EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXX ENTERTAINMENT COMPANY,
GET MERGER SUB, INC.
AND
RESORTQUEST INTERNATIONAL, INC.
Dated as of August 4, 2003
TABLE OF CONTENTS
Page
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ARTICLE 1. THE MERGER..................................................................................1
Section 1.1 The Merger..................................................................................1
Section 1.2 Effective Time..............................................................................2
Section 1.3 Effects of the Merger.......................................................................2
Section 1.4 Certificate of Incorporation; By-Laws.......................................................2
Section 1.5 Directors and Officers......................................................................2
Section 1.6 Exchange Ratio..............................................................................2
Section 1.7 Surrender and Exchange of Shares............................................................3
Section 1.8 Dividends; Transfer Taxes; Withholdings; Escheat............................................4
Section 1.9 No Fractional Securities....................................................................5
Section 1.10 No Further Rights; Closing of Company Transfer Books........................................6
Section 1.11 Further Assurances..........................................................................6
Section 1.12 Closing.....................................................................................6
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................7
Section 2.1 Organization and Qualification..............................................................7
Section 2.2 Capitalization..............................................................................8
Section 2.3 Authority Relative to this Agreement........................................................9
Section 2.4 Absence of Certain Changes..................................................................9
Section 2.5 Reports and Financial Statements...........................................................10
Section 2.6 Information in Joint Proxy Statement and Registration Statement............................11
Section 2.7 Consents and Approvals; No Violation.......................................................12
Section 2.8 Brokerage Fees and Commissions.............................................................12
Section 2.9 Litigation.................................................................................12
Section 2.10 [Intentionally left blank].................................................................13
Section 2.11 ERISA Compliance...........................................................................13
Section 2.12 Taxes......................................................................................14
Section 2.13 No Excess Parachute Payments; Termination Payments; Section 162(m) of the Code.............15
Section 2.14 Compliance with Applicable Laws............................................................15
Section 2.15 State Takeover Statutes....................................................................17
Section 2.16 Contracts..................................................................................17
Section 2.17 Labor Matters..............................................................................17
Section 2.18 Title to Properties........................................................................18
Section 2.19 Undisclosed Liabilities....................................................................18
Section 2.20 Opinion of Company Financial Advisor.......................................................18
Section 2.21 Insurance..................................................................................19
Section 2.22 Tax Matters................................................................................19
Section 2.23 No Knowledge of Breach.....................................................................19
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Section 2.24 Real Property; Leases......................................................................19
Section 2.25 Intellectual Property......................................................................20
Section 2.26 Affiliate Transactions.....................................................................21
Section 2.27 No Existing Acquisition Proposals..........................................................22
Section 2.28 Acquisitions...............................................................................22
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...........................................22
Section 3.1 Organization and Qualification.............................................................22
Section 3.2 Capitalization.............................................................................22
Section 3.3 Authority Relative to this Agreement.......................................................23
Section 3.4 Absence of Certain Changes.................................................................24
Section 3.5 Reports and Financial Statements...........................................................25
Section 3.6 Information in Joint Proxy Statement and Registration Statement............................25
Section 3.7 Consents and Approvals; No Violation.......................................................26
Section 3.8 Brokerage Fees and Commissions.............................................................27
Section 3.9 Litigation.................................................................................27
Section 3.10 Compliance with Applicable Laws............................................................27
Section 3.11 Contracts..................................................................................28
Section 3.12 Undisclosed Liabilities....................................................................28
Section 3.13 Opinion of Parent Financial Advisor........................................................28
Section 3.14 Tax Matters................................................................................29
Section 3.15 Affiliate Transactions.....................................................................29
Section 3.16 No Knowledge of Breach.....................................................................29
Section 3.17 Real Property; Leases......................................................................29
ARTICLE 4. CONDUCT OF BUSINESS PENDING THE MERGER.....................................................30
Section 4.1 Conduct of Business of the Company Pending the Merger......................................30
Section 4.2 Prohibited Actions by the Company..........................................................30
Section 4.3 Conduct of Business by Parent Pending the Merger...........................................33
Section 4.4 Conduct of Business of Sub.................................................................33
ARTICLE 5. COVENANTS..................................................................................34
Section 5.1 No Solicitation............................................................................34
Section 5.2 Access to Information......................................................................36
Section 5.3 Confidentiality Agreements.................................................................37
Section 5.4 Registration Statement and Proxy Statement.................................................37
Section 5.5 Proxy Statement; Stockholder Approvals.....................................................38
Section 5.6 Compliance with the Securities Act.........................................................39
Section 5.7 Reasonable Efforts.........................................................................39
Section 5.8 Company Stock Options......................................................................40
Section 5.9 Indemnification of Directors and Officers..................................................41
Section 5.10 Employment Arrangements; Employee Plans and Benefits.......................................42
Section 5.11 Public Announcements.......................................................................43
Section 5.12 Listing Application........................................................................43
Section 5.13 Supplemental Disclosure....................................................................43
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Section 5.14 Letters of Accountants.....................................................................44
Section 5.15 Recruitment................................................................................44
Section 5.16 Rights Agreement...........................................................................44
Section 5.17 Section 16(b) Board Approval...............................................................44
Section 5.18 Employment Agreements......................................................................45
Section 5.19 Parent Loan................................................................................45
ARTICLE 6. CONDITIONS TO CONSUMMATION OF THE MERGER...................................................46
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.................................46
Section 6.2 Conditions to Obligations of Parent and Sub to Effect the Merger...........................48
Section 6.3 Conditions to Obligations of the Company to Effect the Merger..............................49
ARTICLE 7. TERMINATION; AMENDMENT; WAIVER.............................................................50
Section 7.1 Termination................................................................................50
Section 7.2 Effect of Termination......................................................................52
Section 7.3 Termination Fee............................................................................52
Section 7.4 Amendment..................................................................................53
Section 7.5 Extension; Waiver..........................................................................53
ARTICLE 8. MISCELLANEOUS..............................................................................53
Section 8.1 Specific Performance.......................................................................53
Section 8.2 Non-Survival of Representations and Warranties.............................................54
Section 8.3 Entire Agreement; Assignment...............................................................54
Section 8.4 Severability...............................................................................54
Section 8.5 Notices....................................................................................54
Section 8.6 Failure or Indulgence Not Waiver; Remedies Cumulative......................................55
Section 8.7 Governing Law; Consent to Jurisdiction.....................................................55
Section 8.8 Descriptive Headings.......................................................................56
Section 8.9 Parties in Interest........................................................................56
Section 8.10 Counterparts...............................................................................56
Section 8.11 Certain Definitions........................................................................56
Section 8.12 Parent Responsible for Performance by Sub..................................................58
Section 8.13 Interpretation.............................................................................59
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 4, 2003 among Xxxxxxx Entertainment Company, a Delaware corporation
("Parent"), GET Merger Sub, Inc., a Delaware corporation and an indirect wholly
owned subsidiary of Parent ("Sub"), and ResortQuest International, Inc., a
Delaware corporation (the "Company").
Background
WHEREAS, the Board of Directors of the Company has determined that it
is fair to, advisable and in the best interests of the Company and the
stockholders of the Company to enter into and consummate this Agreement with
Parent and Sub, and the Board of Directors of Parent has determined that it is
fair to, advisable and in the best interests of Parent and the stockholders of
Parent to enter into and consummate this Agreement with the Company, providing
for the merger of Sub with and into the Company with the Company as the
surviving corporation (the "Merger"), in accordance with the Delaware General
Corporation Law (the "DGCL"), and the other transactions contemplated hereby,
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Sub has approved the Merger of Sub
with and into the Company and such other transactions in accordance with the
DGCL upon the terms and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, the Company, Parent and Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
intending to be legally bound hereby, Parent, Sub and the Company hereby agree
as follows:
ARTICLE 1.
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the DGCL,
Sub shall be merged with and into the Company as soon as practicable following
the satisfaction or waiver of the conditions set forth in Article 6. Following
the Merger, the Company shall continue as the surviving corporation (the
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"Surviving Corporation") under the name " ResortQuest International, Inc." and
shall continue its existence under the laws of the State of Delaware, and the
separate corporate existence of Sub shall cease. At the election of Parent, any
direct or indirect wholly owned subsidiary of Parent may be substituted for Sub
as a constituent corporation in the Merger. In the event of such an execution,
the parties agree to execute an appropriate amendment to this Agreement in
order to reflect such election.
Section 1.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article 6, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State
of Delaware (the "Delaware Secretary"), 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 Delaware Secretary (or
such later time as agreed to by the parties and specified in the Certificate of
Merger) being the "Effective Time").
Section 1.3 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 Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; By-Laws.
(a) From and after the Effective Time and without any
further action on the part of the Company and Sub, the Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), as in effect
immediately prior to the Effective Time, shall be amended in its entirety and
replaced by the certificate of incorporation attached as Exhibit 1.4 hereto
thereafter amended as provided by applicable law and such Certificate of
Incorporation, except only that the name of the Surviving Corporation shall be
"ResortQuest International, Inc."
(b) At the Effective Time and without any further action
on the part of the Company and Sub, the Bylaws of Sub shall be the Bylaws of
the Surviving Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation of the
Surviving Corporation and as provided by applicable law.
Section 1.5 Directors and Officers. The directors of Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed (as the case may be) and qualified.
Section 1.6 Exchange Ratio. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the
holders of any of the following securities:
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(i) Each share of Common Stock, par value $.01 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in
accordance with Section 1.6(ii)) shall subject to Section 1.6(iv) be exchanged
for and converted into the right to receive .275 (the "Exchange Ratio") of a
fully paid and non-assessable share of the Common Stock, par value $.01 per
share, of Parent (the "Parent Common Stock"), payable upon the surrender of the
certificate formerly representing such share of Company Common Stock.
(ii) All shares of Company Common Stock that are held by
the Company as treasury shares or that are held by Parent or Sub or any
wholly-owned subsidiary of Parent shall be automatically canceled and retired
and cease to exist, and no securities of Parent or other consideration shall be
delivered in exchange therefor.
(iii) Each share of Common Stock, par value $.01 per
share, of Sub ("Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(iv) Each outstanding option (a "Company Stock Option")
to purchase Company Common Stock that is listed on Section 2.2(c) of the
Company Disclosure Schedule shall be assumed by Parent as more specifically
provided in Section 5.8.
(v) Shares of Company Common Stock converted pursuant to
this Section 1.6 shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a Certificate
(as defined below) shall cease to have any rights as a stockholder of the
Company, except the right to receive the corresponding Parent Common Stock
specified herein for each such share.
(vi) If between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock shall have been
changed into a different number of shares or a different class by reason of any
stock dividend (including any dividend or distribution of securities
convertible into or exchangeable for Parent Common Stock), subdivision,
reclassification, recapitalization, split, combination or similar transaction,
or if Parent pays an extraordinary dividend or distribution, the number of
shares of Parent Common Stock to be issued in the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, or similar transaction
or extraordinary dividend or distribution.
Section 1.7 Surrender and Exchange of Shares.
(a) Prior to the Closing Date, Parent shall designate
its stock transfer agent or such other bank or trust company reasonably
acceptable to the Company to act as Exchange Agent hereunder (the "Exchange
Agent"). Prior to Effective Time, Parent shall deposit with or for the account
of the Exchange Agent stock certificates representing the number of shares of
Parent Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding shares of Company Common Stock, which shares of Parent Common Stock
shall be deemed to have been
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issued at the Effective Time and which certificates shall be returned to Parent
if such Effective Time does not occur.
(b) As soon as practicable after the Effective Time (but
not later than the first business day after the Effective Time), Parent shall
cause the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") that were
converted pursuant to Section 1.6 into the right to receive shares of Parent
Common Stock (i) a form of letter of transmittal specifying 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 (ii)
instructions for use in surrendering such Certificates in exchange for
certificates representing shares of Parent Common Stock and any cash in lieu of
fractional shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article 1 and (y) cash in lieu of any fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 1.9,
after giving effect to any required tax withholdings, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock may be issued to a transferee if the Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer, and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.7(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender a certificate representing shares of Parent Common
Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Article 1. In no event will the holder of any such
surrendered Certificate be entitled to receive interest on any cash to be
received in lieu of fractional shares.
(c) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if reasonably required by
Parent, the posting by such person of a bond, in such reasonable and customary
amount as Parent may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue the
corresponding Parent Common Stock in exchange for such lost, stolen or
destroyed Certificate.
Section 1.8 Dividends; Transfer Taxes; Withholdings; Escheat. No
dividends or distributions that are declared on shares of Parent Common Stock
after the Effective Time will be paid to persons entitled to receive
certificates representing shares of Parent Common Stock until such persons
surrender their Certificates. Subject to applicable law, upon such surrender,
there shall be paid, to the person in whose name the certificates representing
such shares of Parent Common Stock shall be issued, any dividends or
distributions with respect to such shares of Parent Common Stock which have a
record date after the Effective Time and shall have
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become payable between the Effective Time and the time of such surrender. In no
event shall the person entitled to receive such dividends or distributions be
entitled to receive interest thereon. As soon as practicable following the date
which is six months after the Effective Time, the Exchange Agent shall deliver
to the Surviving Corporation all cash, certificates and other documents in its
possession relating to the transactions described in this Agreement, and any
holders of Company Common Stock who have not theretofore complied with this
Article 1 shall look thereafter only to the Surviving Corporation for the
shares of Parent Common Stock, any dividends or distributions thereon, and any
cash in lieu of fractional shares thereof to which they are entitled pursuant
to this Article 1. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Company Common Stock for
any shares of Parent Common Stock, any dividends or distributions thereon or
any cash in lieu of fractional shares thereof delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws upon the
lapse of the applicable time periods provided for therein. Parent or the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of a Certificate
such amounts as Parent or the Exchange Agent are required to deduct and
withhold under the Code or any provision of state, local or foreign tax law
with respect to the making of such payment. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Certificate in respect of whom such deduction and withholding were made by
Parent or the Exchange Agent.
Section 1.9 No Fractional Securities. No certificates or scrip
representing less than one whole share of Parent Common Stock shall be issued
pursuant to this Agreement. In lieu of any such fractional share, each holder
of record of Company Common Stock who would otherwise have been entitled to
such fractional shares of Parent Common Stock shall be paid cash (without
interest) in an amount equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares of Parent Common
Stock issued pursuant to this Section 1.9. As soon as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (a) the number
of shares of Parent Common Stock delivered to the Exchange Agent by Parent over
(b) the aggregate number of whole shares of Parent Common Stock to be
distributed to such holders (such excess being herein called the "Excess
Shares"), and the Exchange Agent, as agent for such holders, shall sell the
Excess Shares at the then-prevailing prices on the New York Stock Exchange (the
"NYSE"). The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more members firms of the NYSE and shall be executed
in round lots to the extent practicable. The Exchange Agent shall use its best
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Parent shall pay all commissions, transfer taxes
and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
the Excess Shares. Until the net proceeds of such sale have been distributed to
such holders, the Exchange Agent shall hold such proceeds in trust for such
holders. As soon as practicable after the determination of the amount of cash
to be paid to the holders of Company Common Stock in lieu of any fractional
share interests, the Exchange Agent shall make available in accordance with
this Agreement such
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amounts to such holders. The fractional Parent Common Stock interests of each
such holder will be aggregated, and no such holder will receive cash in an
amount equal to or greater than the value of one whole share of Parent Common
Stock.
Section 1.10 No Further Rights; Closing of Company Transfer Books.
All shares of Parent Common Stock issued pursuant to this Article 1 shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to the corresponding shares of Company Common Stock, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
may have been declared or made by the Company on such shares of Company Common
Stock in accordance with the terms of this Agreement or prior to the date of
this Agreement and which remain unpaid at the Effective Time. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer
of shares of Company Common Stock shall thereafter be made on such stock
transfer books. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided in this
Article 1; provided, however, if any Certificate has not been surrendered prior
to five years after the Effective Time (or immediately prior to such earlier
date on which Parent Common Stock or any dividends or distributions with
respect to Parent Common Stock as contemplated by Section 1.8 in respect of
such Certificate would otherwise escheat to or become the property of any
Government), any such shares, cash, dividends or distributions in respect of
such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
Section 1.11 Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise
in the Surviving Corporation its right, title or interest in, to or under any
of the rights, properties or assets of either of Sub or the Company acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of Sub and the Company or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in such names and
on such behalf or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
Section 1.12 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Akin Gump Xxxxxxx Xxxxx & Xxxx
LLP, 0000 Xxx Xxxxxxxxx Xxxxxx XX, Xxxxxxxxxx, XX 00000, at 10:00 a.m., on the
next business day after the date on which all of the conditions set forth in
Article 6 are satisfied or waived or on such other date and at such other time
and place as Parent and the Company shall agree (such date, the "Closing
Date").
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub as
follows, subject to the exceptions and qualifications set forth in the Company
Disclosure Letter:
Section 2.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority and possesses all governmental
franchises and Permits (as defined in Section 2.14 hereof) necessary to enable
it to own, lease and operate its properties and assets and to carry on its
business as it is now being conducted, except where the failure to possess such
franchises and Permits has not had and would not be reasonably expected to have
a Company Material Adverse Effect (as defined in Section 8.11 hereof). The
Company is duly qualified as a foreign corporation or licensed to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed or in good standing has not had and would not reasonably
be expected to have a Company Material Adverse Effect. Section 2.1(a) of the
Company Disclosure Letter sets forth a list of the jurisdictions in which the
Company is qualified to do business.
(b) The only subsidiaries of the Company are those set
forth in Section 2.1(b) of the Company Disclosure Letter. Each subsidiary of
the Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority and possesses all governmental
franchises and Permits necessary to enable it to own, lease and operate its
properties and assets and to carry on its business as it is now being
conducted, except where the failure to possess such franchises and Permits has
not had and would not be reasonably expected to have a Company Material Adverse
Effect. Each subsidiary of the Company is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed or in good standing has
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
(c) All of the outstanding shares of capital stock of
each such subsidiary have been validly issued and are fully paid and
non-assessable and, except as set forth in Section 2.1(b) of the Company
Disclosure Letter, are owned by the Company, by another wholly owned subsidiary
of the Company or by the Company and another such wholly owned subsidiary, free
and clear of all pledges, claims, equities, options, liens, charges, rights of
first refusal, "tag" or "drag" along rights, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"). Except for
the capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in or security of any
corporation, partnership, limited liability company, joint venture or other
entity. The Company has delivered to Parent complete and correct copies of its
Certificate of Incorporation and
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Bylaws, each as amended to date and each of which is in full force and effect.
The Company is not in violation of any of these documents.
Section 2.2 Capitalization.
(a) The authorized capital stock of the Company consists
of 50,000,000 shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share ("Company Preferred Stock"). All of the issued
and outstanding shares of Company Common Stock and Company Preferred Stock have
been duly authorized and all of the shares of Company Common Stock have been
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights. As of June 30, 2003, 19,251,749 shares of Company Common
Stock were issued and outstanding, 2,188,484 shares of Company Common Stock
were reserved for issuance pursuant to outstanding Company Stock Options issued
under the Company's Amended and Restated 1998 Long-Term Incentive Plan (the
"Stock Option Plan") and no shares of Company Preferred Stock were issued and
outstanding. Such shares of Company Common Stock reserved for issuance under
the Stock Option Plan have not been issued and will not be issued prior to the
Effective Time, and no commitment has been or will be made for their issuance,
other than under the Company Stock Options described in the preceding sentence
and issued and outstanding under the Stock Option Plan as of the date of this
Agreement. Except as described in this Section 2.2(a) or as set forth in
Section 2.2(a) of the Company Disclosure Letter: (i) there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote ("Voting Company
Debt"); (ii) no shares of capital stock or other equity securities of the
Company are authorized and there are no outstanding securities, options,
warrants, calls, rights, convertible or exchangeable securities, "phantom"
stock rights, SARs, stock-based performance units, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound obligating the Company
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or any of its subsidiaries or obligating the Company
or any of its subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, unit, commitment, agreement,
arrangement or undertaking; (iii) there are not any outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire, or providing preemptive rights with respect to, any shares
of, or any outstanding options, warrants or rights of any kind to acquire any
shares of, or any outstanding securities that are convertible into or
exchangeable for any shares of, capital stock of the Company or any of its
subsidiaries; and (iv) there are no dividends accrued or declared, but not
paid, in respect of any of the capital stock of the Company.
(b) Except as set forth in Section 2.2(b) of the Company
Disclosure Letter, there are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound with respect to the voting of any shares of capital stock of the
Company or any of its subsidiaries or with respect to the registration of the
offering, sale or delivery of any shares of capital stock of the Company or any
of its subsidiaries under the Securities Act of 1933, as amended (the
"Securities Act").
8
(c) Section 2.2(c) of the Company Disclosure Letter sets
forth a list of: (i) all the holders of Company Stock Options; (ii) the number
of shares of Company Common Stock to which the Company Stock Options are
applicable; and (iii) the exercise price, date of grant, duration and vesting
schedule for each Company Stock Option. Except as set forth in Section 2.2(c)
of the Company Disclosure Letter, none of the Company Stock Options will
accelerate or vest upon the Company's entering into this Agreement or the
consummation of the transactions contemplated hereby.
Section 2.3 Authority Relative to this Agreement.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, the ancillary agreements
hereto and each instrument required hereby to be executed and delivered by the
Company prior to or at the Effective Time, to perform its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby (subject
to the Company Stockholder Approval (as defined in Section 2.3(b) below) with
respect to the Merger). The execution and delivery of this Agreement, the
ancillary agreements hereto and each instrument required hereby to be executed
and delivered by the Company prior to or at the Effective Time and the
performance of its obligations hereunder and thereunder and the consummation by
the Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
Company Stockholder Approval and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement and the ancillary
agreements hereto executed on the date hereof have been duly and validly
executed and delivered by the Company, and, assuming this Agreement and the
ancillary agreements hereto constitute valid and binding agreements of Parent
and Sub, the Agreement and the ancillary agreements hereto executed on the date
hereof constitute, and the ancillary agreements to be executed at the closing
when executed will constitute valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights
generally and (ii) general principles of equity (whether in a proceeding at law
or in equity).
(b) The only vote of holders of any class or series of
capital stock of the Company or any of its subsidiaries necessary to adopt or
approve this Agreement and the Merger is the adoption of this Agreement by the
holders of a majority of the outstanding shares of Company Common Stock (the
"Company Stockholder Approval"). The affirmative vote of the holders of any
capital stock or other securities of the Company or any of its subsidiaries, or
any of them, is not necessary to consummate the Merger other than as set forth
in the preceding sentence.
Section 2.4 Absence of Certain Changes. Except as specifically
disclosed in the Company's filings and reports under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") filed and publicly available prior
to the date of this Agreement or as set forth in Section 2.4 of the Company
Disclosure Letter, from January 1, 2003 through the date hereof, the Company
and its subsidiaries have conducted their business and operations only in the
9
ordinary course consistent with past practice, and during such period there has
not been any event, change, effect or development that has had or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and there has not occurred (i) any damage, destruction
or loss (whether or not covered by insurance) having or which reasonably could
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect; (ii) any declaration, setting aside or payment of any dividend
or distribution of any kind by the Company on any class of its capital stock or
any repurchase for value by the Company of any of its capital stock (except
upon the cashless exercise of Company Stock Options); (iii) any split,
combination or reclassification of any Company capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Company capital stock; (iv) any
material increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its directors, officers or key
employees or the creation of or any material increase in any bonus, insurance,
pension, severance or other employee benefit plan, payment or arrangement made
to, for or with any such director, officer or key employee, other than in the
ordinary course of business consistent with past practice; (v) any entry by the
Company or any of its subsidiaries into any commitment or transaction
(including, without limitation, any borrowing or capital expenditure) material
(individually or in the aggregate) to the Company or any of its subsidiaries
other than in the ordinary course of business; (vi) any material elections with
respect to Taxes by the Company or any of its subsidiaries or settlement or
compromise by the Company or any of its subsidiaries of any material Tax
liability or refund; (vii) any change by the Company or its subsidiaries in
accounting methods, principles or practices except as required by concurrent
changes in GAAP; (viii) any contract or agreement to take any action described
in this Section 2.4; or (ix) any merger, combination or consolidation of the
Company or any of its subsidiaries with another person, or any sale, lease,
exchange or other disposition of, or grant of any Lien with respect to, any of
the properties or assets of the Company or any of its subsidiaries that are
individually or in the aggregate, material to the business of the Company and
its subsidiaries, except for dispositions of excess or obsolete assets in the
ordinary course of business and consistent with past practice.
Section 2.5 Reports and Financial Statements.
(a) Since May 26, 1998, the date of its initial public
offering, the Company has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations
thereunder (collectively, the "Company SEC Documents"), all of which have
complied as of their respective filing dates, or, if amended, as of the date of
the last such amendment, in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules
promulgated thereunder. None of such forms, reports or documents at the time
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements
10
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent information contained in any Company SEC
Document has been revised or superseded by a later filed Company SEC Document,
none of the Company SEC Documents (including any and all financial statements
included therein) contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the Company SEC Documents (including the notes thereto) at the time filed
complied in all material respects as to form with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and in Management's Discussion
and Analysis of Financial Condition and Results of Operation) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (and include, in the case
of any unaudited interim financial statements, reasonable accruals for normal
year-end adjustments). No subsidiaries of the Company are required to file
periodic reports with the SEC under the Exchange Act.
(b) Since May 26, 1998, the Company and its subsidiaries
have filed all reports required to be filed with any Governmental Entity (as
hereafter defined) other than the SEC, including state securities
administrators, except where the failure to file any such reports of the
Company and its subsidiaries has not had and would not reasonably be expected
to have a Company Material Adverse Effect. Such reports of the Company and its
subsidiaries were prepared in accordance with the requirements of applicable
law, except where the failure to prepare any such reports in accordance with
the requirements of applicable law has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
Section 2.6 Information in Joint Proxy Statement and Registration
Statement. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in (i) the Registration Statement
to be filed with the SEC by Parent on Form S-4 under the Securities Act for the
purpose of registering the shares of Parent Common Stock to be issued in
connection with the Merger (the "Registration Statement") or (ii) the joint
proxy statement/prospectus to be distributed in connection with the Company's
and Parent's respective meetings of stockholders to vote in connection with
this Agreement (the "Proxy Statement") will, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time, or, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments
or supplements thereto, and at the time of the respective meetings of
stockholders of the Company and Parent to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. As of the date of its initial mailing and as of the date of the
respective meetings of stockholders of the Company and Parent, the Proxy
Statement will comply as to form in all material respects with the applicable
provisions 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 therein based on information supplied by Parent or its
representatives for inclusion in the Proxy Statement or with respect to
information concerning Parent or any of its subsidiaries incorporated by
reference in the Proxy Statement.
11
Section 2.7 Consents and Approvals; No Violation. Subject to
obtaining the Company Stockholder Approval and the taking of the actions
described in the immediately succeeding sentence, the execution, delivery and
performance of this Agreement do not, and the consummation of the transactions
contemplated hereby (including the changes in ownership of the shares of
Company Common Stock or the composition of the Board of Directors of the
Company) and compliance with the provisions of this Agreement will not,
conflict with, or result in any material violation of, or default (with or
without notice or lapse to time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under, or result in the creation of any Lien upon any of the
material properties or material assets of the Company or any of its
subsidiaries under, or result in the termination of, or require that any
consent be obtained or any notice be given with respect to, (i) the certificate
of incorporation or bylaws of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) except as set forth
in Section 2.7 of the Company Disclosure Letter, any loan or credit agreement,
note, bond, mortgage, indenture, lease, license or other agreement, instrument,
contract or Permit applicable to the Company or any of its subsidiaries or
their respective properties or assets, (iii) any judgment, order, writ,
injunction, decree, law, statute, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries or their respective properties or assets
or (iv) any licenses to which the Company or any of its subsidiaries is a
party, other than, in each such case, any such conflicts, violations, defaults,
rights, Liens, losses of a material benefit, consents or notices that have not
and would not reasonably be expected to have a Company Material Adverse Effect.
No consent, approval, order or authorization of, or registration, declaration
or filing with, any Federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity") is required
by the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for (i) the filing of a premerger
notification and report form by the Company under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing
with the SEC of (x) the Proxy Statement relating to the approval by the
Company's and the Parent's respective stockholders of this Agreement and (y)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (iii)
the filing of the Certificate of Merger pursuant to the DGCL and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made has not had and would
not reasonably be expected to have a Company Material Adverse Effect.
Section 2.8 Brokerage Fees and Commissions. Except for those fees
and expenses payable to Xxxxxxx Xxxxx Barney, Inc. (the "Company Financial
Advisor"), no person is entitled to receive any investment banking, brokerage
or finder's fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf
of the Company or any of its subsidiaries or by any affiliate of the Company or
any of its subsidiaries.
Section 2.9 Litigation. Except as disclosed in the Company SEC
Documents or in Section 2.9 of the Company Disclosure Letter, (a) there is no
claim, suit, action or proceeding (including arbitration proceedings) pending
or, to the knowledge of the Company, threatened
12
against the Company or any of its subsidiaries, any of their properties, assets
or business, or to the knowledge of the Company, any of the Company's or its
subsidiaries' current or former directors or officers (during the period they
served as such) or any other person whom the Company has agreed to indemnify
that has had or would reasonably be expected to have a Company Material Adverse
Effect, (b) there is no judgment, award, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
its subsidiaries, any of their properties, assets or business, or, to the
knowledge of the Company, any of the Company's or its subsidiaries' current or
former directors or officers (during the period they served as such) or any
other person whom the Company has agreed to indemnify which has had or would
reasonably be expected to have a Company Material Adverse Effect; (c) neither
the Company or any of its subsidiaries nor any of their officers, directors or,
to the knowledge of the Company, employees has been permanently or temporarily
enjoined or prohibited by order, judgment or decree of any Government Entity,
other regulatory or self-regulatory body or association or arbitrator from
engaging in or continuing any conduct or practice in connection with the
business engaged in by the Company; (d) there is not in existence any order,
judgment or decree of any Government Entity, other regulatory or
self-regulatory body or association or arbitrator enjoining or prohibiting the
Company or any of its subsidiaries from taking, or requiring the Company or any
of its subsidiaries to take, any action of any kind or to which the Company,
its subsidiaries or any of its business, properties or assets are subject or
bound; and (e) neither the Company nor any of its subsidiaries is in default in
any material respect under any order, writ, injunction or decree of any
Government Entity, other regulatory or self-regulatory body or association or
arbitrator.
Section 2.10 [INTENTIONALLY LEFT BLANK].
Section 2.11 ERISA Compliance.
(a) Section 2.11(a) of the Company Disclosure Letter
sets forth a list of all "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or incentive plans or other material written employee programs,
arrangements or agreements currently maintained by, sponsored in whole or in
part by, or contributed to by the Company or its subsidiaries or any entity
required to be aggregated with the Company (each, an "ERISA Affiliate")
pursuant to Section 414 of the Code for the benefit of present and former
employees or directors of the Company or its subsidiaries or their
beneficiaries (collectively, the "Benefit Plans"). With respect to each Benefit
Plan, true and complete copies of all material documents embodying and relating
to the Benefit Plan have been delivered or made available to Parent.
(b) Except for any of the following which has not had
and would not reasonably be expected to have a Company Material Adverse Effect
and except as disclosed on Section 2.11(b) of the Company Disclosure Letter:
(i) each of the Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) or 501 of the Code has been determined by the Internal Revenue
Service to be so qualified (which may be a favorable determination letter
issued to a prototype sponsor) and such Benefits Plans are so qualified in both
form and operation; (ii) each of the Benefit Plans is in compliance with its
terms and the applicable terms of ERISA and
13
the Code and any other applicable laws, rules and regulations; (iii) neither
the Company (including any subsidiary thereof) nor any ERISA Affiliate has ever
contributed to, contributes to, has ever been required to contribute to, or
otherwise participated in or participates in or in any way, directly or
indirectly, or has any liability with respect to any plan subject to Section
412 of the Code, Section 302 of ERISA or Title IV of ERISA, including, without
limitation, any "multiemployer plan" (within the meaning of Sections 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code), or any single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA) which is
subject to Sections 4063 and 4064 of ERISA; (iv) no claim, lawsuit, arbitration
or other action has been instituted, or to the Company's knowledge, threatened
or against any Benefit Plan; and (v) neither the Company nor any of its
subsidiaries maintains, contributes to, or in any way provides for any benefits
of any kind (other than under Section 4980B of the Code, the Federal Social
Security Act, or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee.
Section 2.12 Taxes. Except as set forth in Section 2.12 of the
Company Disclosure Letter:
(a) all federal income Tax Returns (as defined in this
Section 2.12. below) and all other material Tax Returns that are required to be
filed by or with respect to the Company or any of its subsidiaries have been
timely filed, and all such Tax Returns are true, complete and accurate in all
material respects and correctly reflect in all material respects the income, or
other measure of Tax (as defined in this Section 2.12. below), required to be
shown thereon; all Taxes shown as due on such returns have been paid in full;
and the most recent financial statements contained in the Company SEC Documents
reflect an adequate reserve for all Taxes of the Company and its subsidiaries
for all taxable periods and portions thereof through the date of such financial
statements;
(b) no Tax Return of the Company or any of its
subsidiaries is under audit or examination by any taxing authority, and no
written notice of such an audit or examination has been received by the Company
or a subsidiary; there is no material dispute or claim concerning any Tax
liability of the Company or any of its subsidiaries claimed or raised by any
authority in writing;
(c) there is not in force any extension of time with
respect to the due date for the filing of any Tax Return or any waiver or
agreement for any extension of time for the assessment or payment of any Tax
due with respect to the period covered by any Tax Return;
(d) since May 26, 1998 (the date of the Company's
organization), none of the Company and its subsidiaries has been a member of an
affiliated group filing a consolidated federal income Tax Return other than the
affiliated group of which the Company is the common parent corporation; and
(e) neither the Company nor any of its subsidiaries is
bound by any tax sharing, tax indemnity or similar agreement with respect to
Taxes.
14
As used herein, "Tax Returns" shall mean all material returns and
reports of or with respect to any Tax which are required to be filed by or with
respect to the Company or any of its subsidiaries other than returns or reports
of or with respect to Benefit Plans, and "Taxes" shall mean (i) all taxes,
charges, imposts, tariffs, fees, levies or other similar assessments or
liabilities, including income taxes, ad valorem taxes, excise taxes,
withholding taxes, stamp taxes or other taxes of or with respect to gross
receipts, premiums, real property, personal property, windfall profits, sales,
use, transfers, licensing, employment, payroll and franchises imposed by or
under any statute, law, rule or regulation, and such terms shall include any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any such tax or any contest or
dispute thereof; (ii) liability of the Company or any fiduciary for the payment
of any amounts of the type described in clause (i) as a result of being a
member of an affiliated, combined consolidated or unitary group for any taxable
period; and (iii) liability of the Company or any subsidiary for the payment of
any amounts of the type described in clauses (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
Section 2.13 No Excess Parachute Payments; Termination Payments;
Section 162(m) of the Code. Except as listed in Section 2.13 of the Company
Disclosure Letter: (i) any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated hereby by any stockholder, employee, officer or director of either
the Company or any of its subsidiaries or any of their affiliates who is a
"disqualified individual" (as is defined in proposed Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Benefit Plan would not be characterized as an
"excess parachute payment" (as is defined in Section 280G(b)(1) of the Code);
and (ii) there are no payments that the Company or any of its subsidiaries or
the Surviving Corporation is or would be required to make to any of the
Company's current or former employees or to any third party which payment (a)
is contingent upon a change of control of the Company or any of its
subsidiaries or payable as a result of the transactions contemplated hereby,
including, without limitation, the termination of any of the Company's or any
of its subsidiaries' employees after the Effective Time or (b) will not be
fully deductible as a result of Section 162(m) of the Code.
Section 2.14 Compliance with Applicable Laws. Except for any of
the following which would not reasonably be expected to have a Company Material
Adverse Effect and except as disclosed on Section 2.14 of the Company
Disclosure Letter:
(a) (i) the Company and its subsidiaries have, and are
in compliance with the terms of, all Federal, state, local and foreign
governmental approvals, authorizations, certificates, franchises, licenses,
notices, permits (including Environmental Permits (as defined below)) and
rights ("Permits") necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, (ii) there has occurred
no default under any such Permit, (iii) with respect to such Permits, no action
or proceeding is pending or, to the knowledge of the Company, threatened in
writing against the Company, (iv) the business of the Company and its
subsidiaries has been and is being conducted in compliance with all applicable
laws, including, without limitation, all laws concerning privacy and/or data
protection; (v) no investigation or review by any Government Entity of the
Company or any of its subsidiaries is pending or, to the knowledge of the
Company, threatened in writing; (vi) neither the Company nor any of its
15
subsidiaries has received any written communication in the past two years from
a Government Entity that alleges that the Company or any of its subsidiaries is
not in compliance in any material respect with any applicable law; and (vii)
the management contracts relating to the management of real or leased property
entered into by the Company and its subsidiaries comply with all applicable
laws. "Environmental Permit" means any permit, license, approval or other
authorization issued under any applicable law, regulation and other requirement
of any country, state, municipality or other subdivision thereof relating to
pollution or protection of health or the environment, including laws,
regulations or other requirements governing discharges, releases of Hazardous
Materials (as defined in Section 2.14(d) below) into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials;
(b) each of the Company and its subsidiaries is in
compliance with all applicable Environmental Laws (as hereafter defined);
(c) each of the Company and its subsidiaries and their
respective properties, assets, businesses and operations is, and has been, and
their respective properties, assets, businesses and operations are, and have
been, in compliance with all applicable Environmental Laws and Environmental
Permits. "Environmental Laws" means any federal, state, local or foreign
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction, including the requirement to register underground storage tanks,
relating to: (i) emissions, discharges, releases or threatened releases of
Hazardous Material into the environment, including, without limitation, into
ambient air, soil, sediments, land surface or subsurface, buildings or
facilities, surface water, groundwater, publicly-owned treatment works, septic
systems or land; or (ii) the generation, treatment, storage, recycling,
disposal, use, handling, manufacturing, transportation or shipment of Hazardous
Material; including without limitation, the following statutes, their
implementing regulations and any state corollaries: the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean
Water Act, 33 U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; and
(d) the Company is not aware that, during the period of
ownership or operation by the Company and its subsidiaries of any of their
properties, there has been any Release (as defined below) of Hazardous Material
in, on, under, from or affecting such properties, any surrounding site or any
off-site location. "Hazardous Materials" means (l) hazardous materials,
pollutants or contaminants, medical, hazardous or infectious wastes, hazardous
waste constituents, hazardous chemicals, hazardous or toxic pollutants, and
hazardous or toxic substances as those terms are defined in or regulated by any
Environmental Law, (2) petroleum, including crude oil and any fractions
thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4)
radioactive materials including, without limitation, source byproduct or
special nuclear materials and (5) pesticides. "Releases" means spills, leaks,
discharges, disposal, pumping, pouring, emissions, injection, emptying,
leaching or dumping.
16
Section 2.15 State Takeover Statutes. The Company has taken all
action necessary to render the restrictions of Section 203 of the DGCL
inapplicable to Parent, Sub and their respective affiliates, and to the Merger,
this Agreement and the other transactions contemplated hereby. No other "fair
price," "moratorium," "control share acquisition," "business combination," or
other state takeover statute or similar statute or regulation applies to this
Agreement or any of the other transactions contemplated hereby. As a result of
the foregoing actions, the only action required to authorize the Merger is the
Company Stockholder Approval and no further action is required to authorize the
other transactions contemplated hereby.
Section 2.16 Contracts. All of the contracts that are required to
be described in the Company SEC Documents or required to be filed as exhibits
thereto have been described therein or filed therewith as required. Except for
such contracts required to be described or filed in the Company SEC Documents
as described above or as set forth on Section 2.16 of the Company Disclosure
Letter, none of the Company or its subsidiaries is party to any: (a) employment
agreement or consulting agreement involving an aggregate dollar amount equal to
or in excess of $100,000; (b) union or collective bargaining agreement; (c)
contract which purports to limit in any material respect the manner in which,
or the localities in which, the Company or any of its subsidiaries is entitled
to conduct all or any material portion of the business of the Company or any of
its subsidiaries; (d) contracts under which the Company or any of its
subsidiaries has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money in excess of $100,000, or any capitalized lease obligation or
under which it has imposed, or has incurred, an Encumbrance on any of its
assets; (e) contracts under which the Company or any of its subsidiaries is
obligated to indemnify former or current directors, officers and employees; or
(f) contract of any sort, other than in the ordinary course of business, which
(i) is not terminable by the Company or its subsidiary, as applicable, on
ninety (90) or fewer days' notice at any time without penalty and contemplates
the receipt or payment by the Company or its subsidiary, as applicable, of more
than $250,000, (ii) contemplates any joint venture, partnership or similar
arrangement extending beyond six (6) months or involving equity or investments
of more than $250,000, or (iii) is otherwise material to the Company and its
subsidiaries taken as a whole. All such Contracts are in full force and effect
and are valid and enforceable with respect to the Company or its subsidiary, as
applicable, except as enforceability may be subject to (x) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (y) general principles of equity (whether in a
proceeding at law or in equity), and to the knowledge of the Company and its
subsidiaries, with respect to each other party thereto, in accordance with
their respective terms. Neither the Company nor any of its subsidiaries is in
violation of, or in default under (nor does there exist any condition which
upon the passage of time or the giving of notice would cause such a violation
of or default under) any of the aforesaid contracts, except for violations or
defaults that have not and would not reasonably be expected to have a Company
Material Adverse Effect.
Section 2.17 Labor Matters. Except to the extent set forth in
Section 2.17 of the Company Disclosure Letter: (a) there is no material unfair
labor practice complaint against the Company or any of its subsidiaries pending
or, to the knowledge of the Company, threatened by or before the National Labor
Relations Board or any other Governmental Entity; (b) there is no labor strike,
or material dispute, slowdown, representation campaign or work stoppage pending
or, to the knowledge of the Company, threatened against or affecting the
Company or any of its
17
subsidiaries; (c) no material grievance or arbitration proceeding arising out
of or under any collective bargaining agreement is pending and no claim
therefor has been asserted against the Company or its subsidiaries; and (d)
neither the Company or any of its subsidiaries has experienced any material
work stoppage since January 1, 2001. Each of the Company and its subsidiaries
is in compliance in all material respects with all applicable laws relating to
employment and employment practices, terms and conditions of employment, wages
and hours.
Section 2.18 Title to Properties. The Company and its subsidiaries
have good and marketable title to, or valid leasehold interests in, its
properties sufficient to operate such properties and to conduct its business as
currently conducted, except for (i) the Company Permitted Encumbrances and (ii)
other defects in such titles, or any easements, restrictive covenants or
similar encumbrances that have not had and would not reasonably be expected to
have a Company Material Adverse Effect. For purposes of this Agreement:
"Company Permitted Encumbrances" means: (i) encumbrances for assessments,
taxes, water, sewer and other similar charges not yet due and payable or that
the Company or any of its subsidiaries is contesting in good faith through
appropriate proceedings; (ii) easements or reservations thereof, rights of way,
highway and railroad crossings, sewers, electric and other utility lines,
telegraph and telephone lines, zoning, building code and other covenants,
conditions and restrictions as to the use of the real property; (iii) vault
rights; (iv) encumbrances previously disclosed to Parent; (v) liens securing
the claims of materialmen, landlords and others provided payment is not yet
delinquent; (vi) any leases, subleases or licenses listed on Section 2.24 of
the Company Disclosure Letter; (vii) all encumbrances relating to liens
securing borrowed money to be released at or prior to the Closing; (viii) any
and all matters and encumbrances (including, without limitation, fee mortgages
or ground leases) affecting the leased real property of the Company or its
subsidiaries, not created or granted by the Company or its subsidiaries; and
(ix) any subordination or attornment agreement between the Company and its
subsidiaries and the lender for any of the landlords of the Company or its
subsidiaries.
Section 2.19 Undisclosed Liabilities. Except as disclosed in the
Company SEC Documents or accrued or reserved against on the March 31, 2003
balance sheet included in the Company SEC Documents, or as set forth in Section
2.19 of the Company Disclosure Letter, and except for liabilities incurred in
the ordinary course of business since March 31, 2003 which individually and in
the aggregate are not material or liabilities under this Agreement, the Company
and each of its subsidiaries does not have any material (individually or in the
aggregate) liabilities or obligations of any nature (whether absolute,
contingent or otherwise).
Section 2.20 Opinion of Company Financial Advisor. The Board of
Directors of the Company has received the opinion of the Company Financial
Advisor, dated August 4, 2003 (the "Company Fairness Opinion"), substantially
to the effect that as of the date of such Company Fairness Opinion the Exchange
Ratio is fair from a financial point of view to the holders of the Company
Common Stock. A true, correct and complete copy of the written opinion
delivered by the Company Financial Advisor, as well as a true and correct copy
of the agreement for the Company's engagement of the Company Financial Advisor,
have been delivered to Parent by the Company. The Company has been authorized
by the Company Financial Advisor to permit the inclusion of the Company
Fairness Opinion (and, subject to prior review and consent by the
18
Company Financial Advisor, a reference thereto) in the Registration Statement
and the Proxy Statement.
Section 2.21 Insurance. The Company and its subsidiaries maintain
policies of fire and casualty, liability and other forms of insurance (other
than insurance under any Benefit Plans set forth in Section 2.11(a) of the
Company Disclosure Letter) in such amounts, with such deductibles and against
such risks and losses as are, in the Company's judgment, reasonable for the
assets and properties of the Company and its subsidiaries and customary in the
Company's industry, except where the failure to maintain any such policy has
not had and would not reasonably be expected to have a Company Material Adverse
Effect. As of the date of this Agreement, except as have not had and would not
reasonably be expected to have a Company Material Adverse Effect and except as
set forth in Section 2.21 of the Company's Disclosure Schedule, all such
policies are in full force and effect, all premiums due and payable thereon
have been paid, and no notice of cancellation, non-renewal or termination has
been received with respect to any such policy.
Section 2.22 Tax Matters. The Company knows of no fact or
circumstance which is reasonably likely to cause the Merger to be treated other
than as a tax-free reorganization under Section 368(a) of the Code.
Section 2.23 No Knowledge of Breach. The Company has no knowledge
on the date hereof of any facts or circumstances which would cause any
representation or warranty of Parent or Sub contained in this Agreement or in
any ancillary agreements to be misleading or incorrect in any respect and is
not aware of any statement which was omitted from any such representation or
warranty which is necessary to make the statements made in any such
representation or warranty not misleading.
Section 2.24 Real Property; Leases.
(a) Section 2.24 of the Company Disclosure Letter sets
forth a complete and accurate list of the locations of all real property owned
and leased by the Company or any of its subsidiaries (collectively with all
improvements located thereon and appurtenances thereto, the "Real Property").
(b) No portion of the Real Property is subject to any
order to be sold or is being condemned, expropriated or otherwise taken by any
Government Entity with or without payment or compensation therefor, nor, to the
knowledge of the Company and its subsidiaries, has any such condemnation,
expropriation or taking been threatened or proposed.
(c) There are no pending or, to the knowledge of the
Company and its subsidiaries, threatened condemnation proceedings, lawsuits, or
administrative actions relating to any of the Real Property.
(d) Except as described in Section 2.24(d) of the
Company Disclosure Letter, neither the Company nor any of its subsidiaries has
entered into any contract, agreement or
19
arrangement granting to any person the right of or use or occupancy of any
material portion of the Real Property.
Section 2.25 Intellectual Property.
As used herein, "Intellectual Property" means all patents, patent
applications, registered and unregistered trademarks, trade names, service
marks, and logos, registered and unregistered copyrights, proprietary software,
technology, know-how, trade secrets, processes, formulas, techniques, licenses
(other than for off-the-shelf software programs that have not been customized
for the Company's use) and domain names, used in or necessary to the business
of the Company and its subsidiaries as now being conducted. Section 2.25 of the
Company Disclosure Letter sets forth a complete and accurate list of all U.S.
and foreign (i) patents and patent applications, (ii) trademark and service
xxxx registrations, trademark and service xxxx applications and material
unregistered trademarks and service marks, (iii) Internet domain name
registrations, (iv) copyright registrations, copyright applications and
material unregistered copyrights, and (v) proprietary software licenses, that
are material to the business or operations of the Company and its subsidiaries
taken as a whole; provided, however, that all items described in (i) through
(v) above used in or necessary to the use of the First Resort Software as
currently used by the Company and its Subsidiaries, are listed without regard
to materiality in Section 2.25 of the Company Disclosure Letter. Except for any
of the following which would not reasonably be expected to have a Company
Material Adverse Effect with respect to (a), (b) and (c) but not (d) below:
(a) The Company or one of its subsidiaries owns or is
licensed or otherwise has the full and unrestricted right to use throughout the
world, without the payment of royalties or other further consideration except
as indicated in Section 2.25 of the Company Disclosure Letter, all of the
Intellectual Property. No intellectual property rights, privileges, licenses,
contracts or other agreements, instruments or evidences of interest, other than
(i) the Intellectual Property, and (ii) off-the-shelf software programs that
have not been customized for the Company's use, are material to the business
and operations of the Company and its subsidiaries (taken as a whole) as now
being conducted. Neither the Company nor any of its subsidiaries is a party to
any agreement which imposes on the Company any obligation of any kind, matured
or unmatured, fixed or contingent, or creates any rights of any kind in favor
of any other person or entity with respect to the Intellectual Property. Unless
specified in Section 2.25 of the Company Disclosure Letter, all of the patents,
registered trademarks and registered copyrights owned by the Company and its
subsidiaries have been duly registered in, filed in or issued by the United
States Patent and Trademark Office or Register of Copyrights or the
corresponding offices of other countries as identified in Section 2.25 of the
Company Disclosure Letter, and have been properly maintained and renewed,
consistent with commercially reasonable business practices, in accordance with
all applicable provisions of law and administrative regulations in the United
States and each such country. All filing, amendment, issue and maintenance or
other fees due and owing to the United States Patent and Trademark Office and
the United States Copyright Office and any fees or payments due and owing to
any governmental agency, office or department of any other country in
connection with the Intellectual Property, have been paid in full.
20
(b) In any instance where the Company's or its
subsidiaries' rights to Intellectual Property arise under a license or similar
agreement (other than for off-the-shelf software programs that have not been
customized for their use), this is indicated in Section 2.25 of the Company
Disclosure Letter, and such rights are licensed exclusively to the Company or
its subsidiaries, except as indicated in Section 2.25 of the Company Disclosure
Letter. Except as indicated on Section 2.25 of the Company Disclosure Letter,
no other person has an interest in or right or license to use any of the
Intellectual Property. None of the Intellectual Property owned by the Company
or its subsidiaries is, to the Company's knowledge, being infringed by others,
or is subject to any outstanding order, decree, judgment, or stipulation. To
the knowledge of the Company no litigation (or other proceedings in or before
any court or other governmental, adjudicatory, arbitral, or administrative
body) relating to the Intellectual Property is pending or threatened, nor is
there any basis for any such litigation or proceeding. The Company and each of
its subsidiaries maintains reasonable security measures for the preservation of
the secrecy and proprietary nature of such of the Intellectual Property as
constitute trade secrets or other confidential information.
(c) Neither the Company, any of its subsidiaries, nor,
to the Company's knowledge, any employees of or consultants to the Company or
any of its subsidiaries in connection with their employment has infringed or
made unlawful use of, or is infringing or making unlawful use of, any
proprietary or confidential information of any person, including without
limitation any former employer of any past or present employee or consultant of
the Company or its subsidiaries; and, to the knowledge of the Company, the
activities of the employees of or consultants to the Company and its
subsidiaries in connection with their employment do not violate any agreements
or arrangements that any such employees or consultants have with any former
employer or any other person. Except as described in Section 2.25 of the
Company Disclosure Letter, no litigation (or other proceedings in or before any
court or other governmental, adjudicatory, arbitral, or administrative body)
charging the Company or any of its subsidiaries with infringement or unlawful
use of any license, patent, trademark, service xxxx, trade name, logo,
copyright, trade secret or other proprietary right is pending, or to the
knowledge of the Company threatened.
(d) Any software proprietary to the Company or any of
its subsidiaries, including, without limitation, the First Resort Software, was
developed by either employees of the Company and its subsidiaries during the
time they were employed by the Company or its subsidiaries or independent
contractors under a written nondisclosure agreement or a
work-for-hire/assignment agreement, and all rights arising from the work of
such employees and independent contractors in respect of such software are
owned by the Company or its subsidiaries. The software developed by the
Company's employees or independent contractors does not include any inventions
of such employees or independent contractors made prior to the time at which
they were engaged by the Company, nor any intellectual property of any previous
employer of any such employee or independent contractor.
Section 2.26 Affiliate Transactions. Except as set forth in the
Company SEC Documents, compensation arrangements pursuant to employment
agreements or Benefit Plans or as described in Section 2.26 of the Company
Disclosure Letter, there are no contracts, indebtedness, arrangements or other
transactions between the Company or any of its subsidiaries,
21
on the one hand, and any (i) officer or director or key employee of the Company
or executive officer or director or key employee of any of its subsidiaries
that involves amounts in excess of $40,000 individually or collectively for
such individual, (ii) record or beneficial owner of five percent or more of any
class of the voting securities of the Company or (iii) affiliate (as such term
is defined in Rule 12b-2 promulgated under the Exchange Act) of any such
officer, director or beneficial owner, on the other hand. None of the Company,
any subsidiary of the Company, the directors or officers of the Company or any
subsidiary, nor any person acting on behalf of any of them, has made or
received any payment not categorized in a manner consistent with generally
accepted accounting principles and fully disclosed in the books and records of
the Company in connection with or in any way relating to or affecting the
Company.
Section 2.27 No Existing Acquisition Proposals. Except as set
forth in Section 2.27 of the Company Disclosure Letter, there is currently no
Acquisition Proposal (as defined in Section 5.1(e)) or Acquisition Proposal
Interest (as defined in Section 5.1(e)).
Section 2.28 Acquisitions. Section 2.28 of the Company Disclosure
Letter lists (i) each of the businesses or entities acquired by the Company or
its subsidiaries since January 1, 2003, (ii) the consideration paid by the
Company and its subsidiaries in connection with each such acquisition, (iii)
any remaining obligations or liabilities of the Company and its subsidiaries to
the sellers or their successors and assigns with respect to each such
acquisition, and (iv) any current disputes with the sellers or their successors
and assigns with respect to each such acquisition.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows,
subject to the exceptions and qualifications set forth in the Parent Disclosure
Letter:
Section 3.1 Organization and Qualification. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite
corporate power and authority and possesses all governmental franchises and
Permits necessary to enable it to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted, except where
the failure to possess such franchises and Permits has not had and would not be
reasonably expected to have a Parent Material Adverse Effect (as defined in
Section 8.11 hereof). Each of Parent and Sub is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed or in good standing has
not had and would not reasonably be expected to have a Parent Material Adverse
Effect.
Section 3.2 Capitalization.
(a) The authorized capital stock of Parent consists of
150,000,000 shares of Common Stock, par value $.01 per share ("Parent Common
Stock"), and 100,000,000 shares of
22
preferred stock, par value $.01 per share ("Parent Preferred Stock"). All of
the issued and outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and are not
subject to preemptive rights. As of July 30, 2003, 33,849,087 shares of Parent
Common Stock were issued and outstanding, 4,054,283 shares of Parent Common
Stock were reserved for issuance pursuant to outstanding stock options issued
under Parent's 1997 Omnibus Stock Option and Incentive Plan and no shares of
Parent Preferred Stock were issued and outstanding. Except as described in this
Section 3.2(a) or as set forth in Section 3.2(a) of the Parent Disclosure
Letter, no shares of capital stock or other equity securities of the Parent are
authorized and there are no outstanding securities, options, warrants, calls,
rights, convertible or exchangeable securities, "phantom" stock rights, SARs,
stock-based performance units, commitments, agreements, arrangements or
undertakings of any kind to which the Parent or any of its subsidiaries is a
party or by which any of them is bound obligating the Parent or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of Parent
or any of its subsidiaries or obligating Parent or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, unit, commitment, agreement, arrangement or undertaking.
(b) The authorized capital stock of Sub consists of 100
shares of Common Stock, par value $.001 per share, of which 100 shares, as of
the date hereof, were issued and outstanding. All of such outstanding shares
are owned by Parent, and are validly issued, fully paid and nonassessable.
(c) Parent and its subsidiaries, affiliates and
associates do not own any shares of the Company's voting stock (terms used in
this sentence and defined in Section 203 of the DGCL have the meaning given to
them in such section).
Section 3.3 Authority Relative to this Agreement.
(a) Each of Parent and Sub has all requisite corporate
power and authority to execute and deliver this Agreement, the ancillary
agreements hereto to which it is a party, and each instrument required hereby
to be executed and delivered by Parent or Sub prior to or at the Effective
Time, to perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby (subject to the Parent Stockholder
Approval (as defined in Section 3.3(b) below) with respect to the issuance of
the shares of Parent Common Stock issuable upon the Merger). The execution and
delivery of this Agreement, the ancillary agreements hereto to which it
is a party, and each instrument required hereby to be executed and delivered by
Parent or Sub prior to or at the Effective Time and the performance of its
obligations hereunder and thereunder and the consummation by Parent and Sub of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Parent and Sub and no other corporate proceedings on
the part of Parent or Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than the Parent
Stockholder Approval and the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement and the ancillary agreements
hereto to which it is a party executed on the date hereof have been duly and
validly executed and delivered by Parent and Sub, and, assuming this Agreement
and the ancillary agreements hereto to which it
23
is a party constitute valid and binding agreements of the Company, this
Agreement and the ancillary agreements hereto executed on the date hereof to
which it is a party constitute, and the ancillary agreements to be executed at
the closing will constitute, valid and binding agreements of Parent and Sub,
enforceable against the Parent and Sub in accordance with their terms, except
as enforceability may be subject to (i) any applicable bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights
generally and (ii) general principles of equity (whether in a proceeding at
law or in equity).
(b) The only vote of holders of any class or series of
capital stock of Parent necessary in connection with this Agreement and the
Merger is the approval of the issuance of the shares of Parent Common Stock to
the stockholders of the Company upon the Merger by the affirmative vote of a
majority of the outstanding shares of Parent Common Stock present in person or
represented by proxy at the meeting and entitled to vote (the "Parent
Stockholder Approval").
Section 3.4 Absence of Certain Changes. Except as specifically
disclosed in the Parent's filings and reports under the Exchange Act filed and
publicly available prior to the date of this Agreement or as set forth in
Section 3.4 of the Parent Disclosure Letter, from January 1, 2003 through the
date hereof, the Parent and its subsidiaries have conducted their business and
operations only in the ordinary course consistent with past practice, and
during such period there has not been any event, change, effect or development
that has had or would reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect; and there has not occurred (i) any
damage, destruction or loss (whether or not covered by insurance) having or
which reasonably could be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect; (ii) any declaration, setting aside or payment
of any dividend or distribution of any kind by the Parent on any class of its
capital stock or any repurchase for value by the Parent of any of its capital
stock (except upon the cashless exercise of Parent Stock Options); (iii) any
split, combination or reclassification of any Parent capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of Parent capital stock;
(iv) any material increase in the compensation payable or to become payable by
the Parent or any of its subsidiaries to any of its directors, officers or key
employees or the creation of or any material increase in any bonus, insurance,
pension, severance or other employee benefit plan, payment or arrangement made
to, for or with any such director, officer or key employee, other than in the
ordinary course of business consistent with past practice; (v) any entry by the
Parent or any of its subsidiaries into any commitment or transaction
(including, without limitation, any borrowing or capital expenditure) material
(individually or in the aggregate) to the Parent or any of its subsidiaries
other than in the ordinary course of business; (vi) any material elections with
respect to Taxes by the Parent or any of its subsidiaries or settlement or
compromise by the Parent or any of its subsidiaries of any material Tax
liability or refund; (vii) any change by the Parent or its subsidiaries in
accounting methods, principles or practices except as required by concurrent
changes in GAAP; (viii) any contract or agreement to take any action described
in this Section 3.4; or (ix) any merger, combination or consolidation of the
Parent or any of its subsidiaries with another person, or any sale, lease,
exchange or other disposition of, or grant of any lien with respect to, any of
the properties or assets of the Parent or any of its subsidiaries that are
individually or in the
24
aggregate, material to the business of the Parent and its subsidiaries, except
for dispositions of excess or obsolete assets in the ordinary course of
business and consistent with past practice.
Section 3.5 Reports and Financial Statements.
(a) The Parent has filed all required forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder (collectively, the
"Parent SEC Documents"), all of which have complied as of their respective
filing dates, or, if amended, as of the date of the last such amendment, in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act, and the rules promulgated thereunder. None of such forms,
reports or documents at the time filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
information contained in any Parent SEC Documents has been revised or
superseded by a later filed Parent SEC Document, none of the Parent SEC
Documents (including any and all financial statements included therein)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Parent included in the Parent SEC
Documents (including the notes thereto) at the time filed complied in all
material respects as to form with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operation and fairly present the consolidated
financial position of the Parent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (and include, in the case of any unaudited interim
financial statements, reasonable accruals for normal year-end adjustments). No
subsidiaries of the Parent are required to file periodic reports with the SEC
under the Exchange Act.
(b) The Parent and its subsidiaries have filed all
reports required to be filed with any Governmental Entity other than the SEC,
including state securities administrators, except where the failure to file any
such reports of the Parent and its subsidiaries has not had and would not
reasonably be expected to have a Parent Material Adverse Effect. Such reports
of the Parent and its subsidiaries were prepared in accordance with the
requirements of applicable law, except where the failure to prepare any such
reports in accordance with the requirements of applicable law has not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
Section 3.6 Information in Joint Proxy Statement and Registration
Statement. None of the information supplied or to be supplied by the Parent or
Sub for inclusion or incorporation by reference in (i) the Registration
Statement or (ii) the Proxy Statement will, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time, or, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the
25
mailing of the Proxy Statement and any amendments or supplements thereto, and
at the time of the respective meetings of stockholders of the Company and
Parent to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. As of the date of its
initial mailing and as of the date of the respective meetings of the
stockholders of the Company and Parent, the Proxy Statement will comply as to
form in all material respects with the applicable provisions of the Exchange
Act, and the rules and regulations promulgated thereunder, except that no
representation is made by the Parent with respect to statements made therein
based on information supplied by the Company or its representatives for
inclusion in the Proxy Statement or with respect to information concerning the
Company or any of its subsidiaries incorporated by reference in the Proxy
Statement.
Section 3.7 Consents and Approvals; No Violation. Subject to
obtaining the Parent Stockholder Approval and the taking of the actions
described in the immediately succeeding sentence, the execution, delivery and
performance of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions of this Agreement will
not, conflict with, or result in any material violation of, or default (with or
without notice or lapse to time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under, or result in the creation of any Lien upon any of the
material properties or material assets of the Parent or any of its subsidiaries
under, or result in the termination of, or require that any consent be obtained
or any notice be given with respect to, (i) the certificate of incorporation or
bylaws of the Parent or the comparable charter or organizational documents of
any of its subsidiaries, (ii) except as set forth in Section 3.7 of the Parent
Disclosure Letter, any loan or credit agreement, note, bond, mortgage,
indenture, lease, license or other agreement, instrument, contract or Permit
applicable to the Parent or any of its subsidiaries or their respective
properties or assets, (iii) any judgment, order, writ, injunction, decree, law,
statute, ordinance, rule or regulation applicable to the Parent or any of its
subsidiaries or their respective properties or assets or (iv) any licenses to
which the Parent or any of its subsidiaries is a party, other than, in each
such case, any such conflicts, violations, defaults, rights, Liens, losses of a
material benefit, consents or notices that have not and would not reasonably be
expected to have a Parent Material Adverse Effect. Except as set forth in
Section 3.7 of the Parent Disclosure Letter, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or other third party is required by the Parent or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
the Parent or the consummation by the Parent of the transactions contemplated
hereby, except for (i) the filing of a premerger notification and report form
by the Parent under the HSR Act, (ii) the filing with the SEC of (x) the
Registration Statement and the Proxy Statement relating to the approval by the
Company's and the Parent's respective stockholders of this Agreement and (y)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (iii)
the filing of the Certificate of Merger pursuant to the DGCL and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made has not had and would
not reasonably be expected to have a Parent Material Adverse Effect.
26
Section 3.8 Brokerage Fees and Commissions. Except for those fees
and expenses payable to Deutsche Bank Securities Inc. (the "Parent Financial
Advisor"), no person is entitled to receive any investment banking, brokerage
or finder's fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf
of the Parent or any of its subsidiaries or by any affiliate of the Parent or
any of its subsidiaries.
Section 3.9 Litigation. Except as disclosed in the Parent SEC
Documents or in Section 3.9 of the Parent Disclosure Letter, (a) there is no
claim, suit, action or proceeding (including arbitration proceedings) pending
or, to the knowledge of the Parent, threatened against the Parent or any of its
subsidiaries, any of their properties, assets or business, or to the knowledge
of the Parent, any of the Parent's or its subsidiaries' current or former
directors or officers (during the period they served as such) or any other
person whom the Parent has agreed to indemnify that has had or would reasonably
be expected to have a Parent Material Adverse Effect; (b) there is no judgment,
award, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Parent or any of its subsidiaries, any of
their properties, assets or business, or to the knowledge of the Parent, any of
the Parent's or its subsidiaries' current or former directors or officers
(during the period they served as such) or any other person whom the Parent has
agreed to indemnify which has had or would reasonably be expected to have a
Parent Material Adverse Effect; (c) neither the Parent or any of its
subsidiaries nor any of their officers, directors or, to the knowledge of
Parent, employees has been permanently or temporarily enjoined or prohibited by
order, judgment or decree of any Government Entity, other regulatory or
self-regulatory body or association or arbitrator from engaging in or
continuing any conduct or practice in connection with the business engaged in
by the Parent; (d) there is not in existence any order, judgment or decree of
any Government Entity, other regulatory or self-regulatory body or association
or arbitrator enjoining or prohibiting the Parent or any of its subsidiaries
from taking, or requiring the Parent or any of its subsidiaries to take, any
action of any kind or to which the Parent, its subsidiaries or any of its
business, properties or assets are subject or bound; and (e) neither the Parent
nor any of its subsidiaries is in default in any material respect under any
order, writ, injunction or decree of any Government Entity, other regulatory or
self-regulatory body or association or arbitrator.
Section 3.10 Compliance with Applicable Laws. Except for any of
the following which would not reasonably be expected to have a Parent Material
Adverse Effect and except as disclosed on Section 3.10 of the Parent Disclosure
Letter:
(a) (i) the Parent and its subsidiaries have, and are in
compliance with the terms of, all Permits and all Intellectual Property
necessary for it to own, lease or operate its properties and assets and to
carry on its business as now conducted, (ii) there has occurred no default
under any such Permit, (iii) with respect to such Permits, no action or
proceeding is pending or, to the knowledge of the Parent, threatened in writing
against the Parent, (iv) the business of the Parent and its subsidiaries has
been and is being conducted in compliance with all applicable laws, including,
without limitation, all laws concerning privacy and/or data protection; (v) no
investigation or review by any Government Entity of the Parent or any of its
subsidiaries is pending or, to the knowledge of the Parent, threatened in
writing; and (vi) neither the Parent nor any of its subsidiaries has received
any written communication in the past two years from a
27
Government Entity that alleges that the Parent or any of its subsidiaries is
not in compliance in any material respect with any applicable laws;
(b) each of the Parent and its subsidiaries is in
compliance with all applicable Environmental Laws;
(c) each of the Parent and its subsidiaries and their
respective properties, assets, businesses and operations is, and has been, and
their respective properties, assets, businesses and operations are, and have
been, in compliance with all applicable Environmental Laws and Environmental
Permits; and
(d) the Parent is not aware that, during the period of
ownership or operation by the Parent and its subsidiaries of any of their
properties, there has been any Release of Hazardous Material in, on, under,
from or affecting such properties, any surrounding site or any off-site
location.
Section 3.11 Contracts. All of the contracts that are required to
be described in the Parent SEC Documents or required to be filed as exhibits
thereto have been described therein or filed therewith as required. All such
Contracts are in full force and effect and are valid and enforceable with
respect to the Parent or its subsidiary, as applicable, except as
enforceability may be subject to (x) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights
generally, and (y) general principles of equity (whether in a proceeding at law
or in equity), and to the knowledge of the Parent and its subsidiaries, with
respect to each other party thereto, in accordance with their respective terms.
Neither the Parent nor any of its subsidiaries is in violation of, or in
default under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or default under)
any of the aforesaid contracts, except for violations or defaults that have not
and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 3.12 Undisclosed Liabilities. Except as disclosed in the
Parent SEC Documents or accrued or reserved against on the March 31, 2003
balance sheet included in the Parent SEC Documents, or as set forth in Section
3.12 of the Parent Disclosure Letter, and except for liabilities incurred in
the ordinary course of business since March 31, 2003 which individually and in
the aggregate are not material or liabilities under this Agreement, the Parent
and each of its subsidiaries does not have any material (individually or in the
aggregate) liabilities or obligations of any nature (whether absolute,
contingent or otherwise).
Section 3.13 Opinion of Parent Financial Advisor. The Parent has
received the opinion of the Parent Financial Advisor, dated August 4, 2003 (the
"Parent Fairness Opinion"), substantially to the effect that as of the date of
the Parent Fairness Opinion the Exchange Ratio is fair from a financial point
of view to the Parent, a signed copy of which written opinion has been
delivered to Parent. The Parent has been authorized by the Parent Financial
Advisor to permit the inclusion of the Parent Fairness Opinion (and, subject to
prior review and consent by the Parent Financial Advisor, a reference thereto)
in the Registration Statement and the Proxy Statement.
28
Section 3.14 Tax Matters. The Parent knows of no fact or
circumstance which is reasonably likely to cause the Merger to be treated other
than as a tax-free reorganization under Section 368(a) of the Code.
Section 3.15 Affiliate Transactions. Except as set forth in the
Parent SEC Documents, compensation arrangements pursuant to employment
agreements or employee benefit plans or as described in Section 3.15 of the
Parent Disclosure Letter, there are no contracts, indebtedness, arrangements or
other transactions between the Parent or any of its subsidiaries, on the one
hand, and any (i) officer or director of the Parent or executive officer or
director or key employee of any of its subsidiaries, (ii) record or beneficial
owner of five percent or more of any class of the voting securities of the
Parent or (iii) affiliate (as such term is defined in Rule 12b-2 promulgated
under the Exchange Act) of any such officer, director or beneficial owner, on
the other hand. None of the Parent, any subsidiary of the Parent, the directors
or officers of the Parent or any subsidiary, nor any person acting on behalf of
any of them, has made or received any payment not categorized in a manner
consistent with generally accepted accounting principles and fully disclosed in
the books and records of the Parent in connection with or in any way relating
to or affecting the Parent.
Section 3.16 No Knowledge of Breach. The Parent has no knowledge
on the date hereof of any facts or circumstances which would cause any
representation or warranty of the Company contained in this Agreement or in any
ancillary agreement to be misleading or incorrect in any respect and is not
aware of any statement which was omitted from any such representation or
warranty which is necessary to make the statements made in any such
representation or warranty not misleading.
Section 3.17 Real Property; Leases.
(a) Section 3.17 of the Parent Disclosure Letter sets
forth a complete and accurate list of the locations of all real property owned
and leased by the Parent or any of its subsidiaries (collectively with all
improvements located thereon and appurtenances thereto, the "Real Property").
(b) No portion of the Real Property is subject to any
order to be sold or is being condemned, expropriated or otherwise taken by any
Government Entity with or without payment or compensation therefor, nor, to the
knowledge of the Parent and its subsidiaries, has any such condemnation,
expropriation or taking been threatened or proposed.
(c) There are no pending or, to the knowledge of the
Parent and its subsidiaries, threatened condemnation proceedings, lawsuits, or
administrative actions relating to any of the Real Property.
(d) Except as described in Section 3.17(d) of the Parent
Disclosure Letter other than the Parent Permitted Encumbrances, neither the
Parent nor any of its subsidiaries has entered into any contract, agreement or
arrangement granting to any person the right of use or occupancy of any
material portion of the Real Property. For purposes of this Agreement: "Parent
Permitted Encumbrances" means: (i) encumbrances for assessments, taxes, water,
sewer
29
and other similar charges not yet due and payable or that Parent or any of its
subsidiaries is contesting in good faith through appropriate proceedings; (ii)
easements or reservations thereof, rights of way, highway and railroad
crossings, sewers, electric and other utility lines, telegraph and telephone
lines, zoning, building code and other covenants, conditions and restrictions
as to the use of the real property; (iii) vault rights; (iv) encumbrances
previously disclosed to the Company; (v) liens securing the claims of
materialmen, landlords and others provided payment is not yet delinquent; (vi)
any leases, subleases or licenses listed on Section 3.17 of the Parent
Disclosure Letter; (vii) all encumbrances relating to liens securing borrowed
money to be released at or prior to the Closing; (viii) any and all matters and
encumbrances (including, without limitation, fee mortgages or ground leases)
affecting the leased real property of Parent or its subsidiaries, not created
or granted by Parent or any of its subsidiaries; and (ix) any subordination or
attornment agreement between Parent or any of its subsidiaries and the lender
for any of the landlords of Parent or its subsidiaries.
ARTICLE 4.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1 Conduct of Business of the Company Pending the
Merger. The Company hereby covenants and agrees that, prior to the Effective
Time, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Parent, it will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary
course consistent with past practices and in compliance in all material
respects with all applicable laws;
(b) use its reasonable efforts to preserve intact its
assets and its business organization, maintain its rights and franchises,
retain the services of its present officers and its respective key employees
and maintain its relationships with its respective customers and suppliers and
others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time;
(c) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear excepted, and
maintain supplies in quantities consistent with its customary business
practice; and
(d) use its reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
Section 4.2 Prohibited Actions by the Company. Without limiting
the generality of Section 4.1, except as set forth in Section 4.2 of the
Company Disclosure Letter, the Company covenants and agrees that, except as
expressly contemplated by this Agreement or otherwise consented to in writing
by Parent (which consent shall not be unreasonably withheld or delayed), from
the date of this Agreement until the Effective Time, it will not do, and will
not permit any of its subsidiaries to do, any of the following:
30
(a) (i) increase the compensation (or benefits) payable
to or to become payable to any director or employee, except for increases in
salary or wages of employees in the ordinary course of business and consistent
with past practice; (ii) grant any severance or termination pay (other than
pursuant to the severance policy or practice of the Company or its subsidiaries
as disclosed in Section 2.11 of the Company Disclosure Letter and in effect on
the date of this Agreement) to, or enter into or amend in any respect any
employment or severance agreement with, any employee; (iii) establish, adopt,
enter into or amend in any respect any collective bargaining agreement or any
Benefit Plan of the Company or any ERISA Affiliate; (iv) take any action to
accelerate or otherwise remove restrictions with respect to any rights or
benefits, or make any determinations not in the ordinary course of business
consistent with past practice, under any collective bargaining agreement or
Benefit Plan of the Company or any ERISA Affiliate; (v) grant any options to
purchase Company Common Stock or any other capital stock of the Company; or
(vi) terminate the employment of any employee or consultant who is party to an
employment or consulting agreement with the Company (other than for cause
pursuant to such employment or consulting agreement);
(b) declare, set aside or pay any dividend on, or make
any other distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, except for dividends by a wholly owned
subsidiary of the Company to the Company or another wholly owned subsidiary of
the Company;
(c) directly or indirectly redeem, purchase or otherwise
acquire, or offer or propose to redeem, purchase or otherwise acquire, any
outstanding shares of capital stock of, or other equity interests in, or any
securities that are convertible into or exchangeable for any shares of capital
stock of, or other equity interests in, or any outstanding options, warrants or
rights of any kind to acquire any shares of capital stock of, or other equity
interests in, the Company or any of its subsidiaries (other than (i) any such
acquisition by the Company or any of its wholly owned subsidiaries directly
from any wholly owned subsidiary of the Company in exchange for capital
contributions or loans to such subsidiary, or (ii) any purchase, forfeiture or
retirement of shares of Company Common Stock or the Company Stock Options
occurring pursuant to the terms (as in effect on the date of this Agreement) of
any existing Benefit Plan of the Company or any of its subsidiaries, in a
manner otherwise consistent with the terms of this Agreement);
(d) effect any reorganization or recapitalization; or
split, combine or reclassify any of the capital stock of, or other equity
interests in, the Company or any of its subsidiaries or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of such capital stock or such equity interests, or
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property of any class of its capital stock;
(e) offer, sell, issue or grant, or authorize or propose
the offering, sale, issuance or grant of, any shares of capital stock of, or
other equity interests in, any securities convertible into or exchangeable for
(or accelerate any right to convert or exchange securities for) any shares of
capital stock of, or other equity interest in, or any options, warrants or
rights of any kind to acquire any shares of capital stock of, or other equity
interests in, or any Voting Company Debt or other voting securities of, the
Company or any of its subsidiaries, or any "phantom"
31
stock, "phantom" stock rights, SARs or stock-based performance units, other
than issuances of shares of Company Common Stock upon the exercise of the
Company Stock Options outstanding at the date of this Agreement in accordance
with the terms thereof (as in effect on the date of this Agreement);
(f) (i) merge, combine or consolidate with another
person or (ii) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any assets
of any other person;
(g) sell, lease, exchange or otherwise dispose of, or
grant any Lien with respect to, any of the properties or assets of the Company
or any of its subsidiaries that are, individually or in the aggregate, material
to the business of the Company and its subsidiaries, except for dispositions of
excess or obsolete assets in the ordinary course of business and consistent
with past practice;
(h) propose or adopt any amendments to its certificate
of incorporation or bylaws or other organizational documents;
(i) effect any change in any accounting methods,
principles or practices in effect as of December 31, 2002 affecting the
reported consolidated assets, liabilities, results of operations, cash flow or
stockholders' equity of the Company, except as may be specifically required by
a change in generally accepted accounting principles;
(j) (i) incur, guaranty, assume or prepay any
indebtedness, obligations or liabilities in excess of $100,000 (individually or
in the aggregate) other than in the ordinary course of business consistent with
past practice; (ii) issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any such indebtedness or debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, or (iii) make any loans, advances or
capital contributions to, or investments in, any other person, other than to or
in the Company or any direct or indirect wholly owned subsidiary of the
Company; provided, however, (a) nothing shall limit the Company's right to
borrow pursuant to the Company Credit Agreement in the ordinary course of
business (except that the Company shall not exercise its rights under Section
2(a)(iii) of the Company Credit Agreement) and to enter into the Loan Agreement
as borrower under the Parent Loan and (b) at such time as the Board of
Directors of the Company in its reasonable judgment shall determine, the
Company may engage in conversations and negotiations related to refinancing the
Company Credit Agreement, and in the event that the Effective Time does not
occur by January 22, 2004, then the Company may refinance, and Parent shall use
commercially reasonable efforts to facilitate such refinancing, its Company
Credit Agreement with the proceeds of indebtedness incurred by the Company
(which may be secured by a Lien on assets of the Company), the terms of which
are reasonably satisfactory to Parent; provided however, that Parent's efforts
to refinance the Company's indebtedness in connection
32
with the Merger shall not be deemed inconsistent with the exercise of such
commercially reasonable efforts;
(k) make any Tax election except in a manner consistent
with past practice, change any method of accounting for Tax purposes, or settle
or compromise any material Tax liability;
(l) pay, satisfy, discharge or settle any material
claim, liability or obligation (absolute, accrued, contingent or otherwise),
other than in the ordinary course of business consistent with past practice or
pursuant to mandatory terms of any contract of the Company or its subsidiaries
in effect on the date hereof;
(m) modify or amend, or waive any benefit of, any
non-competition agreement to which the Company or any of its subsidiaries is a
party;
(n) authorize or make capital expenditures in excess of
$100,000 individually, or in excess of $100,000 in the aggregate except for
those projects set forth in Section 4.2(n) of the Company Disclosure Letter;
(o) permit any insurance policy naming the Company or
any subsidiary of the Company as a beneficiary or a loss payee to be canceled
(other than due to circumstances beyond the Company's control) or terminated
other than in the ordinary course of business;
(p) enter into any new contract, or modify or amend any
existing contract that involves individually amounts not in excess of $200,000
or collectively for all such contracts, amounts not in excess of $200,000;
other than contracts in the ordinary course of business, for which there shall
be no dollar limit; or
(q) agree in writing or otherwise to take any of the
foregoing actions.
Section 4.3 Conduct of Business by Parent Pending the Merger.
Parent hereby covenants and agrees that, prior to the Effective Time, unless
otherwise expressly contemplated by this Agreement or consented to in writing
by the Company, it will not (i) amend its Certificate of Incorporation or
bylaws in a manner that would reasonably be likely to adversely affect the
Parent Company Stock; (ii) split, combine or reclassify any shares of its
outstanding capital stock; (iii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property; or (iv) acquire (by
merger, consolidation or acquisition of stock or assets) any corporation,
partnership or business unit thereof or any equity interest therein if such
acquisition would be deemed to be a significant acquisition as defined in Rule
11-01(b)(1) of Regulation S-X.
Section 4.4 Conduct of Business of Sub. During the period from
the date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement. It is understood that Sub was formed by Parent solely for the
purpose of effecting the Merger, and that Sub will have no material assets and
no material liabilities prior to the Merger. Parent shall cause Sub to perform
its obligations under this Agreement.
33
ARTICLE 5.
COVENANTS
Section 5.1 No Solicitation.
(a) The Company agrees that it shall immediately cease
and cause to be terminated all existing discussions, negotiations and
communications with any third parties with respect to any Acquisition Proposal
(as defined in Section 5.1(e) below). From and after the date hereof until the
Effective Time or the termination of this Agreement in accordance with Section
7.1, the Company and its subsidiaries and their respective officers, directors,
employees, representatives, agents or affiliates (including, without limitation,
any investment banker, attorney or accountant retained by the Company or any of
its subsidiaries) (collectively, "Representatives") shall not, directly or
indirectly, (i) initiate, solicit or knowingly encourage (including, without
limitation, by way of furnishing information), or take any action designed to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Acquisition Proposal, (ii) enter into any
agreement regarding an Acquisition Proposal, (iii) participate in negotiations
or discussions with, or provide any information or data to, any person (other
than Parent, Sub or any of their respective affiliates or Representatives)
regarding any Acquisition Proposal or (iv) make or authorize any statement,
recommendation or solicitation in support of any Acquisition Proposal, or
otherwise encourage any effort or attempt by any person to do or seek any of the
foregoing. Any violation of the foregoing restrictions by any person of the
Company's Representatives, whether or not such Representative is so authorized
and whether or not such Representative is purporting to act on behalf of the
Company or otherwise, shall be deemed to be a breach of this Agreement by the
Company.
(b) Notwithstanding the foregoing, the Company (i) may
permit any person who expresses an Acquisition Proposal Interest to make an
Acquisition Proposal to the Board of Directors of the Company, notwithstanding
the existence of a standstill obligation which would otherwise restrict the
person from making such Acquisition Proposal to the Board of Directors of the
Company, if the Board of Directors of the Company with the advice of independent
counsel (who may be the Company's regularly engaged independent counsel)
determines in good faith that the failure to do so would be inconsistent with
the fiduciary duty of the Board of Directors of the Company under applicable
law, (ii) may furnish information concerning its business, properties or assets
to any person pursuant to a customary confidentiality agreement with terms no
less favorable to the Company than those contained in the Confidentiality
Agreement dated May 15, 2002, entered into between Parent and the Company (the
"Confidentiality Agreement") if, and only if, such person has on an unsolicited
basis, and in the absence of any violation of this Section 5.1 by the Company or
any of its Representatives, submitted an Acquisition Proposal or Acquisition
Proposal Interest that constitutes or, that in the good faith opinion of the
Company Board of Directors, is reasonably likely to result in a Superior
Proposal and (iii) may negotiate and participate in discussions and negotiations
with such person concerning an Acquisition Proposal if, and only if, (x) such
person has on an unsolicited basis, and in the absence of any violation of this
Section 5.1 by the Company or any of its Representatives, submitted a bona fide
written Superior Proposal to the Company and (y) in the good faith opinion of
the Company Board of Directors, only after consultation with independent outside
legal counsel to the Company, the Board of Directors of the Company has
determined that engaging in such
34
discussions or negotiations is in the best interests of the Company and its
stockholders and the failure to engage in such discussions or negotiations would
be inconsistent with the Board's fiduciary duties to the Company's stockholders
under applicable law. A "Superior Proposal" means any Acquisition Proposal that
is not conditioned upon the ability to obtain financing (A) which is for not
less than eighty percent (80%) of the issued and outstanding shares of Company
Common Stock or eighty percent (80%) of the consolidated assets of the Company
and (B) which the Company Board of Directors determines in good faith, after
consultation with a nationally recognized investment banking firm, is (I)
superior to the Company's stockholders from a financial point of view and,
taking into account relevant legal, financial and regulatory aspects of the
proposal and any other factors that the Company Board of Directors determines to
be relevant, the identity of the third party making such proposal, and the
conditions for completion of such proposal, a more favorable transaction than
the Merger and (II) reasonably likely to be completed. The Company shall
promptly, and in any event within twenty-four hours following receipt by the
Company or any of its Representatives of an Acquisition Proposal or any inquiry
or expression of interest relating to an Acquisition Proposal or Acquisition
Proposal Interest (as defined below) and prior to providing any such party from
whom an Acquisition Proposal has been received with any material non-public
information, notify Parent of the receipt of the same. The Company shall
promptly provide to Parent any material non-public information regarding the
Company provided to any other party which was not previously provided to Parent,
such additional information to be provided no later than the next business day
after the date of provision of such information to such other party.
(c) Except as expressly permitted by this Section 5.1(c),
neither the Company Board of Directors nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or to Sub, the approval or recommendation by the Company Board of
Directors or any such committee of this Agreement, the Merger or take any action
or make any statement inconsistent with such approval, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal (any
action described in the foregoing clauses (i) and (ii), a "Change in the
Company's Recommendation"), or (iii) enter into any letter of intent, agreement
in principle or agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, the Company Board of Directors, subject to the
terms of this and the following two sentences, to the extent that it determines
in good faith, after consultation with independent outside legal counsel, that
the failure to do so would be inconsistent with the Board's fiduciary duties to
the Company's stockholders under applicable law, may make a Change in the
Company's Recommendation. The Company may make a Change in the Company's
Recommendation (A) at a time that is after the third day following the Company's
delivery to Parent of written notice advising Parent that the Company Board of
Directors has determined that it has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal, identifying the
Person making such Superior Proposal and indicating that it intends to make a
Change in the Company's Recommendation and (B) if, during such three (3) day
period, the Company and its advisors shall have negotiated in good faith with
Parent to make adjustments in the terms and conditions of this Agreement such
that such Acquisition Proposal would no longer constitute a Superior Proposal.
Any such Change in the Company's Recommendation shall not change the approval of
the Company Board of Directors for purposes
35
of causing any state takeover statute or other state law to be inapplicable and
the transactions contemplated thereby.
(d) Notwithstanding the foregoing, nothing contained in
this Section 5.1 or any other provision hereof shall prohibit the Company or the
Company Board of Directors from taking and disclosing to the Company's
stockholders a position contemplated by Rule 14e-2 promulgated under the
Exchange Act or from making any disclosure if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure to do so would inconsistent with the Board's fiduciary duties to the
Company's stockholders under applicable law; provided, however, that the Company
Board of Directors shall not in any case make a Change in the Company's
Recommendation except in accordance with Section 5.1(c).
(e) The Company shall promptly notify Parent if any
proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or continued with the
Company or any of its subsidiaries or any of their respective Representatives,
in each case in connection with any Acquisition Proposal (as hereinafter
defined) or the possibility or consideration of making an Acquisition Proposal
("Acquisition Proposal Interest") indicating, in connection with such notice,
the name of the Person initiating such Acquisition Proposal Interest, and the
material terms and conditions of any proposals or offers. The Company agrees
that it shall keep Parent informed, on a current basis, of the status and terms
of any Acquisition Proposal Interest. As used in this Agreement, "Acquisition
Proposal" means any tender or exchange offer involving the Company or any of its
subsidiaries, any proposal for a merger, consolidation or other business
combination involving the Company or any of its subsidiaries, any proposal or
offer to acquire in any manner an interest in excess of fifteen percent (15%) of
the outstanding equity securities, or a substantial portion of the business or
assets of, the Company or any of its subsidiaries (other than assets or
inventory in the ordinary course of business or assets held for sale), any
proposal or offer with respect to any recapitalization or restructuring with
respect to the Company or any of its subsidiaries or any proposal or offer with
respect to any other transaction similar to any of the foregoing with respect to
the Company or any of its subsidiaries other than pursuant to the Merger.
Section 5.2 Access to Information. Each of the Company and Parent
shall (and shall cause its subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access, during normal business
hours throughout the period from the date hereof until the earlier of the
Effective Time and the termination of this Agreement, to all of its books and
records and its properties, plants and personnel and, during such period, each
shall furnish promptly to the other a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal
securities laws, provided that no investigation pursuant to this Section 5.2
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger. Unless
otherwise required by law, each of Parent and the Company agrees that it (and
its respective subsidiaries and its and their respective representatives) shall
hold in confidence all non-public information so acquired in accordance with the
terms of the Confidentiality Agreement (as defined below).
36
Section 5.3 Confidentiality Agreements. The parties agree that
the provisions of the Confidentiality Agreements dated May 15, 2002 between
Parent and the Company (the "Confidentiality Agreements") shall remain binding
and in full force and effect; provided, however, that any consents from the
Company necessary under the Confidentiality Agreements for Parent and Sub to
consummate the transactions contemplated hereby shall be deemed to have been
made and provided that the provisions of the Confidentiality Agreements relating
to standstill obligations shall terminate and be of no further force and effect
after the date hereof. Without limiting the generality of the foregoing, the
Company shall, within two (2) business days of request therefor, provide to
Parent the information described in Rule 14a-7(a)(2)(ii) under the Exchange Act
and any information to which a holder of Company Common Stock would be entitled
under Section 220 of the DGCL (assuming such holder met the requirements of such
section).
Section 5.4 Registration Statement and Proxy Statement. As
promptly as practicable after the execution of this Agreement, Parent and the
Company shall in consultation with each other prepare and file with the SEC the
Proxy Statement and Parent in consultation with the Company shall prepare and
file with the SEC the Registration Statement. Each of Parent and the Company
shall use its reasonable efforts to have the Registration Statement declared
effective as soon as practicable after the date hereof. Parent shall also use
its reasonable efforts to take any action required to be taken under state
securities or "blue sky" laws in connection with the issuance of the shares of
Parent Common Stock pursuant to this Agreement in the Merger. The Company shall
furnish Parent with all information concerning the Company and the holders of
its capital stock and shall take such other action as Parent may reasonably
request in connection with the Proxy Statement and the Registration Statement
and the issuance of shares of Parent Common Stock, and Parent shall furnish the
Company with all information concerning Parent and the holders of its capital
stock and shall take such other action as the Company may reasonably request in
connection with the Proxy Statement. If at any time prior to the Effective Time
any event or circumstance relating to Parent, any subsidiary of Parent, the
Company, any subsidiary of the Company, or their respective officers or
directors, should be discovered by such party which should be set forth in an
amendment or a supplement to the Registration Statement or Proxy Statement, such
party shall promptly inform the other thereof and take appropriate action in
respect thereof. Each of the parties hereto shall cause the Proxy Statement to
comply as to form and substance, as to such party, in all material respects with
the applicable requirements of (i) the Exchange Act, (ii) the Securities Act,
(iii) the rules and regulations of the Exchange. No amendment or supplement to
the Proxy Statement or the Registration Statement shall be made without the
approval of Parent and the Company, which approval shall not be unreasonably
withheld or delayed; provided, however, that the consent of Parent shall not be
required to amend or supplement the Proxy Statement to reflect the withdrawal of
the recommendation of Company's Board of Directors that Company's stockholders
vote in favor of the approval of this Agreement and/or the recommendation that
Company's stockholders approve a Superior Proposal. Each of the parties hereto
shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy
37
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
Section 5.5 Proxy Statement; Stockholder Approvals.
(a) The Company, acting through its Board of Directors,
shall, subject to and in accordance with applicable law and its certificate of
incorporation and by-laws, promptly and duly call, give notice of and, as soon
as practicable following the date upon which the Registration Statement becomes
effective, hold a meeting of the holders of Company Common Stock for the purpose
of voting to approve and adopt this Agreement and the transactions contemplated
hereby (the "Company Stockholders' Meeting"), and, subject to Section 5.1, (i)
recommend approval and adoption of this Agreement and the transactions
contemplated hereby, by the stockholders of the Company and include in the Proxy
Statement such recommendation and (ii) take all reasonable and lawful action to
solicit and obtain such approval.
(b) Parent, acting through its Board of Directors, shall,
subject to and in accordance with applicable law and its certificate of
incorporation and by-laws, promptly and duly call, give notice of and, as soon
as practicable following the date upon which the Registration Statement becomes
effective, hold a meeting of the holders of Parent Common Stock for the purpose
of voting to approve the issuance of the shares of Parent Common Stock to the
stockholders of the Company upon the Merger, and (i) recommend approval by the
stockholders of Parent and include in the Proxy Statement such recommendation
and (ii) take all reasonable and lawful action to solicit and obtain such
approval.
(c) The Company and the Parent, as promptly as
practicable, shall each cause the definitive Proxy Statement to be mailed to
their respective stockholders.
(d) At or prior to the Closing, (i) the Company shall
deliver to Parent a certificate of its Secretary setting forth the voting
results from its stockholder meeting and (ii) Parent shall deliver to the
Company a certificate of its Secretary setting forth the voting results from its
stockholder meeting.
(e) None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency, and, in addition, (i) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of Company, at the time of the Company Stockholders' Meeting and at the
Effective Time and (ii) in the case of the Registration Statement, when it
becomes effective under the Securities Act and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or
circumstances relating to the Company or any subsidiary of the Company, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Registration
Statement or the Proxy Statement, the Company shall promptly inform Parent. All
documents that Company is responsible for filing with the SEC in connection with
the Merger will comply as to
38
form in all material respects with the applicable requirements of the rules and
regulations of the Securities Act and the Exchange Act.
(f) None of the information supplied by Parent for
inclusion or incorporation by reference in the Registration Statement or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency and, in addition, (i) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of the Company, at the time of the Company Stockholders' Meeting and at the
Effective Time and (ii) in the case of the Registration Statement, when it
becomes effective under the Securities Act and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any subsidiary of Parent, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Registration Statement or the Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent
is responsible for filing with the SEC in connection with the Merger will comply
as to form in all material respects with the applicable requirements of the
rules and regulations of the Securities Act and the Exchange Act.
Section 5.6 Compliance with the Securities Act.
(a) At least 10 days prior to the Effective Time, the
Company shall cause to be delivered to Parent a list identifying all persons who
were at the record date for its stockholders' meeting convened in accordance
with Section 5.5, "affiliates" of the Company, as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates").
(b) The Company shall use its reasonable best efforts to
cause each person who is identified as one of its Rule 145 Affiliates in its
list referred to in Section 5.6(a) to deliver to Parent (with a copy to the
Company), prior to the Effective Time, a written agreement, in the form attached
hereto as Exhibit 5.6(b) (the "Affiliate Agreement").
(c) Parent shall be entitled to place legends, as
specified in the Affiliate Agreement, on the certificates evidencing any of the
Parent Common Stock to be received by (a) any Rule 145 Affiliates or (b) any
person Parent reasonably identifies, after consultation with outside counsel (by
written notice to Company), as being a person who would be deemed a Rule 145
Affiliate, and to issue appropriate stop transfer instructions to the transfer
agent for such Parent Common Stock, consistent with the terms of the Affiliate
Agreement, regardless of whether such person has executed an Affiliate Agreement
and regardless of whether such person's name appears on such list delivered by
the Company.
Section 5.7 Reasonable Efforts. (a) Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to ensure that the conditions set forth in Article 6 are satisfied
and to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, the obtaining of all necessary
waivers, consents and approvals and
39
the effecting of all necessary registrations and filings; provided, however,
that the Company shall not, without Parent's prior written consent, and Parent
shall not be required to, divest or hold separate or otherwise take or commit to
take any other similar action with respect to any assets, businesses or product
lines of the Company or any of its subsidiaries. Without limiting the generality
of the foregoing, as promptly as practicable, the Company, Parent and Sub shall
make all filings and submissions under the HSR Act as may be reasonably required
to be made in connection with this Agreement and the transactions contemplated
hereby. Subject to the Confidentiality Agreements, the Company will furnish to
Parent and Sub, and Parent and Sub will furnish to the Company, such information
and assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to the Confidentiality
Agreements, the Company will provide Parent and Sub, and Parent and Sub will
provide the Company, with copies of all material written correspondence, filings
and communications (or memoranda setting forth the substance thereof) between
such party or any of its representatives and any Governmental Entity, with
respect to the obtaining of any waivers, consent or approvals and the making of
any registrations or filings, in each case that is necessary to consummate the
Merger and the other transactions contemplated hereby. 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 or directors of Parent and the
Surviving Corporation shall take all such necessary action. In connection with
and without limiting the foregoing, the Company and the Company's Board of
Directors shall (i) take all action necessary to ensure that no state takeover
statute or similar law is or becomes applicable to this Agreement or any
transaction contemplated thereby and (ii) if a state takeover statute or similar
law becomes applicable to this Agreement or any transaction contemplated
thereby, take all action necessary to ensure that the Merger and such other
transaction may be consummated, as promptly as practicable, on the terms
contemplated by this Agreement.
(b) Subject to the terms and conditions herein provided,
the Company agrees to use its reasonable best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to obtain the necessary
waivers, consents and approvals described in Section 5.19(f) prior to September
8, 2003; provided, however, that the Company shall not, without Parent's prior
written consent divest or hold separate or otherwise take or commit to take any
other similar action with respect to any assets, businesses or product lines of
the Company or any of its subsidiaries.
Section 5.8 Company Stock Options. At the Effective Time, each of
the Company Stock Options (and, solely with respect to such options, the Stock
Option Plan if required in accordance with Section 5.8(c) below) listed on
Section 2.2(c) of the Company Disclosure Letter shall be assumed by Parent on
the terms set forth herein and converted automatically into an option to
purchase shares of Parent Common Stock (each, a "Converted Option") in an amount
and at an exercise price determined as provided below:
(a) The number of shares of Parent Common Stock to be
subject to a Converted Option shall be equal to the product of the number of
shares of Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the original option and the Exchange Ratio, provided that any
fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest share; and
40
(b) The exercise price per share of Parent Common Stock
under a Converted Option shall be equal to the exercise price per share of
Company Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded down to the nearest cent.
(c) At or prior to the Effective Time, the Parent shall
either cause to be effected any amendments to the Parent Plans or assume the
Stock Option Plan in order to effect the foregoing provisions of this Section
5.8.
After the Effective Time, each Converted Option shall be exercisable, shall vest
and shall terminate upon the same terms and conditions as were applicable to the
related Company Stock Option immediately prior to the Effective Time, except
that all references to the Company Common Stock shall be deemed to be references
to Parent Common Stock. Within 15 days after the Effective Time, Parent shall
file with the SEC a registration statement on Form S-8 (or other appropriate
form) and shall take any action required to be taken under state securities
"blue sky" laws for purposes of registering all shares of Parent Common Stock
issuable after the Effective Time upon exercise of the Converted Options, and
use all reasonable efforts to have such registration statement (or a successor
or replacement registration statement) become effective with respect thereto as
promptly as practicable after the Effective Time and to remain in effect while
any of the Converted Options remain exercisable. At or prior to the Effective
Time, Parent shall take all corporate action necessary to reserve for issuance
in connection with the exercise of Converted Options such number of shares of
Parent Common Stock as shall be required to be issued upon such exercise.
Section 5.9 Indemnification of Directors and Officers.
(a) Parent shall cause the Surviving Corporation to
maintain in effect for the benefit of individuals who at or prior to the
Effective Time were directors, officers or agents of the Company or the
subsidiaries of the Company the current provisions regarding indemnification and
exculpation of officers, directors and agents of the Company or any of its
subsidiaries (including with respect to advancement expense) contained in the
respective certificate of incorporation, bylaws or agreements listed on Section
2.16 of the Company Disclosure Letter in effect on the date hereof, which
provisions shall not be amended, modified or otherwise repealed for a period of
six years from the Effective Time, except to make changes permitted by
applicable law that would enlarge the exculpation or indemnification thereunder.
Parent shall cause to be maintained, if available, for a period of six years
from the Effective Time the Company's current directors' and officers' insurance
and indemnification policy and fiduciary liability policy (the "D&O Insurance")
(provided that Parent may substitute therefor, at its election, policies or
financial guarantees with the same carriers or other reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous than the existing D&O Insurance) to
the extent that such insurance policies provide coverage for events occurring
prior to the Effective Time for all persons who are directors and officers of
the Company on the date of this Agreement (or were prior to the date of this
Agreement), so long as the annual premium to be paid by the Company after the
date of this Agreement for such D&O Insurance during such six-year period would
not exceed 300% of the annual premium as of the date of this Agreement. If,
during such six-year period, such insurance
41
coverage cannot be obtained at all or can only be obtained for an amount in
excess of 300% of the annual premium therefor as of the date of this Agreement,
Parent shall use reasonable best efforts to cause insurance coverage to be
obtained for an amount equal to 300% of the current annual premium therefor, on
terms and conditions substantially similar to the existing D&O Insurance.
(b) If any claim or claims shall, subsequent to the
Effective Time and within six years thereafter, be made in writing against any
present or former director or officer of the Company based on or arising out of
the services of such person at or prior to the Effective Time in the capacity of
such person as a director or officer of the Company (and such director or
officer shall have given Parent written notice of such claim or claims within
such six year period), the provisions of subsection (a) of this Section
respecting the obligation to indemnify the current or former directors or
officers under the certificate of incorporation and bylaws of the Company and
its subsidiaries shall continue in effect until the final disposition of all
such claims.
(c) Notwithstanding anything to the contrary in this
Section 5.9, neither Parent nor the Surviving Corporation shall be liable for
any settlement effected without its written consent, which shall not be
unreasonably withheld.
(d) The provisions of this Section 5.9 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each person entitled to indemnification hereunder and the heirs
and representatives of such person.
(e) Parent will not, nor will Parent permit the Surviving
Corporation to, merge or consolidate with any other person or sell all or
substantially all of Parent's or such subsidiary's assets unless Parent and/or
the Surviving Corporation will ensure that the surviving or resulting entity
assumes the obligations imposed by this Section 5.9.
Section 5.10 Employment Arrangements; Employee Plans and Benefits.
(a) Employment Arrangements and Accrued Benefits. From
and after the date hereof, the Company and the Surviving Corporation, as the
case may be, shall honor in accordance with their terms (i) all existing
employment, severance, consulting, change of control and indemnification
agreements and other bonus and compensation arrangements between the Company or
any of its subsidiaries and any current or former officer, director or employee
of the Company or any of its subsidiaries and (ii) with respect to all
employees, officers and directors of the Company, all benefits or other amounts
earned or accrued through the Effective Time under the Benefit Plans disclosed
in Schedule 2.11(a) of the Company Disclosure Letter (or not required to be
disclosed in such schedule).
(b) Post-Closing Benefits. For a period of not less than
one year following the Effective Time, Parent shall cause the Surviving
Corporation to maintain a compensation structure and benefit plans for employees
of the Company who remain employees of the Surviving Corporation ("Transferred
Employees") with terms that, in the aggregate for each employee, are
substantially comparable to the compensation structure and Benefit Plans
currently in place for such employees. With respect to any benefits plans of
Parent or its subsidiaries in
42
which the Transferred Employees participate after the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, use reasonable best efforts
to: (i) waive any limitations as to pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Transferred Employees under any benefit plan in which such
employees may be eligible to participate after the Effective Time (provided,
however, that no such waiver shall apply to a pre-existing condition of any
Transferred Employee who was, as of the Effective Time, excluded from
participation in a Company benefit plan by nature of such pre-existing
condition), (ii) provide each Transferred Employee with credit for any
co-payments and deductibles paid prior to the Effective Time during the year in
which the Effective Time occurs in satisfying any applicable deductible or
out-of-pocket requirements under any benefit plan in which such employees may be
eligible to participate after the Effective Time, and (iii) recognize all
service of the Transferred Employees with the Company for all purposes
(including without limitation purposes of eligibility to participate, vesting
credit, entitlement for benefits, and benefit accrual) in any benefit plan in
which such employees may be eligible to participate after the Effective Time,
except to the extent such treatment would result in duplicative accrual of
benefits for the same period of service.
(c) No Right to Employment. Notwithstanding the
foregoing, nothing contained in this Agreement shall confer upon any employee of
the Company, any ERISA Affiliate or any of the Company's subsidiaries any right
with respect to employment by the Parent, the Sub or any of the Parent's
subsidiaries or affiliates, nor shall anything herein interfere with the right
of Parent, the Sub or any of the Parent's subsidiaries or affiliates to
terminate the employment of any such employee at anytime, with or without cause,
or, except as provided in Sections 5.10(a) or (b), restrict Parent, the Sub or
any of the Parent's subsidiaries or affiliates in the exercise of their
independent business judgment in modifying any other terms and conditions of the
employment of any such employee.
Section 5.11 Public Announcements. Parent and the Company shall to
the fullest extent practicable consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger and
the other transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with any national securities
exchange.
Section 5.12 Listing Application. Parent will use its reasonable
best efforts to cause the shares of Parent Common Stock to be issued pursuant to
this Agreement in the Merger (as well as the shares of Parent Common Stock
issuable after the Effective Time upon exercise of the Parent Options) to be
listed for quotation and trading on the New York Stock Exchange prior to the
Effective Time.
Section 5.13 Supplemental Disclosure. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or
43
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.13 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article 6 of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
Section 5.14 Letters of Accountants.
(a) Parent shall use its reasonable best efforts to cause
to be delivered to the Company a letter of Ernst & Young LLP, Parent's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to the
Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement, which letter shall be brought down to a date within two
business days prior to the Effective Time.
(b) The Company shall use its reasonable best efforts to
cause to be delivered to Parent a letter of Deloitte & Touche LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to a date within two business days prior to
the Effective Time.
Section 5.15 Recruitment. Prior to the Effective Time, and, if
this Agreement is terminated by the Company pursuant to Section 7.1(f)(i), prior
to the first anniversary of the date of such termination, neither Parent nor any
of its subsidiaries shall hire or solicit the employment of any employee of the
Company or any of its subsidiaries. Prior to the Effective Time and, if this
Agreement is terminated by Parent pursuant to Section 7.1(e)(i) or 7.1(e)(ii)
prior to the first anniversary of such termination, neither the Company nor any
of its subsidiaries shall hire or solicit the employment of any employee of
Parent or any of its subsidiaries. If this Agreement terminates without the
Merger being consummated except as provided in the preceding sentence of this
Section 5.15, neither Parent nor its subsidiaries, on the one hand, nor the
Company nor its subsidiaries, on the other, will hire or solicit the employment
of any employee of any of the others, for a period of six months from the date
of such termination.
Section 5.16 Rights Agreement. At the election of the Parent or
Sub, the Company will redeem the Rights prior to the Closing Date.
Section 5.17 Section 16(b) Board Approval.
(a) Prior to the Effective Time, the Board of Directors
of Parent shall, by resolution duly adopted by such Board of Directors or a duly
authorized committee of "non-employee directors" thereof, approve and adopt, for
purposes of exemption from "short-swing" liability under Section 16(b) of the
Exchange Act, the acquisition of Parent Common Stock at the Effective Time by
officers or directors of the Company who become, prior to, at, or following the
Effective Time of the Merger, officers or directors of Parent as a result of the
conversion of
44
shares of Company Common Stock in the Merger and the assumption of the Company
Stock Options by Parent at the Effective Time. Such resolution shall set forth
the name of the applicable "insiders" for purposes of Section 16 of the Exchange
Act, the number of securities to be acquired by each individual, that the
approval is being granted to exempt the transaction under Rule 16b-3 under the
Exchange Act, and, for the Company Stock Options to be assumed by Parent at the
Effective Time, the material terms of the Company Stock Options to purchase
Parent Common Stock acquired by such insiders as a result of the assumption by
Parent of such Company Stock Options.
(b) Prior to the Effective Time, the Board of Directors
of the Company shall, by resolution duly adopted by such Board of Directors or a
duly authorized committee of "non-employee directors" thereof, approve and
adopt, for purposes of exemption from "short-swing" liability under Section
16(b) of the Exchange Act, the conversion at the Effective Time of the shares of
the Company Common Stock held by officers and directors of the Company into
shares of Parent Common Stock as a result of the conversion of shares in the
Merger, and the assumption by Parent at the Effective Time of the Company Stock
Options of the officers and directors of the Company. Such resolution shall set
forth the name of the applicable "insiders" for purposes of Section 16 of the
Exchange Act and, for each "insider," the number of shares of Company Common
Stock to be converted into shares of Parent Common Stock at the Effective Time,
the number and material terms of the Company Stock Options to be assumed by
Parent at the Effective Time, and that the approval is being granted to exempt
the transaction under Rule 16b-3 under the Exchange Act.
Section 5.18 Employment Agreements. Prior to the Effective Time,
the Company shall use its reasonable efforts to cause Xxxxx X. Xxxx, Xxxx X.
XxXxxxxx, X. Xxxx Xxxxx, Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx to execute and
deliver to Parent employment agreements substantially in the forms attached
hereto as Exhibits 5.18(a), (b), (c), (d) and (e), respectively.
Section 5.19 Parent Loan. As soon as practicable after the date
hereof and following fulfillment of the conditions described in this Section
5.19, Parent and/or Sub shall make available to the Company a revolving line of
credit (the "Parent Loan") in the maximum principal amount of $10 million
pursuant to the terms and conditions of a loan agreement (the "Loan Agreement")
to be entered into by the Company, Parent and/or Sub, which Loan Agreement shall
contain the following terms and conditions in addition to other reasonable and
customary terms and conditions:
(a) the Parent Loan shall mature on the earliest to occur
of: (i) the Effective Time; (ii) an event of default under the Loan Agreement;
(iii) termination of this Agreement; or (iv) August 4, 2005, and the Parent Loan
shall be subordinated to the Company's Senior Notes and indebtedness outstanding
under the Company Credit Agreement and be unsecured;
(b) proceeds of the Parent Loan will be used by the
Company for general working capital purposes and not for any other purpose,
including the repayment of Company debt;
45
(c) events of default under the Loan Agreement shall
include, among other customary provisions: (i) failure by the Company to pay any
principal, interest or cost due under the Loan Agreement within three (3)
business days after the date such payment is due; and (ii) the failure of the
Company to observe and perform any material covenant, condition or agreement
under this Agreement or the Loan Agreement, which failure is not cured within
ten (10) days after notice from Parent and/or Sub or discovery or knowledge
thereof by the Company;
(d) interest under the Parent Loan prior to an event of
default shall accrue at the rate of ten and one-half percent (10.5%) per annum;
in the event that this Agreement is terminated pursuant to Section 7.1(d) or
7.1(e) hereof, then the entire amount of interest which would accrue from the
date of advances under the Parent Loan through August 4, 2005 shall be due and
payable together with all other amounts due at maturity;
(e) Parent and/or Sub shall be required to make advances
under the Parent Loan only if (among other customary conditions): no event of
default has occurred; and all representations and warranties of the Company in
the Loan Agreement and this Agreement shall be, and shall have been when made,
true and correct in all material respects; and
(f) Parent's and/or Sub's obligation to enter into the
Loan Agreement and make advances thereunder shall be subject to the condition
that the required holders of the Company Senior Notes and the required lenders
under the Company Credit Agreement consent to: (i) the making of the Parent Loan
to the Company; (ii) the use of proceeds of the Parent Loan for working capital
by the Company and not for the repayment of Company debt; and (iii) the waiver
of events of default or change of control payments occasioned by the execution
and consummation of this Agreement and the waiver of compliance with any
financial covenants which the Company believes will likely be breached under the
Company Senior Notes, the Company Note Purchase and Guarantee Agreement or the
Company Credit Agreement prior to the Effective Time.
ARTICLE 6.
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
(a) HSR Approval. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall have not been withdrawn or
terminated.
46
(b) Stockholder Approvals. The Company Stockholder
Approval described in Section 2.3(b) shall have been obtained and the Parent
Stockholder Approval described in Section 3.3(b) shall have been obtained.
(c) Exchange Listing. The shares of Parent Common Stock
issuable to the holders of Company Common Stock pursuant to this Agreement in
the Merger shall have been authorized for listing on the Exchange, upon official
notice of issuance.
(d) Registration Statement. The Registration Statement
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceeding by the SEC seeking a stop order.
(e) Market Events. There shall not have occurred and be
continuing any general suspension or limitation of trading in Parent Common
Stock (exclusive, however, of any temporary suspension pending an ensuing public
announcement) or in securities generally on the Exchange.
(f) No Order. No Governmental Entity (including a federal
or state court) of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Merger or any transaction contemplated by this Agreement;
provided, however, that the parties shall use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(g) Approvals. Other than the filing of merger documents
in accordance with the DGCL, all authorizations, consents, waivers, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity necessary to consummate the transactions or
to operate the Surviving Corporation the failure of which to obtain, make or
occur would, individually or in the aggregate, have a material adverse effect at
or after the Effective Time on Parent and its subsidiaries including the
Surviving Corporation and its subsidiaries, shall have been obtained, been filed
or have occurred.
(h) Litigation. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which enjoins, restrains or prohibits the
transactions contemplated hereby, including the consummation of the Merger or
has the effect of making the Merger illegal and which is in effect at the
Effective Time (each party agreeing to use its reasonable best efforts to have
any such injunction or order lifted), provided, that the provisions of this
Section 6.1(h) shall not be available to any party who has failed to fulfill its
obligations under Section 5.7.
(i) Statutes. No statute, rule, regulation, executive
order, decree or order of any kind shall have been enacted, entered, promulgated
or enforced by any court or governmental authority which prohibits the
consummation of the Merger or has the effect of making the Merger illegal.
47
(j) Tax Opinion. The Company shall have received the
opinion of Akin Gump Xxxxxxx Xxxxx & Xxxx, counsel to the Company, which opinion
shall be reasonably satisfactory to Parent, to the effect that the Merger will
be treated for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, which opinion shall be dated
on or about the date that is two business days prior to the date the Proxy
Statement is first mailed to the respective stockholders of the Company and
Parent and shall have not have been withdrawn or modified in any material
respect. In rendering such opinion, counsel shall be entitled to rely upon
customary assumptions and representations reasonably satisfactory to such
counsel, including representations as to the matters of fact set forth in
certificates of officers of the Company and Parent and of other appropriate
persons that are provided to Parent.
(k) Company Credit Agreement Matters. The Company shall
have (i) promptly complied in all material respects with its obligations under
Section 8.3 of the Company Note Purchase and Guarantee Agreement arising out of
its entering into this Agreement and delivered evidence reasonably satisfactory
to Citibank, N.A. (the "Agent") of such compliance; (ii) (A) paid in full in
cash all its Obligations (as such term is defined under the Company Credit
Agreement) under the Credit Documents (as such term is defined under the Company
Credit Agreement), (B) caused to be surrendered for cancellation or 100% cash
collateralized all Letters of Credit (as such term is defined under the Company
Credit Agreement) then outstanding under the Company Credit Agreement, (C) given
written notice to Agent and the Lenders (as such term is defined under the
Company Credit Agreement) that all Commitments (as such term is defined under
the Company Credit Agreement) have been terminated, (D) performed and satisfied
in full all other obligations required to be performed and satisfied by the
Company under the Company Credit Agreement and (E) paid all costs and expenses
of Agent in connection with the preparation of any waivers under the Company
Credit Agreement and the consummation of the Merger, including, without
limitation, the reasonable fees and expenses of counsel with respect thereto and
with respect to advising Agent and the Lenders (as such term is defined under
the Company Credit Agreement) as to their rights and responsibilities under the
Credit Documents (as such term is defined under the Company Credit Agreement);
and (iii) together with all other Credit Parties (as such term is defined under
the Company Credit Agreement), executed and delivered such documents,
instruments and certificates as Agent may have requested so as to cause or
evidence the satisfaction in full of their respective obligations under the
Credit Documents (as such term is defined under the Company Credit Agreement).
Section 6.2 Conditions to Obligations of Parent and Sub to Effect
the Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. The aggregate effect
of all inaccuracies in the representations and warranties of the Company set
forth in this Agreement does not and would not reasonably be expected to have a
Company Material Adverse Effect and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. Each of
the Company and its subsidiaries shall have performed in all material respects
all obligations required to be
48
performed by it under this Agreement at or prior to the Effective Time, and
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to such
effect.
(c) Letters of Resignation. Each officer and director of
the Company and its subsidiaries requested by Parent to do so shall have
resigned from each such position on or prior to, and effective not later than,
the Effective Time.
(d) No Company Material Adverse Effect. Since the date of
this Agreement there shall have been no event, change, effect or development
that has had or would reasonably be expected to have a Company Material Adverse
Effect, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(e) Legal Opinion. Parent shall have received the
opinion, dated the Closing Date, of Akin Gump Xxxxxxx Xxxxx & Xxxx, counsel to
the Company, substantially to the effect set forth in Exhibit 6.2(e) hereto,
subject to assumptions, qualifications and limitations reasonably satisfactory
to such counsel, which opinion shall be reasonably satisfactory to Parent. In
rendering such opinion, counsel shall be entitled to rely upon customary
assumptions and representations reasonably satisfactory to such counsel,
including representations as to the matters of fact set forth in certificates of
officers of the Company.
(f) Company Consents. The Company shall have obtained the
consents of each person named in Section 6.2(f) of the Company Disclosure Letter
to consummate the transactions contemplated hereby, each in form and substance
reasonably satisfactory to Parent and its counsel.
(g) Parent Consents. Parent shall have obtained the
consents of each person named in Section 6.2(g) of the Parent Disclosure Letter
to consummate the transactions contemplated hereby, each in form and substance
reasonably satisfactory to Parent and its counsel.
(h) Employment Agreements. Xxxxx X. Xxxx, Xxxx X.
XxXxxxxx, Xxxxxx X. Xxxxx, X. Xxxx Xxxxx, Jr. and Xxxxxxx X. Xxxxx shall have
executed and delivered to Parent employment agreements substantially in the
forms attached hereto as Exhibits 5.18 (a), (b), (c), (d) and (e), respectively.
Section 6.3 Conditions to Obligations of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by the Company:
(a) Representations and Warranties. (i) The aggregate
effect of all inaccuracies in the representations and warranties of Parent set
forth in this Agreement does not and would not reasonably be expected to have a
Parent Material Adverse Effect and the
49
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Each of
Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief financial officer of Parent
to such effect.
(c) No Parent Material Adverse Effect. Since the date of
this Agreement, there shall not have been any event, change, effect or
development that has had or would reasonably be expected to have a Parent
Material Adverse Effect, and the Company shall have received a certificate
signed on behalf of Parent by the chief executive officer or the chief financial
officer of Parent to such effect.
(d) Legal Opinion. The Company shall have received an
opinion, dated the Closing Date, of Bass, Xxxxx & Xxxx PLC, counsel to the
Parent, substantially to the effect set forth in Exhibit 6.3(d) hereto, subject
to assumptions, qualifications and limitations reasonably satisfactory to such
counsel, which opinion shall be reasonably satisfactory to the Company. In
rendering such opinion, counsel shall be entitled to rely upon customary
assumptions and representations reasonably satisfactory to such counsel,
including representations as to the matters of fact set forth in certificates of
officers of the Parent and/or Sub.
ARTICLE 7.
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated, and
the Merger and the other transactions contemplated hereby may be abandoned, at
any time (notwithstanding approval thereof by the stockholders of the Company or
the Parent) prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by either Parent or the Company, if (i) the Merger
shall not have been consummated before May 31, 2004, provided that a party may
not terminate pursuant to clause (i) if such party's failure to satisfy its
obligations under the Agreement shall be the principal reason that Effective
Time has not occurred before such date, or (ii) the Company Stockholder Approval
shall not have been obtained at a meeting duly convened therefor or any
adjournment thereof or (iii) the Parent Stockholders Approval shall not have
been obtained at a meeting duly convened therefor or any adjournment thereof
(unless, in the case of any such termination pursuant to this Section 7.1(b),
the failure to so consummate the Merger by such date or to obtain such
stockholder approval shall have been caused by the action or failure to act of
the party (or its subsidiaries) seeking to terminate this Agreement, which
action or failure to act constitutes a breach of this Agreement);
(c) by Parent or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling or taken any other final
50
action restraining, enjoining or otherwise prohibiting the consummation of the
Merger and such order, decree or ruling or other action is or shall have become
nonappealable;
(d) by the Company, concurrently with the execution of an
Acquisition Agreement under the circumstances permitted by Section 5.1 in
connection with a Superior Proposal provided that the Company pays the
termination fee and other amounts due under Section 7.3(b) as a condition
precedent to such termination (provided that the Company shall not accept or
resolve to accept a Superior Proposal unless (x) it provides Parent with notice
of the material terms of such proposal at least five (5) days prior to such
acceptance and (y) at the time of such acceptance the Board of Directors of the
Company determines in good faith that such proposal continues to be a Superior
Proposal after taking into account any amendments Parent and Sub may have
offered to make to this Agreement); or
(e) by Parent, if (i) there has been a breach of any of
the representations or warranties, covenants or agreements of the Company set
forth in this Agreement, which breach is not curable or, if curable, is not
cured within thirty (30) days after written notice of such breach is given by
Parent to the Company, and such breach individually or collectively has had or
would reasonably likely have a Company Material Adverse Effect, or (ii) the
Board of Directors of the Company or any committee thereof (x) fails to convene
a meeting of the Company's stockholders to approve the Merger on or before 165
days following the date hereof (provided the Registration Statement has been
declared effective within 120 days after the date hereof and if it has not, then
the Company Meeting Date shall mean 45 days following the effective date of the
Registration Statement) (the "Company Meeting Date"), or postpones the date
scheduled for the meeting of the stockholders of the Company to approve this
Agreement beyond the Company Meeting Date, except with the written consent of
Parent, (y) fails to recommend the approval of this Agreement and the Merger to
the Company's stockholders in accordance with Section 5.5(a) hereof or withdraws
or amends or modifies in a manner adverse to Parent its recommendation or
approval in respect of this Agreement or the Merger or takes any other action
specified in clause (i), (ii) or (iii) of Section 5.1(c) hereof or (z) fails,
upon the written request of Parent (which request may be made at any time
following public disclosure of an Acquisition Proposal) to reaffirm publicly its
recommendation to the Company's stockholders that they give the approval of this
Agreement and the Merger, which public reaffirmation must also include the
unconditional rejection of such Acquisition Proposal. Such reaffirmation shall
be made at least ten (10) trading days prior to the Company Stockholders'
Meeting, and Company shall delay the Company Stockholders' Meeting to provide
ten (10) trading days if the Parent so requests in writing (in which case Parent
shall be deemed to have consented for purposes of clause (x) above if such delay
extends the Company Meeting Date beyond the period specified therein); or
(f) by the Company, if there has been a breach of any of
the representations or warranties, covenants or agreements of the Parent and Sub
set forth in this Agreement, which breach is not curable or, if curable, is not
cured within thirty (30) days after written notice of such breach is given by
the Company to Sub and such breach individually or collectively has had or would
reasonably likely have a Parent Material Adverse Effect, or (ii) the Board of
Directors of Parent or any committee thereof fails to convene a meeting of the
Parent's stockholders to approve the Merger on or before 165 days following the
date hereof (provided the Registration Statement has been declared effective
within 120 days after the date hereof and if it has not, then
51
the Parent Meeting Date shall mean 45 days following the effective date of the
Registration Statement) (the "Parent Meeting Date"), or postpones the date
scheduled for the meeting of the stockholders of Parent to approve this
Agreement beyond the Parent Meeting Date, except with the written consent of the
Company;
(g) by Parent, if the Company has not obtained the
consents described in Section 5.19(f) hereof on or prior to September 8, 2003;
provided, however, that Parent may not terminate this Agreement pursuant to this
Subsection 7.1(g) if Parent has made the Parent Loan; or
(h) by the Company on or after September 22, 2003, if (i)
the Company has not obtained the consents described in Section 5.19(f) hereof on
or prior to September 8, 2003, (ii) Parent and/or Sub have elected not to make
the Parent Loan to the Company as a result of the failure of the Company to
obtain such consents, and (iii) the Company has otherwise complied with Section
5.7(b) and Section 5.19 hereof.
Section 7.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 7.1, this
Agreement, except for the provisions of Sections 5.3, 7.2, 7.3, 8.3 and 8.6,
shall forthwith become void and have no effect. Subject to Section 7.3 below, no
termination of this Agreement shall relieve any party to this Agreement of
liability for breach of this Agreement.
Section 7.3 Termination Fee.
(a) Except as otherwise provided in this Section 7.3, all
fees and expenses incurred by the parties hereto shall be borne solely and
entirely by the party which has incurred such fees and expenses.
(b) If at any time before the stockholders meeting
described in Section 2.3(b) (i) the Company terminates this Agreement pursuant
to Section 7.1(d), or (ii) the Parent terminates this Agreement pursuant to
Section 7.1(b)(ii) or 7.1(e)(ii) and prior to such termination any third party
shall have made or announced an intention to make an Acquisition Proposal and
within twelve (12) months of such termination the Company enters into an
agreement relating to an Acquisition Proposal, then, in any such case, the
Company shall pay to Parent, within one business day following (a) the execution
by the Company of an Acquisition Agreement in the case of (i) above or (b) the
consummation of an Acquisition Proposal in the case of (ii) above, a fee
("Termination Fee"), in cash, equal to $6,000,000; provided, however, that the
Company in no event shall be obligated to pay more than once such Termination
Fee with respect to all such agreements and occurrences and such termination.
Any payment required to be made pursuant to this subsection (b) shall be made to
Parent by wire transfer of immediately available funds to an account designated
by Parent.
(c) If this Agreement is terminated by Parent or Sub
pursuant to Section 7.1(e)(i) and the condition does not result from a willful
breach, promptly upon demand the Company shall reimburse Parent and Sub for
their actual reasonable documented out-of-pocket fees and expenses in connection
with this Agreement, the Merger and the transactions
52
contemplated hereby (the "Expenses"); provided, however, that in no event shall
such Expenses exceed a maximum amount of $1,000,000. Payment of Expenses shall
be the sole and exclusive remedy of Parent and Sub for such a breach.
(d) If this Agreement is terminated by the Company
pursuant to Section 7.1(f) and the condition does not result from a willful
breach, promptly upon demand Parent shall reimburse the Company for its actual
reasonable documented Expenses; provided, however, that in no event shall such
Expenses exceed a maximum amount of $1,000,000. Payment of Expenses shall be the
sole and exclusive remedy of the Company for such a breach.
(e) For purposes of this Section 7.3, "willful breach"
shall mean that one or more representations and warranties of a party is false
or misleading when made and one or more of the persons listed in Section 7.3(c)
of the Company Disclosure Letter, in the case of a termination pursuant to
Section 7.3(c), or Section 7.3(d) of the Parent Disclosure Schedule, in the case
of a termination pursuant to Section 7.3(d), had actual knowledge at or as of
(as applicable) the time of the making thereof of events, facts, circumstances
or conditions not disclosed hereunder which caused such representation(s) and
warrant(ies) to be false or misleading.
Section 7.4 Amendment. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent and Sub at any time before or after
approval of this Agreement by the respective stockholders of the Company and
Parent but, after any such stockholder approval, no amendment shall be made that
by law requires the further approval of such stockholders without the approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties.
Section 7.5 Extension; Waiver. At any time prior to the Effective
Time, a party 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 of the other parties
contained herein or in any documents, certificate or writing delivered pursuant
hereto, or (c) waive compliance with any of the agreements or conditions of the
other parties hereto contained herein; provided that after the approval of the
Merger by the stockholders of the Company, no extensions or waivers shall be
made that by law require further approval by such stockholders without the
approval of such stockholders. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 8.
MISCELLANEOUS
Section 8.1 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any party breaches its
obligation to consummate the transactions contemplated by this Agreement in
accordance with the terms of this Agreement and that the parties shall be
entitled to specific performance in such event, in addition to any other remedy
at law or in equity to which such parties may be entitled.
53
Section 8.2 Non-Survival of Representations and Warranties. None
of the representations and warranties made in this Agreement shall survive after
the Effective Time. This Section 8.2 shall not limit any covenant or agreement
of the parties hereto which by its terms contemplates performance after the
Effective Time.
Section 8.3 Entire Agreement; Assignment. This Agreement
(including the Company Disclosure Letter and the Parent Disclosure Letter) and,
to the extent contemplated in Section 5.3, the Confidentiality Agreements, (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise;
provided that Parent or Sub may assign any of their rights and obligations to
any direct or indirect wholly owned subsidiary of Parent, but no such assignment
shall relieve Parent or Sub of its obligations hereunder. Any attempted
assignment in violation of this Section 8.3 shall be void. Subject to the
preceding sentences, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 8.4 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 and legal
substance of the transactions contemplated hereby is not affected in any manner
materially 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 extent
possible. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
Section 8.5 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing (including
telecopy or similar writing) and shall be effective (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section 8.5 and the appropriate telecopy confirmation is received or (b) if
given by any other means, when delivered at the address specified in this
Section 8.5 (or at such other address for a party as shall be specified by like
notice):
if to Parent or Sub:
Xxxxxxx Entertainment Company
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, General Counsel
Telecopy: (000) 000-0000
54
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: F. Xxxxxxxx Xxxxxx, Xx.
Telecopy: (000) 000-0000
if to the Company:
ResortQuest International
Xxxxx 000
0000 Xxxxxxx 00 Xxxx
Xxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telecopy: (000) 000-0000
with a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxx Xxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Section 8.6 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any party hereto in the exercise
of any right hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right.
Section 8.7 Governing Law; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of Delaware regardless of the laws that might otherwise govern
under principles of conflicts of laws applicable thereto.
(a) With respect to any claim or proceeding brought by
Parent and/or Sub related to or arising out of this Agreement or any transaction
contemplated hereby, the Company hereby (i) consents to submit to the personal
jurisdiction of any Federal court located in the State of Tennessee or any
Tennessee state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees not to attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court, and (iii) waives any right to trial by jury with respect to any
claim or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby. With respect to any claim or proceeding
brought by Parent and/or Sub related to or arising out of this Agreement or any
transaction contemplated hereby, the Company hereby irrevocably and
unconditionally waives
55
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in the courts of
the State of Tennessee or of the United States of America located in the State
of Tennessee, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
(b) With respect to any claim or proceeding brought by
the Company related to or arising out of this Agreement or any transaction
contemplated hereby, Parent and Sub hereby (i) consent to submit to the personal
jurisdiction of any Federal court located in the State of Florida or any Florida
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agree not to attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court, and (iii) waive any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby. With respect to any claim or proceeding
brought by the Company related to or arising out of this Agreement or any
transaction contemplated hereby, Parent and Sub hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Florida or of the United States of America
located in the State of Florida, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 8.8 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 8.9 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for Sections 5.9 and 5.10 (which are intended to be for the benefit of
the persons entitled to therein, and may be enforced by such persons).
Section 8.10 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 8.11 Certain Definitions. For purposes of this Agreement,
the following terms shall have the meanings ascribed to them below:
(a) "affiliate" of a person means (i) 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 and
(ii) an "associate", as that term is defined in Rule 12b-2 promulgated under the
Exchange Act.
(b) "Company Credit Agreement" means that certain Amended
and Restated Credit Agreement, dated as of January 22, 2001, by and among the
Company, the guarantors
56
party thereto, the lenders described therein, Citibank, N.A., as administrative
agent for the lenders, Bank of America, N.A., as documentation agent, Credit
Lyonnais New York Branch, as syndication agent, and Xxxxxxx Xxxxx Xxxxxx Inc.,
as arranger, as amended, modified, restated or supplemented as of the date
hereof.
(c) "Company Disclosure Letter" means a letter dated the
date of the Agreement delivered by the Company as a separate document to Parent
and Sub concurrently with the execution of the Agreement, which, among other
things, shall identify exceptions and qualifications to the Company's
representations and warranties contained in Article 2 and covenants contained in
Article 4 by specific section and subsection references.
(d) "Company Material Adverse Effect" means any change or
effect that is (after giving effect to any appropriate reserves for such matter
on the financial statements included in the Company SEC Documents) materially
adverse to, or could be reasonably expected to have a material adverse effect
on, the business, results of operations, assets, liabilities or condition
(financial or otherwise) of the Company and its subsidiaries, taken as a whole,
or any event, matter, condition or effect which precludes the consummation of
the transactions contemplated hereby; provided, however, that in determining
whether there has been a Company Material Adverse Effect, any adverse effect
resulting primarily from the following shall be disregarded: (i) changes in
general economic or business conditions; (ii) conditions (including changes in
economic, financial market, regulatory or political conditions) affecting
generally the leisure travel business; (iii) the taking of any action required
by this Agreement; (iv) the announcement or pendency of the Merger or any of the
other transactions contemplated hereby; (v) the breach by Parent or Sub of this
Agreement; (vi) any change in the market price or trading volume of the Company
Common Stock; (vii) any charge incurred by the Company relating to the
impairment of its goodwill that is caused by a decrease in the market price of
the Parent Common Stock; and (viii) write-down of the Company's recorded
goodwill for Mountain Resorts Division related to the annual impairment reviews
of all recorded goodwill pursuant to Statement of Financial Accounting Standard
No. 142, "Goodwill and Other Intangible Assets."
(e) "Company Note Purchase and Guarantee Agreement" means
that certain Note Purchase and Guarantee Agreement, dated June 1, 1999, by and
among the Company, the guarantors party thereto, and each of the note purchasers
set forth and described therein, as amended, modified, restated or supplemented
as of the date hereof.
(f) "Company Senior Notes" means the notes issued and
outstanding under the Company Note Purchase and Guarantee Agreement.
(g) "control" (including the terms "controlling,"
"controlled by" and "under common control with" or correlative terms) means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities or as trustee or executor, by
contract or credit arrangement, or otherwise
57
(h) "Exchange" means the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Stock Market or other national or
international securities exchange on which the Parent Common Stock is listed for
public trading.
(i) "group" has the meaning ascribed to such term under
Rule 13d-5(b)(1) under the Exchange Act.
(j) "Parent Disclosure Letter" means a letter dated the
date of the Agreement delivered by the Parent and Sub to the Company
concurrently with the execution of the Agreement, which, among other things,
shall identify exceptions to Parent's representations and warranties contained
in Article 3 and covenants contained in Article 6 by specific section and
subsection references.
(k) "Parent Material Adverse Effect" means any change or
effect that is (after giving effect to any appropriate reserves for such matter
on the financial statements included in Parent SEC Documents) materially adverse
to, or could be reasonably expected to have a material adverse effect on, the
business, results of operations, assets, liabilities or condition (financial or
otherwise) of Parent and its subsidiaries, taken as a whole, or any event,
matter, condition or effect which precludes the consummation of the transactions
contemplated hereby; provided, however, that in determining whether there has
been a Parent Material Adverse Effect, any adverse effect resulting primarily
from the following shall be disregarded: (i) changes in general economic or
business conditions; (ii) conditions (including changes in economic, financial
market, regulatory or political conditions) affecting generally the leisure
travel business; (iii) the taking of any action permitted or required by this
Agreement; (iv) the announcement or pendency of the Merger or any of the other
transactions contemplated hereby; (v) the breach by the Company of this
Agreement; (vi) any change in the market price or trading volume of the Parent
Common Stock; and (vii) any change arising from or related to the restatement of
Parent's financial statements included in its Annual Report on Form 10-K for the
year ended December 31, 2002.
(l) "person" means a natural person, company,
corporation, partnership, association, trust or any unincorporated organization.
(m) "subsidiary" means, when used with reference to a
person means any corporation or other business entity of which such person
directly or indirectly owns (i) the majority of the outstanding voting
securities or (ii) voting securities or equity interests which give such person
the power to elect a majority of the board of directors or similar governing
body of such entity.
Section 8.12 Parent Responsible for Performance by Sub. Parent
shall cause Sub to perform all covenants and other agreements made and/or to be
performed by Sub pursuant to this Agreement and Parent shall be fully liable for
any breach of this Agreement by Sub, whether a breach of covenant or other
agreement or otherwise, as if Parent were the primary obligor therefor.
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Section 8.13 Interpretation.
(a) The words "hereof," "herein" and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
(b) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, on the day and
year first above written.
XXXXXXX ENTERTAINMENT COMPANY
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
GET MERGER SUB, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
RESORTQUEST INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: President/CEO
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