electing Shares"), the right to retain one fully paid and
nonassessable share of Company Common Stock (a "Non-Cash Election
Share"); and
(ii) for each such share of Company Common Stock (other than
Electing Shares), the right to receive in cash from the Company
following the Merger an amount equal to $20.25 (the "Cash Election
Price").
(d) Cancellation and Retirement of Company Common Stock. As of the
Effective Time, all shares of Company Common Stock (other than shares
referred to in Section 2.1(b) and 2.1(c)(i)) issued and outstanding
immediately prior to the Effective Time 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 of Company
Common Stock shall, to the extent such certificate represents such shares,
cease to have any rights with respect thereto, except the right to receive
cash, including cash in lieu of fractional shares of Company Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.7.
SECTION 2.2 Dissenting Shares and Section 262 Shares. (a)
Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted in favor of or
consented to the Merger and shall have delivered a written demand for appraisal
of such shares in the time and manner provided in Section 262 of the DGCL and
shall not have failed to perfect or shall not have effectively withdrawn or
lost their rights to appraisal and payment under the DGCL (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration, but shall be entitled to receive the consideration as shall be
determined pursuant to Section 262 of the DGCL; provided, however, that if any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost his, her or its right to appraisal and payment under the DGCL, such
holder's shares of Company Common Stock shall thereupon be deemed to have been
converted, at the Effective Time, into the right to receive the Merger
Consideration set forth in Section 2.1 of this Agreement, without any interest
thereon.
(b) The Company shall give Newco (i) prompt notice of any demands
for appraisal pursuant to Section 262 received by the Company, withdrawals of
such demands and any other instruments served pursuant to the DGCL and received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Newco, make any payment
with respect to any such demands for appraisal or offer to settle or settle any
such demands.
SECTION 2.3 Company Common Stock Elections. (a) Each person who,
on or prior to the Election Date referred to in (c) below, is a record holder
of shares of Company Common Stock will be entitled, with respect to all or any
portion of his shares, to make an unconditional election (a "Non-Cash
Election") on or prior to such Election Date to retain Non-Cash Election
Shares, on the basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement (as defined in
Section 3.14), Newco shall appoint a bank or trust company to act as exchange
agent (the "Exchange Agent") for the payment of the Merger Consideration.
(c) Newco shall prepare and mail a form of election, which form
shall be subject to the reasonable approval of the Company (the "Form of
Election"), with the Proxy Statement to the record holders of Company Common
Stock as of the record date for the Stockholders Meeting (as defined in Section
6.1), which Form of Election shall be used by each record holder of shares of
Company Common Stock who wishes to elect to retain Non-Cash Election Shares for
any or all shares of Company Common Stock held, subject to the provisions of
Section 2.4 hereof, by such holder. The Company will use its best efforts to
make the Form of Election and the Proxy Statement available to all persons who
become holders of Company Common Stock during the period between such record
date and the Election Date referred to below. Any such holder's election to
retain Non-Cash Election Shares shall have been properly made only if the
Exchange Agent shall have received at its designated office, by 5:00 p.m., New
York City time on the business day (the "Election Date") next preceding the
date of the Stockholders Meeting, a Form of Election properly completed and
signed and accompanied by certificates for the shares of Company Common Stock
to which such Form of Election relates, duly endorsed in blank or otherwise in
form acceptable for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the Exchange
Agent within five NASDAQ trading days after the date of execution of such
guarantee of delivery).
(d) Any Form of Election may be revoked by the stockholder
submitting it to the Exchange Agent only by written notice received by the
Exchange Agent prior to 5:00 p.m, New York City time, on the Election Date. In
addition, all Forms of Election shall automatically be revoked if the Exchange
Agent is notified in writing by Newco and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the certificate or certificates
(or guarantees of delivery, as appropriate) for the shares of Company Common
Stock to which such Form of Election relates shall be promptly returned to the
stockholder submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent shall be binding whether
or not elections to retain Non-Cash Election Shares have been properly made or
revoked pursuant to this Section 2.3 with respect to shares of Company Common
Stock and when elections and revocations were received by it. If the Exchange
Agent determines that any election to retain Non-Cash Election Shares was not
properly made with respect to shares of Company Common Stock, such shares shall
be treated by the Exchange Agent as shares which were not Electing Shares at
the Effective Time, and such shares shall be exchanged in the Merger for cash
pursuant to Section 2.1(c)(ii). The Exchange Agent shall also make all
computations as to the allocation and the proration contemplated by Section
2.4, and any such computation shall be conclusive and binding on the holders of
shares of Company Common Stock. The Exchange Agent may, with the mutual
agreement of Newco and the Company, make such rules as are consistent with this
Section 2.3 for the implementation of the elections provided for herein as
shall be necessary or desirable fully to effect such elections.
SECTION 2.4 Proration.
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of shares of Company Common Stock to be converted into the
right to retain Company Common Stock at the Effective Time (the "Non-Cash
Election Number") shall be equal to 1,296,296 (excluding for this purpose any
shares of Company Common Stock to be cancelled pursuant to Section 2.1(b)).
(b) If the number of Electing Shares exceeds the Non-Cash Election
Number, then each Electing Share shall be converted into the right to retain
Non-Cash Election Shares or receive cash in accordance with the terms of
Section 2.1(c) in the following manner:
(i) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Non-Cash Election Number by the total number of
Electing Shares.
(ii) The number of Electing Shares covered by each Non-Cash Election
to be converted into the right to retain Non-Cash Election Shares shall be
determined by multiplying the Non-Cash Proration Factor by the total
number of Electing Shares covered by such Non-Cash Election.
(iii) All Electing Shares, other than those shares converted into the
right to receive Non-Cash Election Shares in accordance with Section
2.4(b)(ii), shall be converted into cash (on a consistent basis among
stockholders who made the election referred to in Section 2.1(c)(i), pro
rata to the number of shares as to which they made such election) as if
such shares were not Electing Shares in accordance with the terms of
Section 2.1(c)(ii).
(c) If the number of Electing Shares is less than the Non-Cash
Election Number, then:
(i) all Electing Shares shall be converted into the right to retain
Company Common Stock in accordance with the terms of Section 2.1(c)(i);
(ii) additional shares of Company Common Stock other than Electing
Shares and Dissenting Shares shall be converted into the right to retain
Non-Cash Election Shares in accordance with the terms of 2.1(c) in the
following manner:
(1) a proration factor (the "Cash Proration Factor") shall be
determined by dividing (x) the difference between the Non-Cash
Election Number and the number of Electing Shares, by (y) the total
number of shares of Company Common Stock other than Electing Shares
and Dissenting Shares; and
(2) the number of shares of Company Common Stock in addition to
Electing Shares to be converted into the right to retain Non-Cash
Election Shares shall be determined by multiplying the Cash Proration
Factor by the total number of shares other than Electing Shares and
Dissenting Shares; and
(iii) subject to Section 2.2, shares of Company Common Stock subject
to clause (ii) of this paragraph (c) shall be converted into the right to
retain Non-Cash Election Shares in accordance with Section 2.1(c)(i) (on a
consistent basis among shareholders who held shares of Company Common
Stock as to which they did not make the election referred to in Section
2.1(c)(i), pro rata to the number of shares as to which they did not make
such election).
SECTION 2.5 Treatment of Options and Other Employee Equity Rights.
(a) Immediately prior to the Effective Time, each outstanding stock option
held by any current or former employee or director (an "Option") granted under
the 1993 Stock Option and Incentive Plan, the 1993 Director Stock Option Plan
or otherwise (the "Stock Plans"), whether or not then exercisable, shall be
cancelled by the Company, and except as otherwise agreed by the Company, Newco
and the holder, the holder thereof shall be entitled to receive at the
Effective Time or as soon as practicable thereafter from the Company following
the Merger in consideration for such cancellation an amount in cash equal to
the product of (a) the number of shares of Company Common Stock previously
subject to such Option and (b) the excess, if any, of the cash Merger
Consideration per share over the exercise price per share previously subject to
such Option, reduced by the amount of any withholding or other taxes required
by law to be withheld.
(b) Effective as of the Effective Time, the Company shall use its
reasonable best efforts to take all such action as is necessary prior to the
Effective Time to terminate all Stock Plans so that on and after the Effective
Time no current or former employee or director shall have any Option to
purchase shares of Company Common Stock or any other equity interest in the
Company under any Stock Plan. The Company shall use its reasonable best
efforts to obtain any consents necessary to release the Company from any
liability in respect of any Option.
SECTION 2.6 Treatment of Warrants. At the Effective Time, pursuant
to the Warrant Agreement (as defined in Section 3.3) and without any action on
the part of Newco, the Company or the holders of any of the Warrants (as
defined in Section 3.3), each Warrant issued and outstanding immediately prior
to the Effective Time shall be cancelled, extinguished and converted into the
right to receive the amount of cash determined in accordance with Section 12(d)
of the Warrant Agreement (the "Warrant Consideration") payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such Warrant in the manner provided in Section 2.7, less any
required withholding taxes.
SECTION 2.7 Surrender of Shares and Warrants; Transfer Books. (a)
Exchange Agent. As soon as reasonably practicable as of or after the Effective
Time, the Company shall deposit with the Exchange Agent, (i) for the benefit of
the holders of shares of Company Common Stock, the cash portion of Merger
Consideration and (ii) for the benefit of the holders of the Warrants, the
Warrant Consideration, each for exchange in accordance with this Article 2.
Such funds shall be invested by the Exchange Agent as directed by the Company,
provided that such investments shall be (i) securities issued or directly and
fully guaranteed or insured by the United Stated government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit, eurodollar time deposits and
bankers' acceptances with maturities not exceeding six months and overnight
bank deposits with any commercial bank, depository institution or trust company
incorporated or doing business under the laws of the United States of America,
any state thereof or the District of Columbia, provided that such commercial
bank, depository institution or trust company has, at the time of investment,
(A) capital and surplus exceeding $250 million and (B) outstanding short-term
debt securities which are rated at least A-1 by Standard & Poor's Rating Group
Division of The XxXxxx-Xxxx Companies, Inc. or at least P-1 by Xxxxx'x
Investors Service, Inc. or carry an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease to
publish ratings of investments, (iii) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clauses
(i) and (ii) above entered into with any financial institution meeting the
qualifications specified in clause (ii) above, (iv) commercial paper having a
rating in the highest rating categories from Standard & Poor's Rating Group
Division of The XxXxxx-Xxxx Companies, Inc. or Xxxxx'x Investors Service, Inc.
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease to publish ratings of investments
and in each case maturing within six months after the date of acquisition and
(v) money market mutual or similar funds having assets in excess of $1 billion.
Any net profit resulting from, or interest or income produced by, such
investments will be payable to the Company.
(b) Exchange Procedures for Shares of Company Common Stock. As soon
as practicable after the Effective Time, each holder of an outstanding
certificate or certificates which prior thereto represented shares of Company
Common Stock shall, upon surrender to the Exchange Agent of such certificate or
certificates and acceptance thereof by the Exchange Agent, be entitled to a
certificate or certificates representing the number of full shares of Company
Common Stock, if any, to be retained by the holder thereof pursuant to this
Agreement and the amount of cash, if any, into which the number of shares of
Company Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to this Agreement. The Exchange
Agent shall accept such certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective
Time, there shall be no further transfer on the records of the Company or its
transfer agent of certificates representing shares of Company Common Stock
which have been converted, in whole or in part, pursuant to this Agreement into
the right to receive cash, and if such certificates are presented to the
Company for transfer, they shall be cancelled against delivery of cash and, if
appropriate, certificates for retained Company Common Stock. If any certificate
for such retained Company Common Stock is to be issued in, or if cash is to be
remitted to, a name other than that in which the certificate for Company Common
Stock surrendered for exchange is registered, it shall be a condition of such
exchange that the certificate so surrendered shall be properly endorsed, with
signature guaranteed, or otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Company or its transfer agent
any transfer or other taxes required by reason of the issuance of certificates
for such retained Company Common Stock in a name other than that of the
registered holder of the certificate surrendered, or establish to the
satisfaction of the Company or its transfer agent that such tax has been paid
or is not applicable. Until surrendered as contemplated by this Section
2.7(b), each certificate for shares of Company Common Stock shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration as contemplated by Section 2.1. No
interest will be paid or will accrue on any cash payable as Merger
Consideration or in lieu of any fractional shares of retained Company Common
Stock.
(c) Exchange Procedures for Warrants. As soon as practicable after
the Effective Time, the Company shall cause to be mailed to each record holder,
as of the Effective Time, of an outstanding certificate or certificates, which
immediately prior to the Effective Time represented Warrants (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment of the Warrant Consideration therefor. The Exchange Agent shall
accept the Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective
Time, there shall be no further transfer on the records of the Company or its
transfer agent of Certificates representing Warrants, and if such Certificates
are presented to the Company for transfer, they shall be cancelled against
delivery of Warrant Consideration therefor. Until surrendered as contemplated
by this Section 2.7(c), each Certificate for Warrants shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Warrant Consideration as contemplated by Section 2.6. No
interest will be paid or will accrue on any cash payable as Warrant
Consideration.
(d) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to retained Company Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered certificate for shares of Company Common Stock with respect to
the shares of retained Company Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.7(f) until the surrender of such certificate in accordance with
this Article 2. Subject to the effect of applicable laws, following surrender
of any such certificate, there shall be paid to the holder of the certificate
representing whole shares of retained Company Common Stock issued in connection
therewith, without interest, (i) at the time of such surrender or as promptly
after the sale of the Excess Shares (as defined in Section 2.7(f)) as
practicable, the amount of any cash payable in lieu of a fractional share of
retained Company Common Stock to which such holder is entitled pursuant to
Section 2.7(f) and the proportionate amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of retained Company Common Stock, and (ii) at the appropriate
payment date, the proportionate amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares of retained Company Common Stock.
(e) No Further Ownership Rights in Company Common Stock Exchanged
For Cash. All cash paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of
this Article 2 (including any cash paid pursuant to Section 2.7(f)) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Company Common Stock exchanged for cash theretofore
represented by such certificates.
(f) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of retained Company Common Stock shall be issued
in connection with the Merger, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of the
Company after the Merger; and
(ii) Notwithstanding any other provision of this Agreement, each
record holder of shares of Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of retained Company Common Stock (after taking into account all shares of
Company Common Stock delivered by such holder) shall receive, in lieu thereof,
a cash payment (without interest) representing such holder's proportionate
interest in the net proceeds from the sale by the Exchange Agent (following the
deduction of applicable transaction costs), on behalf of all such holders, of
the shares (the "Excess Shares") of retained Company Common Stock representing
such fractions. Such sale shall be made as soon as practicable after the
Effective Time.
(g) Termination of Exchange Fund. Any portion of the Merger
Consideration or Warrant Consideration deposited with the Exchange Agent
pursuant to this Section 2.7 (the "Exchange Fund") which remains undistributed
to the holders of the certificates representing shares of Company Common Stock
or Warrants for six months after the Effective Time shall be delivered to the
Company, upon demand, and any holders of shares of Company Common Stock or
Warrants prior to the Merger who have not theretofore complied with this
Article 2 shall thereafter look only to the Company and only as general
creditors thereof for payment of their claim for cash, if any, retained Company
Common Stock, if any, any cash in lieu of fractional shares of retained Company
Common Stock, any dividends or distributions with respect to retained Company
Common Stock or Warrant Consideration, as applicable, to which such holders may
be entitled.
(h) No Liability. None of Newco, the Company nor the Exchange Agent
shall be liable to any person in respect of any shares of retained Company
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock or Warrants shall not have been surrendered
prior to one year after the Effective Time (or immediately prior to such
earlier date on which any cash, if any, any cash in lieu of fractional shares
of retained Company Common Stock, any dividends or distributions with respect
to retained Company Common Stock in respect of such certificate would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 3.5(b)), any such cash, dividends or distributions in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Company, free and clear of all claims or interest of any person
previously entitled thereto.
SECTION 2.8 The Debt Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.1, the Company shall, as
soon as reasonably practicable following execution of this Agreement (but in no
event later than fifteen calendar days after the public announcement of the
execution of this Agreement), commence an offer to purchase all of the
outstanding aggregate principal amount of the Company's 10-3/8% Senior Notes
due 2001 (hereinafter referred to as the "Notes") on the terms set forth in
Section 2.8 of the disclosure schedule between Newco and the Company dated the
date hereof (the "Disclosure Schedule") and such other customary terms and
conditions as are reasonably acceptable to Newco (the "Debt Offer"). The
Company shall waive any of the conditions to the Debt Offer and make any other
changes in the terms and conditions of the Debt Offer as reasonably requested
by Newco, and the Company shall not, without Newco's prior consent, waive any
material condition to the Debt Offer, make any changes to the terms and
conditions of the Debt Offer set forth on Section 2.8 of the Disclosure
Schedule or make any other material changes in the terms and conditions of the
Debt Offer. Notwithstanding the immediately preceding sentence, Newco shall
not request that the Company make any change to the terms and conditions of the
Debt Offer which decreases the price per Note payable in the Debt Offer,
changes the form of consideration payable in the Debt Offer (other than by
adding consideration) or imposes conditions to the Debt Offer in addition to
those set forth in Section 2.8 of the Disclosure Schedule which are materially
adverse to holders of the Notes (it being agreed that a request by Newco that
the Company waive any condition in whole or in part at any time and from time
to time in its sole discretion shall not be deemed to be materially adverse to
any holder of Notes), unless such change was previously approved by the Company
in writing. The Company covenants and agrees that, subject to the terms and
conditions of this Agreement, including but not limited to the conditions to
the Debt Offer, it will accept for payment and pay for Notes as soon as the
condition set forth in Section 7.2(h) of this Agreement is satisfied and it is
permitted to do so under applicable law, provided that the Company shall
coordinate the timing of any such purchase with Newco in order to obtain the
greatest participation in the Debt Offer.
(b) Promptly following the date of this Agreement, Newco and the
Company shall prepare an offer to purchase the Notes (or portions thereof) and
forms of the related letter of transmittal (the "Letter of Transmittal")
(collectively, the "Offer to Purchase") and summary advertisement, as well as
all other information and exhibits (collectively, the "Offer Documents").
Newco and the Company will cooperate with each other in the preparation of the
Offer Documents. All mailings to the holders of Notes in connection with the
Debt Offer shall be subject to the prior review, comment and reasonable
approval of Newco. The Company will use its best efforts to cause the Offer
Documents to be mailed to the holders of the Notes as promptly as practicable
following execution of this Agreement (but in no event later than fifteen
calendar days after the public announcement of the execution of this
Agreement). The Company agrees promptly to correct any information in the
Offer Documents that shall be or have become false or misleading in any
material respect.
(c) In connection with the Debt Offer, if requested by Newco, the
Company shall promptly furnish Newco with security position listings, any non-
objecting beneficial owner lists and any available listings or computer files
containing the names and addresses of the beneficial owners and/or record
holders of Notes, each as of a recent date, and shall promptly furnish Newco
with such additional information (including but not limited to updated lists of
Noteholders, mailing labels, security position listings and non-objecting
beneficial owner lists) and such other assistance as Newco or its agents may
reasonably require in communicating the Debt Offer to the record and beneficial
holders of Notes.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Newco that, except as
set forth on the Disclosure Schedule, but, with respect to any specific
representation and warranty, only to the extent that it would be reasonably
apparent that a reference on the Disclosure Schedule relates to such
representation and warranty:
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of
the Company and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power, authority and governmental approval could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
(as defined below). Each of the Company and each of its Significant
Subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change or effect
that, either individually or in the aggregate with all other changes or
effects, is materially adverse to the business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole.
SECTION 3.2 Certificate of Incorporation and By-Laws. The Company
has heretofore furnished to Newco a complete and correct copy of the
certificate of incorporation and the by-laws of the Company as currently in
effect. Such certificate of incorporation and by-laws are in full force and
effect and no other organizational documents are applicable to or binding upon
the Company. The Company is not in violation of any of the provisions of its
certificate of incorporation or by-laws.
SECTION 3.3 Capitalization. The authorized capital stock of the
Company consists of 40,000,000 shares of Company Common Stock and 10,000,000
shares of Preferred Stock, $.01 par value per share (the "Preferred Stock").
As of October 1, 1996, (i) 19,146,211 shares of Company Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights, (ii) 0
shares of Company Common Stock were held in the treasury of the Company, (iii)
an aggregate of 2,620,282 shares of Company Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Options and (iv) an aggregate of 3,695,317 shares of
Company Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding warrants (the
"Warrants") issued pursuant to the Warrant Agreement, dated March 31, 1993,
between the Company and The First National Bank of Boston (the "Warrant
Agreement"). As of the date hereof, no shares of Preferred Stock are issued
and outstanding. Since October 1, 1996, the Company has not issued or reserved
for issuance (a) any shares of capital stock or other voting securities of the
Company or any of its subsidiaries, except as a result of the exercise of
Options or Warrants outstanding at October 1, 1996 or (b) any Options or
Warrants, except as described in this Section 3.3. Other than Options or
Warrants outstanding as of the date hereof, the Company has issued or reserved
for issuance (a) no options or other rights to acquire from the Company or any
of its subsidiaries, and no obligation of the Company or any of its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company or any of its subsidiaries and (b) no equity equivalents, interests in
the ownership or earnings of the Company or any of its subsidiaries or other
similar rights (collectively, with the Options and the Warrants, "Company
Securities"). All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive (or
similar) rights. There are no outstanding obligations of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such subsidiary or any other
entity. Except for the Equity Registration Rights Agreement dated March 31,
1993, among the Company, Xxxxxxxxx & Co., L.P., Xxxxxxxxx International
Limited, TCW Special Credit Funds, Xxxxxxx Financial Services Corporation,
Lodestar Management Incorporated and Lodestar Associates, L.P (together with
Lodestar Management Incorporated, "Lodestar") and the Warrant Registration
Rights Agreement dated March 31, 1993, between the Company and Lodestar, there
are no other options, calls, warrants 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 to which the Company or any of
its subsidiaries is a party. The Company has delivered to Newco prior to the
date hereof a true and complete list of the subsidiaries and associated
entities of the Company which evidences, among other things, the amount of
capital stock or other equity interests owned by the Company, directly or
indirectly, in such subsidiaries or associated entities. Each of the
outstanding shares of capital stock of each of the Company's Significant
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and all such shares are owned by the Company or another wholly owned subsidiary
of the Company and are owned free and clear of all security interests, liens,
claims, pledges, agreements, limitations in voting rights, charges or other
encumbrances of any nature whatsoever, except as set forth on Section 3.3 of
the Disclosure Schedule. No entity in which the Company owns, directly or
indirectly, less than a 50% equity interest is, individually or when taken
together with all such other entities, material to the business of the Company
and its subsidiaries taken as a whole. As of the date hereof, the only
outstanding indebtedness for borrowed money of the Company and its subsidiaries
is (i) $70 million in aggregate principal amount of Notes issued pursuant to
the Indenture between the Company and AmSouth Bank, N.A., as Trustee, dated as
of June 2, 1994 (the "Indenture"), (ii) $48,500,000 in aggregate principal
amount issued under, the Credit Agreement, dated June 2, 1994 (the "Credit
Agreement"), by and among the Company, the lenders listed therein, The Toronto-
Dominion Bank, as facing bank, and Toronto Dominion (Texas), Inc., as agent,
(iii) $7,437,000 aggregate principal amount issued under a loan agreement,
dated June 2, 1994 (the "Loan Agreement") between the Company and SouthTrust
Bank of Alabama, N.A., (iv) $33,025,000 aggregate principal amount outstanding
under industrial revenue bonds which are secured by a like amount of letters of
credit issued under to the Credit Agreement, (v) $5,350,000 in aggregate
principal amount of industrial revenue bonds secured by real property and (vi)
$64,000 aggregate principal amount issued under a bank overdraft line, dated
August 29, 1995, between the Company and NationsBank of Georgia N.A. The loans
and other extensions of credit under the Credit Agreement and the Loan
Agreement are each prepayable in full in accordance with their respective
terms.
SECTION 3.4 Authority Relative to This Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
approval of this Agreement by the holders of a majority of the outstanding
shares if and to the extent required by the DGCL, and the filing of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Newco, constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms. The Board of Directors of the Company has approved
this Agreement and the transactions contemplated hereby (including but not
limited to the Debt Offer and the Merger) so as to render inapplicable hereto
and thereto the limitation on business combinations contained in Section 203 of
the DGCL (or any similar provision). The Board of Directors of the Company has
approved the Voting Agreement and the transactions contemplated thereby so as
to render inapplicable thereto the limitation on business combinations
contained in Section 203 of the DGCL (or any similar provision). As a result
of the foregoing actions, the only vote required to authorize the Merger is the
affirmative vote of a majority of the outstanding shares of Company Common
Stock.
SECTION 3.5 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by the Company do not and
will not: (i) conflict with or violate the certificate of incorporation or by-
laws of the Company or the equivalent organizational documents of any of its
Significant Subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties are bound or affected; or (iii) result in
any breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could become a default) or result in the loss
of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except (A) in the case of clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect and (B) in the case of clause (iii), other than as set
forth on Section 3.5(a) of the Disclosure Schedule and except that the
consummation of the Merger may result in conflicts, violations, breaches or
defaults under the Indenture, the Credit Agreement and the Loan Agreement.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require any consent, approval, authorization or permit of, action by, filing
with or notification to, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority, official
or agency, domestic or foreign (a "Governmental Entity"), except for (i) the
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), state securities,
takeover and Blue Sky laws, (ii) the filing and recordation of appropriate
merger or other documents as required by the DGCL and (iii) such consents,
approvals, authorizations, permits, actions, filings or notifications the
failure of which to make or obtain could not reasonably be expected to (x)
prevent or materially delay consummation of the Debt Offer or the Merger or (y)
have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are
bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except for any such conflicts, defaults or violations
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company
and, to the extent applicable, each of its then or current subsidiaries, has
filed all forms, reports, statements and documents required to be filed with
the SEC since March 31, 1993 (collectively, the "SEC Reports"), each of which
has complied in all material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. The Company has heretofore delivered or promptly
will deliver to Newco, in the form filed with the SEC (including any amendments
thereto), (i) its (and, to the extent applicable, its subsidiaries') Annual
Reports on Form 10-K for each of the three fiscal years ended June 3, 1994,
June 2, 1995 and May 31, 1996 (as amended by the Form 10-K/A filed with the SEC
on September 30, 1996), (ii) all definitive proxy statements relating to the
Company's (and such subsidiaries') meetings of stockholders (whether annual or
special) held since March 31, 1993 and (iii) all other SEC Reports. No SEC
Report contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except
to the extent revised or superseded by a subsequent filing with the SEC (a copy
of which has been provided to Newco prior to the date hereof), none of the SEC
Reports filed prior to the date hereof contains any untrue statement of a
material fact or omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the audited and unaudited consolidated financial
statements of the Company (including any related notes thereto) included in its
Annual Reports on Form 10-K for each of the three fiscal years ended June 3,
1994, June 2, 1995 and May 31, 1996, which have previously been furnished to
Newco, complies as to form in all material respects with all applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, has been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly presents
the consolidated financial position of the Company and its subsidiaries at the
respective date thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries at May 31, 1996, including
the notes thereto, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with generally accepted accounting
principles consistently applied, except for liabilities or obligations incurred
in the ordinary course of business since May 31, 1996.
SECTION 3.8 Absence of Certain Changes or Events. Since May 31,
1996, except as contemplated by this Agreement, disclosed in the SEC Reports
filed and publicly available prior to the date of this Agreement or disclosed
in Section 3.8 of the Disclosure Schedule, the Company and its subsidiaries
have conducted their businesses only in the ordinary course and, since such
date, there has not been (i) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, (ii) any action which, if it had been taken after the
date hereof, would have required the consent of Newco under Section 5.1 hereof
or (iii) any condition, event or occurrence which could reasonably be expected
to prevent, hinder or materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement.
SECTION 3.9 Absence of Litigation. Except as disclosed with
reasonable specificity in the SEC Reports filed and publicly available prior to
the date of this Agreement, there are no suits, claims, actions, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries, or any properties or rights of
the Company or any of its subsidiaries, before any Governmental Entity, that
(i) individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or (ii) seek to delay or prevent the consummation of
the transactions contemplated hereby. As of the date hereof, neither the
Company nor any of its subsidiaries nor any of their respective properties is
or are subject to any order, writ, judgment, injunction, decree, determination
or award having, or which, insofar as can be reasonably foreseen, in the future
could reasonably be expected to have a Material Adverse Effect or could prevent
or materially delay the consummation of the transactions contemplated hereby.
As of the date hereof, no officer or director of the Company is a defendant in
any litigation commenced by stockholders of the Company with respect to the
performance of his or her duties as an officer and/or director of the Company
under any federal or state law (including litigation under federal and state
securities laws). Except as set forth in Section 3.9 of the Disclosure
Schedule, to the knowledge of the Company, there exist no indemnification
agreements with any of the directors and officers of the Company.
SECTION 3.10 Properties. (a) The Company or one of its
subsidiaries has (i) good and marketable fee title to the real property owned
in fee by the Company or any of its subsidiaries (collectively, the "Owned
Properties") and (ii) good and valid leasehold title or other occupancy right
to the real property leased, subleased or licensed by the Company or any of its
subsidiaries (collectively, the "Leased Properties") (Owned Properties and
Leased Properties being sometimes referred to herein collectively as the
"Company Properties"), in each case free and clear of all options to purchase
or lease (in the case of the Owned Properties), leases, conditions of
limitation, mortgages, liens, security interests, easements, encumbrances,
covenants, rights-of-way and other similar restrictions, except for such
options, leases, conditions of limitation, mortgages, liens, security
interests, easements, encumbrances, covenants, rights-of-way and other similar
restrictions set forth in Section 3.10 of the Disclosure Schedule or which,
individually or in the aggregate with all other options, leases, conditions of
limitation, mortgages, liens, security interests, easements, encumbrances,
covenants, rights-of-way and other similar restrictions, could not reasonably
be expected to have a Material Adverse Effect or prevent or materially delay
the transactions contemplated hereby.
(b) Each agreement under which real property is leased, subleased or
licensed to the Company as of the date hereof (collectively, the "Company
Leases") is in full force and effect in accordance with its respective terms
and the Company or one of its subsidiaries is the holder of the lessee's or
tenant's interest thereunder and there exists no default under any of the
Company Leases by the Company or any of its subsidiaries and no circumstance
exists which, with the giving of notice, the passage of time or both could
result in such a default, except for such defaults or other circumstances set
forth in Section 3.10 of the Disclosure Schedule or which, individually or in
the aggregate with all other defaults or other circumstances, could not
reasonably be expected to have a Material Adverse Effect or prevent or
materially delay the transactions contemplated hereby; except as set forth in
Section 3.10 of the Disclosure Schedule, the transfer of the shares of Company
Common Stock or the consummation of any other part of the transactions
contemplated by this Agreement does not violate the terms of any of the Company
Leases. Except as set forth in Section 3.10 of the Disclosure Schedule and
except for any violations, individually or in the aggregate with all other
violations, could not reasonably be expected to have a Material Adverse Effect
or prevent or materially delay the transactions contemplated hereby, neither
the Company nor any of its subsidiaries (or any of the affiliates of any of the
foregoing) has an ownership, financial or other interest in the landlord under
any of the Company Leases, which exceeds a 50% ownership, financial or other
interest in such landlord.
(c) Except as set forth in Section 3.10 of the Disclosure Schedule,
each of the reciprocal easement or operating agreements to which the Company or
any of its subsidiaries is a party as of the date hereof and which encumbers
any of the Company Properties (collectively, the "REAs") is in full force and
effect and there exists no default on the part of the Company or any subsidiary
of the Company under any REA and no circumstance exists which, with the giving
of notice, the passage of time or both could result in such a default, except
for such defaults or other circumstances set forth in Section 3.10 of the
Disclosure Schedule or which, individually or in the aggregate with all other
defaults or circumstances, could not reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the transactions contemplated
hereby; except as set forth in Section 3.10 of the Disclosure Schedule and
except for any violation or failure to obtain consent, individually or in the
aggregate with all other violations or failures, could not reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
transactions contemplated hereby, the transfer of the shares of Company Common
Stock or the consummation of any other part of transactions contemplated by
this Agreement does not violate the terms of any REAs nor is the consent of any
party to any of the REAs required to be obtained in connection with the
transactions contemplated under this Agreement.
(d) The current operation and use of the Company Properties does not
violate any statutes, laws, regulations, rules, ordinances, permits,
requirements, orders or decrees now in effect except for such violations which
could not, individually or in the aggregate with all other violations,
reasonably be expected to have a Material Adverse Effect or prevent or
materially delay the transactions contemplated hereby.
SECTION 3.11 Employee Benefit Plans. (a) Section 3.11(a) of the
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (including without limitation
multiemployer plans within the meaning of ERISA Section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now
in effect or required in the future as a result of the transaction contemplated
by this Agreement or otherwise), under which any employee or former employee of
the Company or any of its subsidiaries has, or could reasonably be expected to
have, any present or future right to benefits or under which the Company or any
subsidiary of the Company has, or could reasonably be expected to have, any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Company Plans".
Section 3.11 of the Disclosure Schedule also contains a true and complete
description of all severance plans of the Company or any of its subsidiaries.
No Company Plan is a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA or is an "employee pension plan" within the meaning of
Section 3(2) of ERISA subject to Title IV of ERISA.
(b) With respect to each Company Plan, the Company has delivered or
made available to Newco a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or description of any oral
communication) by the Company or any of its subsidiaries which modify in any
significant respect the benefits provided under the terms of any Company Plan
in a manner not reflected in any of the documents described in this subsection
(b); and (iv) for the three most recent years (A) the Form 5500 and attached
schedules; (B) audited financial statements; and (C) actuarial valuation
reports.
(c) With respect to all the Company Plans, except as set forth in
the SEC Reports and except as could not individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: (i) all Company
Plans are in substantial compliance with all applicable law, including the
Internal Revenue Code of 1986, as amended (the "Code") and ERISA, including in
compliance with all filing and reporting requirements; (ii) the aggregate
accumulated benefit obligations of each pension plan that is subject to Title
IV of ERISA (as of the date of the most recent actuarial valuation prepared for
such Plan) do not exceed the fair market value of the assets of such pension
plan (as of the date of such valuation), and no material adverse change has
occurred with respect to the financial condition of such plan since such last
valuation; (iii) each pension plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and the Company is not aware of any circumstances
likely to result in revocation of any such favorable determination letter; (iv)
there is no pending or, to the knowledge of the officers of the Company,
threatened litigation or administrative agency proceeding relating to any
Company Plan (other than benefit claims in the ordinary course); (v) the
Company has no obligations under any unfunded deferred compensation plans other
than with respect to the Nonqualified Deferred Compensation Plan effective
August 1, 1996, and the Company's liability with respect to such plan does not
exceed the assets held by the applicable rabbi trust or otherwise set aside in
satisfaction of benefits payable to participants thereunder by more than
$200,000; and (vi) neither the Company, its subsidiaries nor any entity that is
treated as a single employer with the Company or its subsidiaries under Section
414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") has incurred or
reasonably expects to incur any lien or liability to the Pension Benefit
Guaranty Corporation, any Pension Plan or otherwise under Title IV of ERISA
(other than the payment of contributions or premiums, none of which are
overdue) or under Section 412 of the Code.
(d) Except as specifically contemplated by this Agreement or as
disclosed in Section 3.11(d) of the Disclosure Schedule, the consummation of
the Merger and other transactions contemplated by this Agreement will not (x)
entitle any Company employee or director to severance pay, or (y) accelerate
the time of payment or vesting or trigger any payment of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Company Plans.
SECTION 3.12 Tax Matters. For purposes of this Section 3.12, any
reference to the Company or its subsidiaries shall include any corporation that
merged or was liquidated with and into the Company or any of its subsidiaries.
Except as disclosed in Section 3.12 of the Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect to the
Company and its subsidiaries have been timely filed. The Company and its
subsidiaries have (i) timely paid all Taxes that are due, or that have
been asserted in writing by any taxing authority to be due, from or with
respect to it for the periods ending prior to the date hereof or (ii)
provided adequate reserves in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any Tax Returns.
(b) No material claim for unpaid Taxes has become a lien against the
property of the Company or any of its subsidiaries or is being asserted
against the Company or any of its subsidiaries.
(c) The statute of limitations with respect to the Tax Returns of
the Company and its subsidiaries and of each affiliated group (within the
meaning of the Code) of which the Company and any of its subsidiaries are
or have been a member for all periods through the respective years
specified in Section 3.12 of the Disclosure Schedule has expired. There
are no outstanding agreements, waivers or arrangements extending the
statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or with respect to the
Company or any subsidiary of the Company for any taxable period, and no
power of attorney granted by or with respect to the Company or any
subsidiary of the Company relating to Taxes is currently in force.
(d) No audit or other proceeding by any Governmental Entity has
formally commenced and no specific notification has been given to the
Company or any subsidiary of the Company that such an audit or other
proceeding is pending or threatened with respect to any Taxes due from or
with respect to the Company or any subsidiary of the Company or any Tax
Return filed by or with respect to the Company or any subsidiary of the
Company. No assessment of Tax has been proposed in writing against the
Company or any subsidiary of the Company or any of their assets or
properties.
(e) As of the Effective Time, neither the Company nor any of the
subsidiaries shall be a party to, be bound by or have any obligation
under, any Tax sharing agreement or similar contract or arrangement.
(f) There is no contract or agreement, plan or arrangement by the
Company or any subsidiary of the Company covering any person that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible by the Company or its subsidiaries by reason
of section 280G of the Code, as now in effect.
(g) As used herein, "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any Governmental Entity. As used herein,
"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 3.13 Environmental Laws. To the extent that any inaccuracy,
individually or in the aggregate with any other inaccuracy, could not
reasonably be expected to have a Material Adverse Effect, (a) each of the
Company and each of its subsidiaries complies and has complied with all
Environmental Laws applicable to the properties, assets or businesses of the
Company and its subsidiaries, and possesses and complies with and has possessed
and complied with all Environmental Permits required under such laws except
where any noncompliance or failure to possess any Environmental Permit has not
had or could not reasonably be expected to result in individually or in the
aggregate material liability under Environmental Laws; (b) no modification,
revocation, reissuance, alteration, transfer, or amendment of any of the
Environmental Permits, or any review by, or approval of, any third party of any
of the Environmental Permits is required in connection with the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of Company and its subsidiaries
following such consummation; (c) none of the Company and its subsidiaries has
received any Environmental Claim, and none of the Company and its subsidiaries
is aware after reasonable inquiry of any threatened Environmental Claim; (d)
none of the Company and its subsidiaries has assumed, contractually or by
operation of law, any liabilities or obligations under any Environmental Laws;
(e) there are no past or present events, conditions, circumstances, practices,
plans or legal requirements that could reasonably be expected to result in
material liability to the Company or any of its subsidiaries under
Environmental Laws, prevent, or reasonably be expected to materially increase
the burden on the Company or any subsidiary of, complying with Environmental
Laws or of obtaining, renewing, or complying with all Environmental Permits
required under such laws; (f) there are and have been no Hazardous Materials or
other conditions at or from any property owned, operated or otherwise used by
the Company or any subsidiary now or in the past that could reasonably be
expected to give rise to material liability of the Company or any subsidiary
under any Environmental Law. For purposes of this Agreement, the following
terms shall have the following meanings:
"Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by any
person alleging liability or potential liability arising out of, relating
to, based on or resulting from (i) the presence, discharge, emission,
release or threatened release of any Hazardous Materials at any location,
whether or not owned, leased or operated by the Company or any of its
subsidiaries or (ii) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or Environmental Permit or
(iii) otherwise relating to obligations or liabilities under any
Environmental Laws.
"Environmental Permits" means all permits, licenses, registrations
and other governmental authorizations required for the Company and the
operations of the Company's and its subsidiaries' facilities and otherwise
to conduct its business under Environmental Laws.
"Environmental Laws" means all applicable federal, state and local
statutes, rules, regulations, ordinances, orders, decrees and common law,
as they exist at the date hereof, relating in any manner to contamination,
pollution or protection of human health or the environment, including
without limitation the Comprehensive Environmental Response, Compensation
and Liability Act, the Solid Waste Disposal Act, the Resource Conservation
and Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the Safe Drinking
Water Act, all as amended, and similar state laws.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials, substances
and forces, including but not limited to electromagnetic fields, regulated
pursuant to, or that could form the basis of liability under, any
Environmental Law.
SECTION 3.14 Offer Documents; Proxy Statement. None of the
information supplied by the Company for inclusion in (i) the Offer Documents,
shall, at the time the Offer Documents or any amendments or supplements thereto
are first published, sent or given to noteholders, as the case may be, 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 the light of the circumstances under which they were made, not
misleading, (ii) the registration statement on Form S-4 to be filed with the
SEC by the Company in connection with the issuance of the Common Stock of the
Company following the Merger (such Form S-4, as amended or supplemented, is
herein referred to as the "Form S-4") will, at the time the Form S-4 is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (iii) the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders Meeting (as defined in Section 6.1) (such proxy statement, as
amended or supplemented, is herein referred to as the "Proxy Statement") will,
at the date it is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, 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 the light of the circumstances under
which they are made, not misleading. The Form S-4 will, as of its effective
date, and the prospectus contained therein will, as of its date, comply as to
form in all material respects with the requirements of the Securities Act and
the rules and regulations promulgated thereunder. The Proxy Statement will
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Newco specifically for inclusion in the Proxy Statement. For purposes of this
Agreement, the parties agree that statements made and information in the Offer
Documents, the Form S-4 and the Proxy Statement relating to the Federal income
tax consequences of the transactions herein contemplated to holders of Company
Common Stock shall be deemed to be supplied by the Company and not by Newco.
SECTION 3.15 Brokers. No broker, finder or investment banker (other
than CS First Boston) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Newco a complete and correct copy of all agreements
between the Company and the Financial Adviser pursuant to which such firm would
be entitled to any payment relating to the transactions contemplated hereby.
SECTION 3.16 Opinion of Financial Advisor. The Company has received
the opinion of CS First Boston (the "Financial Adviser") dated the date of this
Agreement, to the effect that the consideration to be received in the Merger by
the Company's stockholders is fair to the holders of the Company Common Stock
from a financial point of view. The aggregate fees payable under such
agreements will not exceed $2.75 million.
SECTION 3.17 Labor Matters. As of the date hereof, the Company is
not a party to any agreement pursuant to which a labor organization is
certified under applicable labor law as a bargaining agent for any of the
Company's or any of its subsidiaries' employees, nor is any such agreement
presently being negotiated.
SECTION 3.18 Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the Voting Agreement and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the stockholders of the Company, and (ii) resolved to recommend that the
holders of the shares of Company Common Stock approve this Agreement and the
transactions contemplated herein, including the Merger.
SECTION 3.19 Tradenames. The Company or its subsidiaries owns (in
each case, except as set forth in Section 3.19 of the Disclosure Schedule, free
and clear of any liens, encumbrances or security interests) all rights to all
domestic or foreign trademarks, trade names, brandmarks, brand names,
copyrights, applications pending for trademarks or trade name registrations,
and brandmarks or brand name registrations or copyright registrations and other
proprietary rights for child care, preschool and after-school educational
services and goods and services related to the rendition of such services
("Intellectual Property") used by the Company and each of its subsidiaries,
including, without limitation, the exclusive right to use the names and marks
KINDERCARE, KINDERCARE (DESIGN) and marks presenting KINDERCARE as a formative
portion thereof (i.e. KINDERCARE WOODEN TOYS, KINDERCARE WEAR, KINDERCARE
PROMISE) and KLUBMATES and any confusingly similar variations thereof used by
the Company or its subsidiaries for child care, preschool and after-school
educational services and goods and services related to the rendition of such
services, in each case in each state in which the centers to which such
Intellectual Property relates are located, except to the extent that any
failure to own such rights could not, individually or in the aggregate with all
other failures, reasonably be expected to have a Material Adverse Effect. The
Company is the owner of the xxxx KID'S CHOICE for educational services
exclusively throughout the United States, with the exception of the geographic
area of use of the xxxx KID'S CHOICE in the States of Pennsylvania and New York
by the entities identified in the Company's presently pending concurrent use
service xxxx application for KID'S CHOICE and KID'S CHOICE (DESIGN), which such
application is set forth in Section 3.19 of the Disclosure Schedule, except to
the extent that the failure to be such owner could not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Section 3.19 of the
Disclosure Schedule, to the best knowledge of the Company, the use of the
Intellectual Property by the Company and its subsidiaries does not infringe on
the rights of any person, except for such infringement which individually or in
the aggregate with other infringements, could not reasonably be expect to have
a Material Adverse Effect.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco hereby represents and warrants to the Company that:
SECTION 4.1 Corporate Organization. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority and any necessary Governmental Entity to own, operate or lease
its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power, authority and governmental approvals could not,
individually or in the aggregate, reasonably be expected to prevent the
consummation of the Debt Offer or the Merger.
SECTION 4.2 Authority Relative to This Agreement. Newco has all
necessary corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Newco and the consummation by Newco of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Newco other than filing and recordation of appropriate merger documents as
required by the DGCL. This Agreement has been duly executed and delivered by
Newco and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Newco enforceable against
it in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Newco does not and
will not: (i) conflict with or violate the certificate of incorporation or by-
laws of Newco; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been
obtained and all filings described in such clauses have been made, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Newco or by which it or its properties are bound or affected; or (iii)
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets of Newco pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Newco is a party or by
which Newco or any of its properties are bound or affected, except, in the case
of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which could not, individually or in the
aggregate, reasonably be expected to prevent the consummation of the Debt Offer
or the Merger.
(b) The execution, delivery and performance of this Agreement by
Newco does not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any Governmental Entity,
except (i) for applicable requirements, if any, of the Exchange Act and the
rules and regulations promulgated thereunder, the HSR Act, state securities,
takeover and Blue Sky laws, (ii) the filing and recordation of appropriate
merger or other documents as required by the DGCL, and (iii) such consents,
approvals, authorizations, permits, actions, filings or notifications the
failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Debt Offer or the
Merger.
SECTION 4.4 Offer Documents; Proxy Statement. None of the
information supplied in writing by Newco specifically for inclusion in (i) the
Offer Documents, shall, at the time the Offer Documents or any amendments or
supplements thereto are first published, sent or given to noteholders, as the
case may be, 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 the light of the circumstances under which they were
made, not misleading, (ii) the Form S-4 will, at the time the Form S-4 is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (iii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, 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 the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Newco makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents.
SECTION 4.5 Brokers. No broker, finder or investment banker (other
than Salomon Brothers Inc) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Newco. Unless the
Merger is consummated, the Company shall not be responsible for the payment of
any such fees to Salomon Brothers Inc.
SECTION 4.6 Financing. Attached as Annex A-1 to A-3 of the
Disclosure Schedule are true and complete copies of the letters addressed to
the Company, dated the date hereof, issued in connection with the financing of
the transactions contemplated by this Agreement. The terms and conditions of
the letters attached as Annex A-1 to A-3 of the Disclosure Schedule are
satisfactory to Newco.
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date hereof
to the Effective Time, unless Newco gives its prior written consent (which
shall not be unreasonably withheld), the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of business and in
compliance with applicable laws; and the Company and its subsidiaries shall
each use its reasonable best efforts to preserve substantially intact the
business organization of the Company and its subsidiaries, to keep available
the services of the present officers, employees and consultants of the Company
and its subsidiaries and to preserve the present relationships of the Company
and its subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business relations. Except
as expressly contemplated by this Agreement, by way of amplification and not
limitation, neither the Company nor any of its subsidiaries shall, between the
date of this Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following without the prior written consent
of Newco (which shall not be unreasonably withheld):
(a) Amend or otherwise change the certificate of incorporation or
by-laws or equivalent organizational documents of the Company or any
Significant Subsidiary;
(b) Other than as set forth on Section 5.1(b) of the Disclosure
Schedule, issue, deliver, sell, lease, sell and leaseback, pledge, dispose
of or encumber, or authorize or commit to the issuance, delivery, sale,
lease, sale/leaseback, pledge, disposition or encumbrance of, (A) any
shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares
of capital stock, or any other ownership interest (including but not
limited to stock appreciation rights or phantom stock), of the Company or
any of its subsidiaries (except for the issuance and delivery of (i)
shares of Company Common Stock issuable in accordance with the terms of
Options outstanding as of October 1, 1996 and (ii) shares of Company
Common Stock issuable in accordance with the terms of Warrants outstanding
as of October 1, 1996) or (B) any assets of the Company or any of its
subsidiaries, other than assets sold, leased, pledged, disposed of or
encumbered in the ordinary course of business;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of the
Company or any of its Significant Subsidiaries;
(e) (i) other than with respect to borrowings, repayments and
repurchases necessary to effect the Debt Offer and borrowings, repayments
and repurchases in the ordinary course of business under the Credit
Agreement (which in the case of borrowings in the ordinary course of
business under the Credit Agreement shall not in aggregate amount exceed
$80 million at any one time outstanding, plus any amounts necessary to
effect the Debt Offer), repurchase, repay or incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person; (ii) enter into any
contract or agreement other than in the ordinary course of business; (iii)
authorize any single expenditure for any capital or acquisition (including
without limitation any acquisition of any corporation, partnership or
other business enterprise or division thereof) which are not specifically
provided for in the Company's capital budget (a true and correct copy of
which has been delivered to Newco and is set forth as Section 5.1(e) of
the Disclosure Schedule), implemented taking into account normal seasonal
patterns (provided that the Company may exceed such budget to with respect
to any center by up to 10%) for the Company and its subsidiaries taken as
a whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
5.1(e);
(f) Except as set forth on Section 5.1(f) of the Disclosure Schedule
and to the extent required under existing employee and director benefit
plans, agreements or arrangements as in effect on the date of this
Agreement, (i) increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or wages
of employees of the Company or its subsidiaries, who are not directors or
officers of the Company, in the ordinary course of business and consistent
with the Company's budget, (ii) grant any severance or termination pay not
currently required to be paid under existing severance plans to, or enter
into any employment, consulting or severance agreement or arrangement
with, any present or former director, officer or other employee of the
Company or any of its subsidiaries, except for the granting of severance
or termination pay, in the ordinary course of business, to employees who
are terminated by the Company after the date hereof or (iii) establish,
adopt, enter into or amend or terminate any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) Make any material tax election or settle or compromise any
material federal, state, local or foreign tax liability;
(i) Settle or compromise any pending or threatened suit, action or
claim for in excess of $100,000 per suit, action or claim or which relates
to the transactions contemplated hereby;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Significant Subsidiaries
(other than the Merger); or
(k) Take, or offer or propose to take, or agree to take in writing
or otherwise, any of the actions described in Sections 5.1(a) through
5.1(j).
ARTICLE 6.
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. The Company, acting through its
Board of Directors, will, as promptly as practicable following the date of this
Agreement and in consultation with Newco, (i) duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of considering
and approving this Agreement and the transactions contemplated hereby (the
"Stockholders Meeting") and (ii) (A) include in the Proxy Statement the
unanimous recommendation of the Board of Directors that the stockholders of the
Company vote in favor of the approval of this Agreement and the transactions
contemplated hereby and the written opinion of the Financial Adviser that the
consideration to be received by the stockholders of the Company pursuant to the
Merger is fair to such stockholders and (B) use its best efforts to obtain the
necessary approval of this Agreement and the transactions contemplated hereby
by its stockholders.
SECTION 6.2 Proxy Statement. Promptly following the date of this
Agreement, the Company shall prepare the Proxy Statement, and the Company shall
prepare and file with the SEC the Form S-4, in which the Proxy Statement will
be included. The Company shall use its best efforts as promptly as practicable
to have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use its best efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
The Company shall also take any action required to be taken under any
applicable state securities laws in connection with the registration and
qualification in connection with the Merger of common stock of the Company
following the Merger. The information provided by the Company for use in the
Form S-4, and to be supplied by Newco in writing specifically for use in the
Form S-4, shall, at the time the Form S-4 becomes effective and on the date of
the Stockholders Meeting referred to above, be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading, and the
Company and Newco each agree to correct any information provided by it for use
in the Form S-4 which shall have become false or misleading. Newco and the
Company will cooperate with each other in the preparation of the Proxy
Statement; without limiting the generality of the foregoing, the Company will
immediately notify Newco of the receipt of any comments from the SEC and any
request by the SEC for any amendment to the Proxy Statement or for additional
information. All filings with the SEC, including the Proxy Statement and any
amendment thereto, and all mailings to the Company's stockholders in connection
with the Merger, including the Proxy Statement, shall be subject to the prior
review, comment and approval of Newco (which approval by Newco shall not be
unreasonably withheld). Newco will furnish to the Company the information
relating to it required by the Exchange Act and the rules and regulations
promulgated thereunder to be set forth in the Proxy Statement. The Company
agrees to use its best efforts, after consultation with the other parties
hereto, to respond promptly to any comments made by the SEC with respect to the
Proxy Statement and any preliminary version thereof filed by it and cause such
Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable time.
SECTION 6.3 Access to Information; Confidentiality. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors, counsel, financial
advisors and other agents to, afford Newco and its representatives and the
potential financing sources for the transactions contemplated by this Agreement
complete access at all reasonable times to its officers, employees, agents,
properties, offices, centers and other facilities and to all books, contracts
and records, and shall furnish Newco and such financing sources with all
financial, operating and other data and information as Newco, through its
representatives or such financing sources may from time to time request.
Except as required by law, each of the Company and Newco will hold any
nonpublic information in confidence to the extent required by, and in
accordance with, the provisions of the letter dated July 3, 1996 among Kohlberg
Kravis Xxxxxxx & Co. ("KKR & Co."), Oaktree Capital Management, LLC and the
Company (the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 6.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.4 Third Parties. The Company shall not take any action
with respect to any transaction or proposed transaction with a third party
which could reasonably be expected to impede, interfere with, prevent or
materially delay the Debt Offer or the Merger. The Company agrees not to
release any third party from, or waive any provisions of, any confidentiality
or standstill agreement to which the Company is a party. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
SECTION 6.5 Employee Benefits Matters. Except as contemplated
herein, the Company, for the period ending on December 31, 1997, shall provide
employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Company which are no
less favorable, in the aggregate, than those provided pursuant to the plans,
programs and arrangements of the Company (other than those related to Company
Securities) in effect and disclosed to Newco on the date hereof; provided,
however, that nothing herein shall prevent the amendment or termination of any
such plan, program or arrangement, require that the Company provide or permit
investment in the securities of the Company or interfere with the Company's
right or obligation to make such changes as are necessary to conform with
applicable law.
SECTION 6.6 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation and By-laws of the Company following the
Merger shall contain provisions identical with respect to elimination of
personal liability and indemnification to those set forth in Articles 8 and 9
of the Certificate of Incorporation of the Company set forth in Exhibit A
hereto and Article VII, Section 5 of the By-laws of the Company, respectively,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, agents or employees of the Company.
(b) The Company shall maintain in effect for six years from the
Effective Time policies of directors' and officers' liability insurance
containing terms and conditions which are not less advantageous than those
policies maintained by the Company at the date hereof, with respect to matters
occurring prior to the Effective Time, to the extent available, and having the
maximum available coverage under the current policies of directors' and
officers' liability insurance; provided that (i) the Company following the
Merger shall not be required to spend in excess of a $450,000 annual premium
therefor; provided further that if the Company following the Merger would be
required to spend in excess of a $450,000 premium per annum to obtain insurance
having the maximum available coverage under the current policies, the Company
will be required to spend $450,000 to maintain or procure insurance coverage
pursuant hereto, subject to availability of such (or similar) coverage and (ii)
such policies may in the sole discretion of the Company be one or more "tail"
policies for all or any portion of the full six year period.
(c) In furtherance of and not in limitation of the preceding
paragraph, Newco agrees that the officers and directors of the Company that are
defendants in all litigation commenced by stockholders of the Company with
respect to (x) the performance of their duties as such officers and/or
directors under federal or state law (including litigation under federal and
state securities laws) and (y) Newco's offer or proposal to acquire the Company
including, without limitation, any and all such litigation commenced on or
after the date of this Agreement (the "Subject Litigation") shall be entitled
to be represented, at the reasonable expense of the Company, in the Subject
Litigation by one counsel (and Delaware counsel if appropriate and one local
counsel in each jurisdiction in which a case is pending and one counsel for
directors of the Company which are affiliated with Oaktree Capital Management,
LLC (the "Oaktree Directors"), if Newco and the Company shall have reasonably
concluded (based on the advice of counsel) that there may be defenses available
to such Oaktree Directors which are different from or additional to those
available to the other directors of the Company) each of which such counsel
shall be selected by a plurality of such director defendants; provided that
neither Newco nor the Company shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and that a condition to the indemnification payments provided in
Section 6.6(a) shall be that such officer/director defendant not have settled
any Subject Litigation without the consent of Newco; and provided further that
the neither Newco nor the Company shall have any obligation hereunder to any
officer/director defendant when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and non-
appealable, that indemnification of such officer/director defendant in the
manner contemplated hereby is prohibited by applicable law.
(d) Upon the Effective Time, the Company shall remain liable for all
of its obligations under the existing indemnification agreements with each of
the directors and officers of the Company.
SECTION 6.7 Notification of Certain Matters. The Company shall give
prompt notice to Newco, and Newco 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 be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Newco, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.8 Further Action; Best Efforts. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action, and to do or
cause to be done, and to assist and cooperate with the parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement and the Voting Agreement, including but not limited to (i)
cooperation in the preparation and filing of the Offer Documents, the Form S-4,
the Proxy Statement, any required filings under the HSR Act and any amendments
to any thereof, (ii) determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any Governmental
Entities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this
Agreement, including the Debt Offer and the Merger, and the Voting Agreement,
including the transactions contemplated by Sections 4 and 5 thereof, and (iii)
promptly making any such filings, furnishing information required in connection
therewith and timely seeking to obtain any such consents, approvals, permits or
authorizations.
(b) Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist the shares of
Company Common Stock from NASDAQ/NMS, provided that such delisting shall not be
effective until after the Effective Time. The parties also acknowledge that it
is Newco's intent that the shares of Company Common Stock following the Merger
will not be quoted on NASDAQ/NMS or listed on any national securities exchange.
(c) The Company agrees to provide, and will cause its subsidiaries
and its and their respective officers, employees and advisers to provide, all
necessary cooperation in connection with (i) the arrangement of any financing
to be consummated contemporaneous with or at or after the Closing in respect of
the transactions contemplated by this Agreement, including without limitation,
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting
or placement agreements, pledge and security documents, other definitive
financing documents, or other requested certificates or documents, including a
certificate of the chief financial officer of the Company with respect to
solvency matters, comfort letters of accountants and legal opinions as may be
requested by Newco and (ii) the amendment to the Indenture contemplated by
Section 2.8 of the Disclosure Schedule. The parties acknowledge that the
payment of any fees by the Company in connection with any commitment letters
shall be subject to the occurrence of the Closing. In addition, in conjunction
with the obtaining of any such financing, the Company agrees, at the request of
Newco, to call for prepayment or redemption, or to prepay, redeem and/or
renegotiate, as the case may be, any then existing indebtedness of the Company;
provided that no such prepayment or redemption shall themselves actually be
made until contemporaneously with or after the Effective Time.
(d) The Company shall cooperate with any reasonable requests of
Newco or the SEC related to the recording of the Merger as a recapitalization
for financial reporting purposes, including, without limitation, to assist
Newco and its affiliates with any presentation to the SEC with regard to such
recording and to include appropriate disclosure with regard to such recording
in all filings with the SEC and all mailings to stockholders made in connection
with the Newco. In furtherance of the foregoing, the Company shall provide to
Newco for the prior review of Newco's advisors any description of the
transactions contemplated by this Agreement which is meant to be disseminated.
(e) (i) Newco hereby agrees to use its reasonable best efforts,
subject to normal conditions, to arrange the financing described in Annexes A-1
and A-2 of the Disclosure Schedule in respect of the transactions contemplated
by this Agreement (as described in Section 7.2(f) hereof), including using its
reasonable best efforts (A) to assist the Company in the negotiation of
definitive agreements with respect thereto and (B) to satisfy all conditions
applicable to Newco in such definitive agreements. Newco will keep the Company
informed of the status of its efforts to arrange such financing, including
making reports with respect to significant developments. In the event Newco is
unable to arrange any portion of such financing in the manner or from the
sources originally contemplated, Newco will use its reasonable best efforts,
subject to normal conditions, to arrange any such portion from alternative
sources.
(ii) Subject to the Company having received the proceeds of the
financing described in Section 7.2(f) on terms satisfactory to Newco, Newco at
Closing will be capitalized with an equity contribution of $148.75 million.
Newco will be under no obligation pursuant to the preceding sentence unless and
until the Company receives the proceeds of the financing described in Section
7.2(f) on terms satisfactory to Newco. In addition, Newco will be under no
obligation under any circumstances to be capitalized with equity of more than
$148.75 million.
(f) 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 each party to this Agreement shall use their
reasonable best efforts to take all such necessary action.
SECTION 6.9 Public Announcements. Neither Newco nor the Company
will issue any press release or public statement with respect to the
transactions contemplated by this Agreement and the Voting Agreement, including
the Debt Offer and the Merger, without the other party's prior consent, except
as may be required by applicable law, court process or by obligations pursuant
to any listing agreement with NASDAQ. In addition to the foregoing, Newco and
the Company will consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any such press release or other
public statements with respect to such transactions. The parties agree that
the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon prior
to the issuance thereof.
SECTION 6.10 Disposition of Litigation. The Company will not
voluntarily cooperate with any third party which has sought or may hereafter
seek to restrain or prohibit or otherwise oppose the Debt Offer or the Merger
and will cooperate with Newco to resist any such effort to restrain or prohibit
or otherwise oppose the Debt Offer or the Merger.
SECTION 6.11 Affiliates. Prior to the Closing Date, the Company
shall deliver to Newco a letter identifying all persons who are, at the time
this Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Newco on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 6.12 Resignation of Directors. Prior to the Effective Time,
the Company shall deliver to Newco evidence satisfactory to Newco of the
resignation of all directors of the Company (other than Xx. Xxxxxx Xxxxx and,
subject to the satisfaction of the conditions set forth in Section 6 of the
Voting Agreement, Xx. Xxxxxxx X. Xxxxxx), effective at the Effective Time.
SECTION 6.13 Stop Transfer Order. The Company shall notify the
Company's transfer agent that there is a stop transfer order with respect to
all of the Subject Shares (as defined in the Voting Agreement) and that the
Voting Agreement places limits on the voting of the Subject Shares.
ARTICLE 7.
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and any material "blue sky" and other
state securities laws applicable to the registration and qualification of
the Common Stock of the Company following the Merger shall have been
complied with.
SECTION 7.2 Conditions to Obligation of Newco. The obligations of
Newco to effect the Merger are further subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified
as to materiality shall 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 Closing Date as though made on and as of the Closing Date. Newco
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
the effect set forth in this paragraph.
(b) Performance of Obligations of the Company. The Company shall
have performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date (except for such failures to
perform as have not had or could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect with
respect to the Company or materially adversely affect the ability of the
Company to consummate the transactions herein contemplated or perform its
obligations hereunder).
(c) Consents, etc. Newco shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained,
except where the failure to obtain such licenses, permits, consents,
approvals, authorizations, qualifications and orders could not,
individually or in the aggregate with all other failures, reasonably be
expected to have a Material Adverse Effect.
(d) No Material Litigation. There shall not be pending by any
Governmental Entity any suit, action or proceeding (or by any other person
any suit, action or proceeding which has a reasonable likelihood, in the
opinion of counsel to Newco, of success) (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or the Voting Agreement or
seeking to obtain from Newco or any of its affiliates any damages that are
material to any such party, (ii) seeking to prohibit or limit the
ownership or operation by the Company or any of its subsidiaries of any
material portion of the business or assets of the Company or any of its
subsidiaries or (iii) seeking to impose limitations on the ability of
Newco (or any designee of Newco pursuant to the Voting Agreement) or any
stockholder of Newco or the Company to acquire or hold, or exercise full
rights of ownership of, any shares of Company Common Stock, including,
without limitation, the right to vote the Company Common Stock on all
matters properly presented to the stockholders of the Company.
(e) Affiliate Letters. Newco shall have received the agreements
referred to in Section 6.11.
(f) Financing. The Company shall have received the proceeds of
financing on the terms and conditions set forth in Annexes A-1 through A-3
of the Disclosure Schedule or upon terms and conditions which are, in the
reasonable judgement of Newco, substantially equivalent thereto, and to
the extent that any terms and conditions are not set forth in Annexes A-1
through A-3 of the Disclosure Schedule, on terms and conditions reasonably
satisfactory to Newco.
(g) Recapitalization Accounting. Newco shall be reasonably
satisfied that the Merger shall be recorded as a recapitalization for
financial reporting purposes.
(h) Notes. Newco shall have received evidence that the terms of the
Notes shall have been amended to the reasonable satisfaction of Newco
including, without limitation, the elimination of the negative covenants
contained therein and the elimination of any restrictions applicable to
the transactions contemplated by this Agreement. The Company shall have
purchased at least that principal amount of Notes as equals the minimum
condition of the Debt Offer.
SECTION 7.3 Conditions to Obligation of the Company. The
obligations of the Company to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Newco set forth in this Agreement that are qualified as to
materiality shall 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 Closing Date as though made on and as of the Closing Date. The
Company shall have received a certificate signed on behalf of Newco by an
authorized officer of Newco to the effect set forth in this paragraph.
(b) Performance of Obligations of Newco. Newco shall have performed
the obligations required to be performed by it under this Agreement at or
prior to the Closing Date (except for such failures to perform as have not
had or could not reasonably be expected, either individually or in the
aggregate, to materially adversely affect the ability of Newco to
consummate the transactions herein contemplated or perform its obligations
hereunder).
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent of Newco and the Company;
(b) By Newco or the Company if any court of competent jurisdiction,
arbitrator or other Governmental Entity located or having jurisdiction
within the United States or any country or economic region in which either
the Company or Newco, directly or indirectly, has material assets or
operations, shall have issued a final order, decree or ruling or taken any
other final action restraining, enjoining or otherwise prohibiting the
consummation of the Merger, the Debt Offer or any of the transactions
contemplated by the Merger Agreement or the Voting Agreement, or otherwise
altering the terms of any of the foregoing in any significant respect, and
such order, decree, ruling or other action is or shall have become final
and nonappealable;
(c) By Newco or the Company if the Merger shall not have been
consummated on or before March 31, 1997, provided that so long as an
Extending Action (as defined below) is no longer in effect at 11:59 p.m.
(New York City time) on March 31, 1997, such date shall be automatically
extended by one day past March 31, 1997 for each day that an Extending
Action was in effect on or prior to March 31, 1997; provided further that
the right to terminate this Agreement under this Section 8.1(c) shall not
be available to the party whose action or failure to act has been the
cause of or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of this
Agreement; or
(d) By Newco if any required approval of the stockholders of the
Company shall not have been obtained by reason of the failure to obtain
the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof.
As used in this Section 8.1, an "Extending Action" shall mean any
order, decree or ruling or other action restraining, enjoining or
otherwise prohibiting the consummation of the Merger, the Debt Offer or
any of the transactions contemplated by the Merger Agreement or the Voting
Agreement, or otherwise altering the terms of any of the foregoing in any
significant respect, by a court of competent jurisdiction, arbitrator or
other Governmental Entity located or having jurisdiction within the United
States or any country or economic region in which either the Company or
Newco, directly or indirectly, has material assets or operations, which
order, decree, ruling or other action has not become final and
nonappealable.
SECTION 8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except as set forth in Section 8.3 and Section 9.1; provided, however, that
nothing herein shall relieve any party from liability for any breach hereof.
SECTION 8.3 Fees and Expenses. (a) In addition to any other
amounts which may be payable or become payable pursuant to any other paragraph
of this Section 8.3, the Company shall (provided that Newco is not then in
material breach of its obligations under this Agreement), promptly, but in no
event later than two business days following written notice thereof, together
with related bills or receipts, reimburse KKR & Co., in an aggregate amount of
up to $2.5 million, for all out-of-pocket expenses and fees (including, without
limitation, fees payable to all banks, investment banking firms and other
financial institutions, and their respective agents and counsel, and all fees
of counsel, accountants, financial printers, experts and consultants to Newco
and its affiliates), whether incurred prior to, on or after the date hereof, in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement, the Voting Agreement and the financing thereof.
(b) Except as otherwise specifically provided herein, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after
approval of the Merger by the stockholders of the Company, no amendment may be
made which would reduce the amount or change the type of consideration into
which each share of Company Common Stock shall be converted upon consummation
of the Merger. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.5 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE 9.
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article 1, Section 6.6 and Articles 8 and 9 shall survive the
Effective Time and those set forth in Section 6.3, Section 6.8(a), Section 8.3
and Articles 8 and 9 shall survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Newco:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co,
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
if to the Company:
Xx. Xxxxxx Xxxxx,
Chairman and Chief Executive Officer
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
and
Xxxxxxx Xxxxx,
Vice President/General Counsel
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
and
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
and
Oaktree Capital Management LLC
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Attention:
SECTION 9.3 Certain Definitions. For purposes of this Agreement,
the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of
such shares (i) which such person or any of its affiliates or associates
(as such term is defined in Rule 12b-2 of the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its
affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of any shares of Company Common Stock;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession in the United States, in each case
applied on a basis consistent with the manner in which the audited
financial statements for the fiscal year of the Company ended May 31, 1996
were prepared;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(f) "subsidiary" or "subsidiaries" of the Company, or any other
person means any corporation, partnership, joint venture or other legal
entity of which the Company, or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holder of which is generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity; and
(g) "Significant Subsidiary" has the meaning set forth in Regulation
S-X promulgated by the SEC.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by operation of
law or otherwise, except that Newco may assign all or any of its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of Newco, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 9.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, with respect to
the provisions of Section 6.6 and 8.3, shall inure to the benefit of the
persons or entities benefitting from the provisions thereof who are intended to
be third-party beneficiaries thereof. Except as provided in the preceding
sentence, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Newco and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
KINDERCARE LEARNING CENTERS, INC.
By: /s/ XXXXXX X. XXXXX
Title: Chairman and Chief Executive Officer
KCLC ACQUISITION CORP.
By: /s/ XXXXXXX X. XXXXXXX
Title: President
ANNEX A
Form of Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.01
per share ("Company Stock"), of KinderCare Learning Centers, Inc., a Delaware
corporation (the "Company"), is entitled to retain in connection with the
merger (the "Merger") of the Company with KCLC Acquisition Corp., a Delaware
corporation, securities (the "Securities") of the Company. The undersigned
acknowledges that the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities
Act of 1933 (the "Act"), although nothing contained herein should be construed
as an admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Securities retained by
the undersigned pursuant to the Merger may be restricted unless such
transaction is registered under the Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company
that the undersigned will not sell, assign or transfer any of the Securities
retained by the undersigned pursuant to the Merger except (i) pursuant to an
effective registration statement under the Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in
the opinion of independent counsel reasonably satisfactory to the Company or as
described in a "no-action" or interpretive letter from the Staff of the
Securities and Exchange Commission (the "SEC"), is not required to be
registered under the Act.
In the event of a sale or other disposition by the undersigned of
Securities pursuant to Rule 145, the undersigned will supply the Company with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that the Company may instruct its
transfer agent to withhold the transfer of any Securities disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent shall effectuate the transfer of the Securities sold as indicated in the
letter.
The undersigned acknowledges and agrees that appropriate legends will
be placed on certificates representing Securities retained by the undersigned
in the Merger or held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Company from independent counsel
reasonably satisfactory to the Company to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of
Securities and (ii) the receipt by Newco of this letter is an inducement and a
condition to Newco's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO ANNEX A
[Name] [Date]
On __________________ the undersigned sold the
securities ("Securities") of KinderCare Learning Centers, Inc. (the "Company")
described below in the space provided for that purpose (the "Securities"). The
Securities were retained by the undersigned in connection with the merger of
KCLC Acquisition Corp. with and into the Company.
Based upon the most recent report or statement filed by the Company
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph (e)
of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
Execution Copy
__________________________________________________________
AGREEMENT AND PLAN OF MERGER
Between
KCLC ACQUISITION CORP.
and
KINDERCARE LEARNING CENTERS, INC.
Dated as of October 3, 1996
__________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE 1.
THE MERGER . . . . . . . . . . . . . . .
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3 Effective Time . . . . . . . . . . . . . . . . . . . .
SECTION 1.4 Effects of the Merger . . . . . . . . . . . . . . . .
SECTION 1.5 Certificate of Incorporation; By-Laws . . . . . . . .
SECTION 1.6 Directors and Officers . . . . . . . . . . . . . . . .
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS . . . . . . . . . . . .
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . .
SECTION 2.2 Dissenting Shares and Section 262 Shares . . . . . . .
SECTION 2.3 Company Common Stock Elections . . . . . . . . . . . .
SECTION 2.4 Proration . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.5 Treatment of Options and Other Employee Equity
Rights . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.6 Treatment of Warrants . . . . . . . . . . . . . . . .
SECTION 2.7 Surrender of Shares and Warrants; Transfer Books . . .
SECTION 2.8 The Debt Offer . . . . . . . . . . . . . . . . . . . .
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . .
SECTION 3.1 Organization and Qualification; Subsidiaries . . . . .
SECTION 3.2 Certificate of Incorporation and By-Laws . . . . . . .
SECTION 3.3 Capitalization . . . . . . . . . . . . . . . . . . . .
SECTION 3.4 Authority Relative to This Agreement . . . . . . . . .
SECTION 3.5 No Conflict; Required Filings and Consents . . . . . .
SECTION 3.6 Compliance . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.7 SEC Filings; Financial Statements . . . . . . . . . .
SECTION 3.8 Absence of Certain Changes or Events . . . . . . . . .
SECTION 3.9 Absence of Litigation . . . . . . . . . . . . . . . .
SECTION 3.10 Properties . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.11 Employee Benefit Plans . . . . . . . . . . . . . . . .
SECTION 3.12 Tax Matters . . . . . . . . . . . . . . . . . . . . .
SECTION 3.13 Environmental Laws . . . . . . . . . . . . . . . . . .
SECTION 3.14 Offer Documents; Proxy Statement . . . . . . . . . . .
SECTION 3.15 Brokers . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.16 Opinion of Financial Advisor . . . . . . . . . . . . .
SECTION 3.17 Labor Matters . . . . . . . . . . . . . . . . . . . .
SECTION 3.18 Board Recommendation . . . . . . . . . . . . . . . . .
SECTION 3.19 Tradenames . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF NEWCO . . . . . . . . . . . . . . . .
SECTION 4.1 Corporate Organization . . . . . . . . . . . . . . . .
SECTION 4.2 Authority Relative to This Agreement . . . . . . . . .
SECTION 4.3 No Conflict; Required Filings and Consents . . . . . .
SECTION 4.4 Offer Documents; Proxy Statement . . . . . . . . . . .
SECTION 4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.6 Financing . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . .
SECTION 5.1 Conduct of Business of the Company Pending the
Merger . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6.
ADDITIONAL AGREEMENTS . . . . . . . . . . . . .
SECTION 6.1 Stockholders Meeting . . . . . . . . . . . . . . . . .
SECTION 6.2 Proxy Statement . . . . . . . . . . . . . . . . . . .
SECTION 6.3 Access to Information; Confidentiality . . . . . . . .
SECTION 6.4 Third Parties . . . . . . . . . . . . . . . . . . . .
SECTION 6.5 Employee Benefits Matters . . . . . . . . . . . . . .
SECTION 6.6 Directors' and Officers' Indemnification and
Insurance . . . . . . . . . . . . . . . . . . . . .
SECTION 6.7 Notification of Certain Matters . . . . . . . . . . .
SECTION 6.8 Further Action; Best Efforts . . . . . . . . . . . . .
SECTION 6.9 Public Announcements . . . . . . . . . . . . . . . . .
SECTION 6.10 Disposition of Litigation. . . . . . . . . . . . . . .
SECTION 6.11 Affiliates . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.12 Resignation of Directors . . . . . . . . . . . . . . .
SECTION 6.13 Stop Transfer Order . . . . . . . . . . . . . . . . .
ARTICLE 7.
CONDITIONS OF MERGER . . . . . . . . . . . . .
SECTION 7.1 Conditions to Obligation of Each Party to Effect
the Merger . . . . . . . . . . . . . . . . . . . . .
SECTION 7.2 Conditions to Obligation of Newco . . . . . . . . . .
SECTION 7.3 Conditions to Obligation of the Company . . . . . . .
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . .
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2 Effect of Termination . . . . . . . . . . . . . . . .
SECTION 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . .
SECTION 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9.
GENERAL PROVISIONS . . . . . . . . . . . . .
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . .
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.3 Certain Definitions . . . . . . . . . . . . . . . . .
SECTION 9.4 Severability . . . . . . . . . . . . . . . . . . . . .
SECTION 9.5 Entire Agreement; Assignment . . . . . . . . . . . . .
SECTION 9.6 Parties in Interest . . . . . . . . . . . . . . . . .
SECTION 9.7 Governing Law . . . . . . . . . . . . . . . . . . . .
SECTION 9.8 Headings . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.9 Counterparts . . . . . . . . . . . . . . . . . . . . .
Annex A - Affiliate Letter
Exhibit A - Certificate of Incorporation of the Company after the Merger
