EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 15, 2002
AMONG
K2 INC.,
RAWLINGS SPORTING GOODS COMPANY, INC.
AND
LARA ACQUISITION SUB
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER............................................................................................1
SECTION 1.1. THE MERGER.........................................................................1
SECTION 1.2. EFFECTIVE TIME.....................................................................1
SECTION 1.3. CLOSING OF THE MERGER..............................................................2
SECTION 1.4. EFFECTS OF THE MERGER..............................................................2
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS............................................2
SECTION 1.6. DIRECTORS..........................................................................2
SECTION 1.7. OFFICERS...........................................................................2
SECTION 1.8. CONVERSION OF SHARES...............................................................2
SECTION 1.9. DISSENTERS AND APPRAISAL RIGHTS....................................................3
SECTION 1.10. EXCHANGE OF CERTIFICATES...........................................................3
SECTION 1.11. STOCK OPTIONS......................................................................5
SECTION 1.12. PLAN OF REORGANIZATION.............................................................6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................6
SECTION 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; INVESTMENTS..........................7
SECTION 2.2. CAPITALIZATION OF THE COMPANY AND SUBSIDIARIES.....................................8
SECTION 2.3. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION...............................9
SECTION 2.4. SEC REPORTS; FINANCIAL STATEMENTS..................................................9
SECTION 2.5. INFORMATION SUPPLIED..............................................................10
SECTION 2.6. CONSENTS AND APPROVALS; NO VIOLATIONS.............................................10
SECTION 2.7. NO DEFAULT........................................................................11
SECTION 2.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES....................................11
SECTION 2.9. LITIGATION........................................................................11
SECTION 2.10. COMPLIANCE WITH APPLICABLE LAW....................................................12
SECTION 2.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.............................................12
SECTION 2.12. ENVIRONMENTAL LAWS AND REGULATIONS................................................15
SECTION 2.13. TAXES.............................................................................16
SECTION 2.14. INTELLECTUAL PROPERTY.............................................................18
SECTION 2.15. MATERIAL CONTRACTS................................................................20
SECTION 2.16. TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES............................22
SECTION 2.17. OFF BALANCE SHEET LIABILITIES.....................................................22
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(CONTINUED)
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SECTION 2.18. PROMOTIONS AND SELLING ARRANGEMENTS...............................................22
SECTION 2.19. TAX TREATMENT.....................................................................23
SECTION 2.20. AFFILIATES........................................................................23
SECTION 2.21. SUPPLIERS AND CUSTOMERS...........................................................23
SECTION 2.22. OPINION OF FINANCIAL ADVISER......................................................23
SECTION 2.23. BROKERS...........................................................................23
SECTION 2.24. INTERESTED PARTY TRANSACTIONS.....................................................23
SECTION 2.25. TAKEOVER STATUTES.................................................................23
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.............................................24
SECTION 3.1. ORGANIZATION......................................................................24
SECTION 3.2. CAPITALIZATION OF PARENT AND ITS SUBSIDIARIES.....................................25
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT..............................................26
SECTION 3.4. SEC REPORTS; FINANCIAL STATEMENTS.................................................26
SECTION 3.5. INFORMATION SUPPLIED..............................................................27
SECTION 3.6. CONSENTS AND APPROVALS; NO VIOLATIONS.............................................27
SECTION 3.7. NO DEFAULT........................................................................28
SECTION 3.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES....................................28
SECTION 3.9. LITIGATION........................................................................28
SECTION 3.10. COMPLIANCE WITH APPLICABLE LAW....................................................29
SECTION 3.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.............................................29
SECTION 3.12. ENVIRONMENTAL LAWS AND REGULATIONS................................................29
SECTION 3.13. TAX MATTERS.......................................................................30
SECTION 3.14. INTELLECTUAL PROPERTY.............................................................30
SECTION 3.15. TITLE TO PROPERTY.................................................................30
SECTION 3.16. BROKERS...........................................................................31
SECTION 3.17. NO PRIOR ACTIVITIES OF ACQUISITION................................................31
SECTION 3.18. OFF BALANCE SHEET LIABILITIES.....................................................31
SECTION 3.19. PROMOTIONS AND SELLING ARRANGEMENTS...............................................31
SECTION 3.20. TAX TREATMENT.....................................................................31
ARTICLE 4 COVENANTS............................................................................................31
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY................................................31
SECTION 4.2. CONDUCT OF BUSINESS OF PARENT.....................................................34
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(CONTINUED)
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SECTION 4.3. PREPARATION OF S-4 AND THE PROXY STATEMENT/PROSPECTUS.............................36
SECTION 4.4. OTHER POTENTIAL ACQUIRERS.........................................................38
SECTION 4.5. COMFORT LETTER....................................................................40
SECTION 4.6. STOCK EXCHANGE LISTING............................................................41
SECTION 4.7. ACCESS TO INFORMATION.............................................................41
SECTION 4.8. CERTAIN FILINGS; REASONABLE EFFORTS...............................................42
SECTION 4.9. PUBLIC ANNOUNCEMENTS..............................................................43
SECTION 4.10. INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE............................43
SECTION 4.11. NOTIFICATION OF CERTAIN MATTERS...................................................44
SECTION 4.12. AFFILIATES........................................................................44
SECTION 4.13. TERMINATION OF 401(K) PLAN........................................................45
SECTION 4.14. LUMP SUM DISTRIBUTIONS............................................................45
SECTION 4.15. EMPLOYEE BENEFITS.................................................................45
SECTION 4.16. LONG TERM INCENTIVE PLAN..........................................................46
SECTION 4.17. TAX-FREE REORGANIZATION...........................................................46
SECTION 4.18. SECTION 16 MATTERS................................................................46
SECTION 4.19. TAKEOVER STATUTES.................................................................46
SECTION 4.20. COMPANY RIGHTS AGREEMENT..........................................................46
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER.............................................................47
SECTION 5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER............................................................................47
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY......................................47
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION...........................48
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER.......................................................................49
SECTION 6.1. TERMINATION.......................................................................49
SECTION 6.2. EFFECT OF TERMINATION.............................................................50
SECTION 6.3. FEES AND EXPENSES.................................................................51
SECTION 6.4. AMENDMENT.........................................................................52
SECTION 6.5. EXTENSION; WAIVER.................................................................52
ARTICLE 7 MISCELLANEOUS........................................................................................52
SECTION 7.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................52
SECTION 7.2. ENTIRE AGREEMENT; ASSIGNMENT......................................................52
SECTION 7.3. VALIDITY..........................................................................53
SECTION 7.4. NOTICES...........................................................................53
SECTION 7.5. GOVERNING LAW.....................................................................54
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TABLE OF CONTENTS
(CONTINUED)
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SECTION 7.6. DESCRIPTIVE HEADINGS; SECTION REFERENCES..........................................54
SECTION 7.7. PARTIES IN INTEREST...............................................................54
SECTION 7.8. CERTAIN DEFINITIONS...............................................................54
SECTION 7.9. NO PERSONAL LIABILITY.............................................................55
SECTION 7.10. SPECIFIC PERFORMANCE..............................................................55
SECTION 7.11. COUNTERPARTS......................................................................55
SECTION 7.12. RULES OF CONSTRUCTION.............................................................55
SECTION 7.13. WAIVER OF JURY TRIAL..............................................................55
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TABLE OF EXHIBITS
Exhibit A..................Form of Certificate of Merger
Exhibit B..................Form of Company Affiliate Letter
Exhibit C..................Initial Officers of Surviving Company
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TABLE OF DEFINED TERMS
Cross-Reference
Term in Agreement Page
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Acquisition...................................................Preamble 1
affiliate.....................................................Section 7.8(a) 54
Agreement.....................................................Preamble 1
Base Trading Price............................................Section 1.8(b) 3
business day..................................................Section 7.8(b) 54
capital stock.................................................Section 7.8(c) 54
Certificate of Merger.........................................Section 1.2 1
Certificates..................................................Section 1.10(b) 3
Closing Date..................................................Section 1.3 2
Closing.......................................................Section 1.3 2
Code..........................................................Preamble 1
Company.......................................................Preamble 1
Company Acquisition...........................................Section 6.3(a) 52
Company Affiliates............................................Section 4.12(a) 44
Company Board.................................................Section 2.3(a) 9
Company Employees.............................................Section 4.15(a) 45
Company Financial Adviser.....................................Section 2.22 23
Company Insider...............................................Section 4.18 46
Company Intellectual Property.................................Section 2.14(b) 18
Company Permits...............................................Section 2.10 12
Company Plans.................................................Section 1.11(a) 5
Company Preferred Stock.......................................Section 2.2(a) 8
Company Right.................................................Section 2.2(a) 8
Company Rights Agreement......................................Section 2.2(a) 8
Company SEC Reports...........................................Section 2.4(a) 9
Company Securities............................................Section 2.2(a) 8
Company Stock Option(s).......................................Section 1.11(a) 5
Company Stockholder Approval..................................Section 2.3(a) 9
Company Stockholder Meeting...................................Section 4.3(e) 38
Confidentiality Agreement.....................................Section 4.7(d) 42
Contract......................................................Section 2.15(a) 20
Copyrights....................................................Section 2.14(a) 18
Debenture Transaction.........................................Section 3.2(a) 25
Debentures....................................................Section 3.2(a) 25
DGCL..........................................................Section 1.1 1
Disclosure Letter.............................................Article 2 7
Effective Time................................................Section 1.2 1
Employee Plans................................................Section 2.11(a) 13
Environmental Claim...........................................Section 2.12(b) 16
Environmental Laws............................................Section 2.12(b) 16
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TABLE OF DEFINED TERMS
(CONTINUED)
ERISA.........................................................Section 2.11(a) 12
ERISA Affiliate...............................................Section 2.11(a) 12
Exchange Act..................................................Section 2.2(b) 9
Exchange Agent................................................Section 1.10(a) 3
Exchange Fund.................................................Section 1.10(a) 3
Exchange Ratio................................................Section 1.8(b) 3
Final Date....................................................Section 6.1(b) 49
Financial Statements..........................................Section 2.4(a) 10
Governmental Entity...........................................Section 2.6 10
GUST..........................................................Section 2.11(i) 15
Hazardous Material............................................Section 2.12(b) 16
HSR Act.......................................................Section 2.6 10
incentive stock options.......................................Section 1.11(a) 6
include or including..........................................Section 7.8(e) 54
Indemnified Liabilities.......................................Section 4.10(a) 43
Indemnified Persons...........................................Section 4.10(a) 43
Insured Parties...............................................Section 4.10(c) 44
Intellectual Property.........................................Section 2.14(a) 18
IRS...........................................................Section 2.11(a) 13
ISOs..........................................................Section 1.11(a) 6
knowledge or known............................................Section 7.8(d) 54
Lien..........................................................Section 7.8(f) 55
M&P Plan......................................................Section 2.11(i) 15
Marks.........................................................Section 2.14(a) 18
Material Adverse Effect on Parent.............................Section 3.1(b) 24
Material Adverse Effect on the Company........................Section 2.1(b) 7
Material Contract(s)..........................................Section 2.15(a) 20
Merger Consideration..........................................Section 1.8(a) 3
Merger........................................................Section 1.1 1
Multiemployer Plan............................................Section 2.11(f) 14
Multiple Employer Plan........................................Section 2.11(f) 14
Notice of Superior Proposal...................................Section 4.4(d) 40
NYSE..........................................................Section 1.8(b) 3
Other Interests...............................................Section 2.1(c) 8
Parent........................................................Preamble 1
Parent Benefit Plans..........................................Section 3.11 29
Parent Board..................................................Section 3.3(a) 26
Parent Common Stock...........................................Section 1.8(a) 2
Parent Disclosure Letter......................................Article 3 24
Parent Financial Statements...................................Section 3.4 27
Parent Intellectual Property..................................Section 3.14 30
Parent Permits................................................Section 3.10 29
Parent Right..................................................Section 3.2(a) 25
Parent SEC Reports............................................Section 3.4 26
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TABLE OF DEFINED TERMS
(CONTINUED)
Parent Securities.............................................Section 3.2(a) 25
Parent Stockholder Approval...................................Section 3.3(a) 26
Parent Stockholder Meeting....................................Section 4.3(d) 38
Parent Subsidiary.............................................Section 3.1(a) 24
Patents.......................................................Section 2.14(a) 18
Permitted Liens...............................................Section 2.16(a) 22
person........................................................Section 7.8(g) 55
Proxy Statement/Prospectus....................................Section 4.3(a) 36
S-4...........................................................Section 2.5 10
SEC...........................................................Section 2.4(a) 9
Securities Act................................................Section 2.2(a) 8
Share(s)......................................................Section 1.8(a) 2
Standstill Agreement..........................................Section 4.4(b) 39
Subsidiary....................................................Section 2.1(a) 7
Superior Proposal.............................................Section 4.4(a) 38
Surviving Company.............................................Section 1.1 1
Tax or Taxes..................................................Section 2.13(a)(i) 16
Tax Return....................................................Section 2.13(a)(ii) 17
Termination Fee...............................................Section 6.3(a) 51
Third Party...................................................Section 4.4(a) 38
Third Party Acquisition.......................................Section 4.4(a) 38
Trade Secrets.................................................Section 2.14(a) 18
Warrants......................................................Section 3.2(a) 25
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
December 15, 2002, is by and among RAWLINGS SPORTING GOODS COMPANY, INC., a
Delaware corporation (the "COMPANY"), K2 INC., a
Delaware corporation
("PARENT"), and LARA ACQUISITION SUB, a
Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
have each (i) determined that the Merger is advisable to and fair and in the
best interests of their respective corporations and stockholders and (ii)
approved the Merger upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, Parent, as the sole stockholder of Acquisition, has approved
and adopted the Merger and this Agreement, and Parent will seek approval of the
shares of its stock to be issued in the Merger by a majority of the votes cast
thereon at a meeting of its stockholders called for that purpose pursuant to
Rule 312.03 of the New York Stock Exchange;
WHEREAS, for U.S. Federal income tax purposes it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE") and the regulations
promulgated thereunder, and that this Agreement constitute a "plan or
reorganization" for purposes of Sections 354 and 361 of the Code; and
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the
Delaware
General Corporation Law (the "DGCL"), Acquisition shall be merged with and into
the Company (the "MERGER"). Following the Merger, the Company shall continue as
the surviving corporation (the "SURVIVING COMPANY") and the separate corporate
existence of Acquisition shall cease.
Section 1.2. Effective Time. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date, a Certificate of Merger
substantially in the form of Exhibit A (the "CERTIFICATE OF MERGER") shall be
duly executed and acknowledged by the Company and thereafter delivered to the
Secretary of State of the State of
Delaware for filing pursuant to Section 251
of the DGCL. The Merger shall become effective at such time as a properly
executed copy of the Certificate of Merger is duly filed with the Secretary of
State of the State of
Delaware in accordance with Section 251 of the DGCL or
such later time as Parent and the Company may agree upon and as set forth in the
Certificate of Merger (the time the Merger becomes effective being referred to
herein as the "EFFECTIVE TIME").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"CLOSING") will take place at a time and on a date (the "CLOSING DATE") to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the latest to occur of the conditions set forth in Article
5, at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the Surviving
Company, and all debts, liabilities and duties of the Company and Acquisition
shall become the debts, liabilities and duties of the Surviving Company.
Section 1.5. Certificate of Incorporation and Bylaws. The Certificate
of Incorporation of the Surviving Company shall be amended as necessary to read
the same as the Certificate of Incorporation of Acquisition in effect at the
Effective Time until amended in accordance with applicable law; provided,
however, that at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Company shall be amended and restated in its
entirety to read as following: "The name of the corporation is Rawlings Sporting
Goods Company, Inc." The bylaws of the Surviving Company shall be amended as
necessary to read the same as the bylaws of Acquisition in effect at the
Effective Time until amended in accordance with applicable law.
Section 1.6. Directors. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Company, each to hold
office in accordance with the Certificate of Incorporation and bylaws of the
Surviving Company until such director's successor is duly elected or appointed
and qualified. The class of directors of Parent expiring in 2005 shall be
expanded by one board member and the vacancy created thereby shall be filled by
action of the Parent Board with a nominee named by the Company Board prior to
the Merger, and such nominee shall be named in the Proxy Statement/Prospectus.
Section 1.7. Officers. The initial officers of the Surviving Company at
the Effective Time shall be as listed on Exhibit C, each to hold office in
accordance with the Certificate of Incorporation and bylaws of the Surviving
Company until such officer's successor is duly elected or appointed and
qualified.
Section 1.8. Conversion of Shares.
(a) At the Effective Time, each share of common stock, $0.01
par value per share, of the Company together with the associated Company Rights
under the Company Rights Agreement (each, a "SHARE" and, collectively, the
"SHARES") issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held in the Company's treasury or by any of the Company's
Subsidiaries (together with the associated Company Right under the Company
Rights Agreement) and (ii) Shares held by Parent, Acquisition or any other
subsidiary of Parent) shall, by virtue of the Merger and without any action on
the part of Acquisition, the Company or the holder thereof, be converted into
and shall become a number of fully paid and nonassessable shares of common
stock, par value $1.00 per share, of Parent ("PARENT COMMON STOCK") equal
2
to the Exchange Ratio (together with any cash in lieu of fractional shares of
Parent Common Stock to be paid pursuant to Section 1.10(f)) (collectively,
"MERGER CONSIDERATION"). Unless the context otherwise requires, each reference
in this Agreement to shares of Parent Common Stock shall include the associated
Parent Rights. Notwithstanding the foregoing, if, between the date of this
Agreement and the Effective Time, the outstanding shares of Parent Common Stock
or the Shares shall have been changed into a different number of shares or a
different class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares then, the Exchange
Ratio shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
(b) The "EXCHANGE RATIO" shall be 0.95; provided, however,
that if the average daily closing price per share of Parent Common Stock as
reported on the New York Stock Exchange ("NYSE") Composite Transactions
reporting system for the fifteen (15) consecutive trading days ending on and
including the second trading day preceding the Closing Date (the "BASE TRADING
PRICE"), (i) is less than $9.47, the Exchange Ratio shall be calculated by
dividing $9.00 by the Base Trading Price, rounded to the third (3rd) decimal
point; or (ii) is greater than $10.53, the Exchange Ratio shall be calculated by
dividing $10.00 by the Base Trading Price, rounded to the third (3rd) decimal
point.
(c) At the Effective Time, each outstanding share of the
common stock, $0.01 par value per share, of Acquisition shall be converted into
one share of common stock, $0.01 par value per share, of the Surviving Company.
(d) At the Effective Time, each Share held in the treasury of
the Company and each Share held by Parent or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled, retired and cease to exist, and no
shares of Parent Common Stock shall be delivered with respect thereto.
Section 1.9. Dissenters and Appraisal Rights. The holders of the Shares
will not be entitled to dissenters and appraisal rights in accordance with
Section 262 of the DGCL.
Section 1.10. Exchange of Certificates.
(a) Prior to the Effective Time, as required by subsections
(b) and (c) below, Parent shall deliver to its transfer agent, or a depository
or trust institution of recognized standing selected by Parent and Acquisition
and reasonably satisfactory to the Company (the "EXCHANGE AGENT") for the
benefit of the holders of Shares for exchange in accordance with this Article 1:
(i) certificates representing the appropriate number of shares of Parent Common
Stock issuable pursuant to Section 1.8, and (ii) cash to be paid in lieu of
fractional shares of Parent Common Stock (such shares of Parent Common Stock and
such cash are hereinafter referred to as the "EXCHANGE FUND"), in exchange for
outstanding Shares.
(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding Shares (the
"CERTIFICATES") and whose shares were converted into the
3
right to receive shares of Parent Common Stock pursuant to Section 1.8: (i) a
letter of transmittal (which shall specify that delivery shall be effected and
risk of loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
customary provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock and, if applicable, a check representing the cash
consideration to which such holder may be entitled on account of a fractional
share of Parent Common Stock that such holder has the right to receive pursuant
to the provisions of this Article 1, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that 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 Shares 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 1.10, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 1.10.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 1.10(f), until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor without interest (i) the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 1.10(f) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such number of whole shares of Parent Common Stock and (ii) at the
appropriate payment date the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) In the event that any Certificate for Shares shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange
therefor upon the making of an affidavit of that fact by the holder thereof such
shares of Parent Common Stock and cash in lieu of fractional shares, if any, as
may be required pursuant to this Agreement; provided, however, that Parent or
the Exchange Agent may, in its discretion, require the delivery of a suitable
bond or indemnity.
(e) All shares of Parent Common Stock issued upon the
surrender for exchange of Shares in accordance with the terms hereof (including
any cash paid pursuant to
4
Section 1.10(c) or 1.10(f)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Company of the Shares that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Company for any reason, they shall be canceled and exchanged as provided in this
Article 1.
(f) No fractions of a share of Parent Common Stock shall be
issued in the Merger, but in lieu thereof each holder of Shares otherwise
entitled to a fraction of a share of Parent Common Stock shall upon surrender of
his or her Certificate or Certificates be entitled to receive an amount of cash
(without interest) determined by multiplying the closing price of a share of
Parent Common Stock on the NYSE (as reported in the New York City edition of the
Wall Street Journal or, if not reported thereby, another nationally recognized
source) on the date of the Effective Time by the fractional share interest to
which such holder would otherwise be entitled. The parties acknowledge that
payment of the cash consideration in lieu of issuing fractional shares was not
separately bargained for consideration, but merely represents a mechanical
rounding off for purposes of simplifying the corporate and accounting
complexities that would otherwise be caused by the issuance of fractional
shares.
(g) Any portion of the Exchange Fund that remains
undistributed to the stockholders of the Company upon the one year anniversary
the Effective Time shall be delivered to Parent upon demand, and any
stockholders of the Company who have not theretofore complied with this Article
1 shall thereafter look only to Parent for payment of their claim for Parent
Common Stock and cash in lieu of fractional shares, as the case may be, and any
applicable dividends or distributions with respect to Parent Common Stock.
(h) Neither Parent nor the Company shall be liable to any
holder of Shares for shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to and as required by any applicable abandoned
property, escheat or similar law.
(i) Notwithstanding anything herein to the contrary, Parent or
Exchange Agent may withhold Merger Consideration as they reasonably deem
necessary to satisfy their withholding obligations under applicable law, and the
withholding of any such Merger Consideration for such purpose shall be treated
as the payment thereof to the person from whom such amount was withheld for
purposes of determining whether such person received amounts to which such
person is entitled hereunder.
Section 1.11. Stock Options.
(a) At the Effective Time, each outstanding option to purchase
Shares (each "COMPANY STOCK OPTION" and, collectively, "COMPANY STOCK OPTIONS")
issued pursuant to the Company's 1994 Long-Term Incentive Plan, Non-Employee
Directors' Stock Plans, or other agreement or arrangement, whether vested or
unvested, shall be converted as of the Effective Time into options to purchase
shares of Parent Common Stock in accordance with this Section 1.11. All plans or
agreements described above pursuant to which any Company Stock Option has been
issued or may be issued are referred to collectively as the "COMPANY PLANS." At
the Effective Time, each Company Stock Option shall be deemed to constitute an
option to
5
acquire, on the same terms and conditions (but taking into account any changes
thereto, including any acceleration in the vesting or exercisability of such
option by reason of this Agreement or the Merger or the transactions or matters
contemplated by this Agreement provided for in such option or the applicable
plan with respect thereto) as were applicable to such Company Stock Option, a
number of shares of Parent Common Stock equal to the number of shares of Parent
Common Stock that the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such option
in full immediately prior to the Effective Time, rounded down to the nearest
whole share, at a price per share equal to (i) the aggregate exercise price for
the Shares otherwise purchasable pursuant to such Company Stock Option divided
by (ii) the product of (A) the number of Shares otherwise purchasable pursuant
to such Company Stock Option multiplied by (B) the Exchange Ratio, rounded up to
the nearest cent; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under Section 422
of the Code ("INCENTIVE STOCK OPTIONS" or "ISOS") Parent may cause the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option to be determined so as to comply with
Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Plan and that the
agreements evidencing the grants of such options shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
1.11 after giving effect to the Merger).
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Stock Options assumed in accordance with this
Section 1.11. Within ten (10) business days after the Effective Time, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Parent Common Stock subject to
any Company Stock Options and shall use all commercially reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) At or before the Effective Time, the Company shall cause
to be effected any necessary amendments to the Company Plans to give effect to
the foregoing provisions of this Section 1.11.
Section 1.12. Plan of Reorganization. The parties hereto hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Department of Treasury
Regulations promulgated under the Code.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Letter
previously delivered by the Company to
6
Parent (the "DISCLOSURE LETTER") and certified by a duly authorized officer of
the Company (which exceptions shall specifically identify the Section,
subsection or paragraph, as applicable, to which such exception relates), that:
Section 2.1. Organization and Qualification; Subsidiaries; Investments.
(a) Section 2.1(a) of the Disclosure Letter sets forth, as of
the date of this Agreement, a true and complete list of each person in which the
Company owns, directly or indirectly, fifty percent (50%) or more of the voting
interests or of which the Company otherwise has the right to direct the
management (each, a "SUBSIDIARY") together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned directly
or indirectly by the Company. All the outstanding capital stock or other
ownership interests of each Subsidiary is owned by the Company, directly or
indirectly, free and clear of any Lien or any other limitation or restriction.
Each of the Company and the Subsidiaries is duly organized and validly existing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. The Company has delivered to
Parent's counsel accurate and complete copies of the Certificate of
Incorporation and bylaws or comparable governing documents, each as in full
force and effect on the date hereof, of the Company and each Subsidiary. The
Company has no operating Subsidiaries other than those incorporated in a state
of the United States, Canada or Costa Rica.
(b) Each of the Company and the Subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing does not, individually or in the aggregate, have a Material Adverse
Effect on the Company. For purposes hereof, the term "MATERIAL ADVERSE EFFECT ON
THE COMPANY" means any circumstance involving, change in or effect on the
Company or any Subsidiary (i) that is, or is reasonably likely in the future to
be, materially adverse to the business operations, earnings, or results of
operations, assets or liabilities (including contingent liabilities) or the
financial condition of the Company and the Subsidiaries, taken as a whole,
excluding from the foregoing any event, change or circumstance arising out of
(A) the compliance by the Company, Subsidiaries, Parent or Acquisition with the
terms and conditions of this Agreement, (B) the announcement or disclosure of
this Agreement or the subject matter hereof, (C) any stockholder class action
litigation arising directly out of allegations of a breach of fiduciary duty
relating to this Agreement or (D) to changes in applicable law or regulations or
in generally accepted accounting principles, or (ii) that is reasonably likely
to prevent or materially delay or impair the ability of the Company to
consummate the transactions contemplated by this Agreement. Except as
specifically set forth in this Agreement, all references to Material Adverse
Effect on the Company or its Subsidiaries contained in this Agreement shall be
deemed to refer solely to the Company and its Subsidiaries without including its
ownership by Parent after the Merger.
(c) Other Interests. Section 2.1(c) of the Disclosure Letter
sets forth a true and complete list, as of the date hereof, of each equity
investment made by the Company or any Subsidiary in any person (including the
percentage ownership, purchase price and any management rights granted to the
Company or any such Subsidiary) other than the Subsidiaries
7
("OTHER INTERESTS"). The Other Interests are owned directly or indirectly by the
Company free and clear of all Liens.
Section 2.2. Capitalization of the Company and Subsidiaries.
(a) The authorized capital stock of the Company consists of
(i) fifty million (50,000,000) Shares, of which, as of December 13, 2002, eight
million, eighty-eight thousand, six hundred fifty-six (8,088,656) were issued
and outstanding (each, together with a Company Common Stock purchase right, the
"COMPANY RIGHT") issued pursuant to the Rights Agreement dated November 27,
2002, between Company and Mellon Investor Services LLC (the "COMPANY RIGHTS
AGREEMENT")); and (ii) ten million (10,000,000) shares of preferred stock, $0.01
par value per share (the "COMPANY PREFERRED STOCK"), none of which are
outstanding as of the date hereof. All of the outstanding Shares are, and the
Shares issuable upon exercise of the Company Stock Options, when issued in
accordance with the Company Plans, would be, validly issued and fully paid,
nonassessable and not subject to any preemptive rights. As of December 13, 2002,
an aggregate of one million, six hundred forty-four thousand, seven hundred
fifty-six (1,644,756) Shares were reserved for issuance and one million, four
hundred thirteen thousand, five hundred thirty-four (1,413,534) Shares were
issuable upon or otherwise deliverable in connection with the exercise of
outstanding Company Stock Options issued pursuant to the Company Plans. Between
December 13, 2002 and the date hereof, no shares of the Company's capital stock
have been issued other than pursuant to the exercise of Company Stock Options
already in existence on such date. Except as set forth above, as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any Subsidiary
convertible into, or exchangeable or exercisable for, shares of capital stock or
voting securities of the Company or any Subsidiary, (iii) no options, warrants
or other rights to acquire from the Company or any Subsidiary and no obligations
of the Company or any Subsidiary to issue any capital stock, voting securities
or securities convertible into or exchangeable or exercisable for capital stock
or voting securities of the Company or any Subsidiary and (iv) no equity
equivalent interests in the ownership or earnings of the Company or any
Subsidiary or other similar rights. All of the outstanding Shares and Company
Stock Options (collectively, the "COMPANY SECURITIES") were issued in compliance
with the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
applicable state securities laws. As of the date hereof, there are no
outstanding rights or obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any of its outstanding capital stock or
other ownership interests. There are no stockholder agreements, voting trusts or
other arrangements or understandings to which the Company or any Subsidiary is a
party or by which it or the Company Board is bound, and to the Company's
knowledge there are no other agreements, voting trusts or other arrangements or
understandings, relating to the voting or registration of any shares of capital
stock or other voting securities of the Company or any Subsidiary. No Shares are
issued and held by the Company in its treasury as of the date hereof. Section
2.2 of the Disclosure Letter sets forth a true and complete list of all holders
of outstanding Company Stock Options, the exercise or vesting schedule, the
exercise price per share, and the term of each such Company Stock Option, as
applicable and in the case of Company Stock Options, whether such option is a
nonqualified stock option or incentive stock option. None of the terms of the
Company Stock Options provides for accelerated vesting or exercisability as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. The Company has not granted Company Stock
Options to
8
employees or consultants under any Company Plan at an exercise price of less
than the fair market value per Share at the time of grant as determined in good
faith by the Company Board.
(b) The Shares and the Company Rights constitute the only
classes of equity securities of the Company or any Subsidiary registered or
required to be registered under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT").
Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby,
subject in the case of the consummation of the Merger, to the affirmative vote
of the holders of a majority of the outstanding Shares of the Company's Common
Stock in favor of the approval and adoption of this Agreement and approval of
the Merger in accordance with the DGCL (the "COMPANY STOCKHOLDER APPROVAL"). The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company (the "COMPANY BOARD"), and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except the approval and
adoption of this Agreement by the holders of a majority of the outstanding
Shares. This Agreement has been duly and validly executed and delivered by the
Company and constitutes, assuming the due authorization, execution and delivery
hereof by Parent and Acquisition, a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to any applicable bankruptcy, insolvency (including all applicable laws relating
to fraudulent transfers), reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(b) The Company Board, at a meeting duly called and held, has
(i) determined that this Agreement and the transactions contemplated hereby
(including the Merger) are fair to and in the best interests of Company's
stockholders, (ii) approved and adopted this Agreement and the transactions
contemplated hereby (including the Merger) and (iii) resolved (subject to
Section 4.4(d)) to recommend that Company's stockholders vote for the approval
and adoption of this Agreement and the transactions contemplated hereby
(including the Merger).
Section 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and
documents (the "COMPANY SEC REPORTS") with the Securities and Exchange
Commission (the "SEC") for the period on or after January 1, 1999, and each of
such Company SEC Reports complied at the time of filing in all material respects
with all applicable requirements of the Securities Act and the Exchange Act,
each as in effect on the dates such forms, reports and documents were filed.
None of such Company SEC Reports, including any financial statements or
schedules included or incorporated by reference therein, contained when filed
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein in light of the circumstances under which they
9
were made not misleading, except to the extent superseded by a Company SEC
Report filed subsequently and prior to the date hereof. Each of the consolidated
financial statements (including, in each case, any related notes and schedules
thereto) contained in the Company SEC Reports (the "FINANCIAL STATEMENTS") have
been prepared in all material respects in accordance with United States
generally accepted accounting principles consistently applied and maintained
throughout the periods indicated, except where noted therein, and fairly present
in all material respects the consolidated financial condition of the Company and
the Subsidiaries at their respective dates and the results of their operations
and changes in financial position for the periods covered thereby, in each case
in conformity with United States generally accepted accounting principles
(subject, in each case, to normal year-end adjustments and except that unaudited
financial statements do not contain all required footnotes).
(b) The Company has delivered to Acquisition or Parent a
complete and correct copy of any amendments or modifications that have not yet
been filed with the SEC but that the Company presently intends to file, to
agreements, documents or other instruments that previously had been filed by the
Company with the SEC.
Section 2.5. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or (ii) the Proxy Statement/Prospectus will, at the date mailed to
stockholders of the Company and at the time of the Company Stockholders Meeting
and the Parent Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein in light of the circumstances
under which they are made not misleading. The Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied or required to be supplied by Parent or Acquisition which
is contained in or omitted from any of the foregoing documents or which is
incorporated by reference therein.
Section 2.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under
applicable requirements of the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the Nasdaq National Market and the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), any filings under similar merger notification laws or regulations of
foreign Governmental Entities and the filing and recordation of the Certificate
of Merger as required by the DGCL, no filing with or notice to and no permit,
authorization, consent or approval of any United States or foreign court or
tribunal, or administrative, governmental or regulatory body, agency or
authority (each, a "GOVERNMENTAL ENTITY") is necessary for the execution and
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (i) conflict with or result in a
breach of any provision of the respective Certificate of Incorporation or bylaws
(or
10
similar governing documents) of the Company or any Subsidiary; (ii) result in a
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any Material Contract to which the Company or any Subsidiary is a
party or by which any of them or their respective properties or assets are
bound; (iii) result in a violation or breach of or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any Contract (other than any Material
Contract) to which the Company or any Subsidiary is a party or by which any of
them or their respective properties or assets are bound; or (iv) violate any
order, writ, injunction, decree to which the Company or a Subsidiary is subject,
or any law, statute, rule or regulation applicable to the Company or any
Subsidiary or any of their respective properties or assets except, in the case
of the foregoing clauses (iii) and (iv), for violations, breaches or defaults
that would not, individually or in the aggregate, result in a Material Adverse
Effect on the Company.
Section 2.7. No Default. Neither the Company nor any Subsidiary is in
material breach, default or violation (and no event has occurred that with
notice or the lapse of time, or both, would constitute a material breach,
default or violation) of any term, condition or provision of (i) its Certificate
of Incorporation or bylaws (or similar governing documents); (ii) each Material
Contract; (iii) any other Contract or obligation to which the Company or any
Subsidiary is now a party or by which it or any of its properties or assets may
be bound; or (iv) any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Company or any Subsidiary or any of its properties
or assets.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
disclosed in the Company SEC Reports filed prior to the date hereof, neither the
Company nor any of its subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise that would be required
by United States generally accepted accounting principles to be reflected on a
consolidated balance sheet of the Company and its consolidated subsidiaries
(including the notes thereto), other than liabilities and obligations incurred
since August 31, 2002, in the ordinary course of business consistent with past
practices. Except as disclosed in Company SEC Reports filed prior to the date
hereof, or for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, or as permitted by Section 4.1, since August
31, 2002, (i) the Company and its Subsidiaries have conducted their business
only in the ordinary course; (ii) through the date hereof, there has not been
any declaration, setting aside or payment of any dividend or other distribution
in cash, stock or property in respect of the Company's capital stock, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof; (iii) there has not been any action by the Company or any of
its Subsidiaries during the period from August 31, 2002 through the date of this
Agreement that, if taken during the period from the date of this Agreement
through the Effective Time would constitute a breach of Section 4.1; and (iv)
except as required by United States generally accepted accounting principles,
there has not been any change by the Company in accounting principles, practices
or methods. Since August 31, 2002, there has not been a Material Adverse Effect
on the Company.
Section 2.9. Litigation. There are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company,
11
any Subsidiary or any of their respective properties or assets before any
Governmental Entity that, if decided adversely to the Company or any such
Subsidiary, would, individually, or in the aggregate, result in any charge,
assessment, levy, fine or other liability being imposed upon or incurred by the
Company or any Subsidiary exceeding One Million Dollars ($1,000,000). Neither
the Company nor any Subsidiary is subject to any outstanding order, writ,
injunction or decree of any Governmental Entity that would individually, or in
the aggregate, result in any charge, assessment, levy, fine or other liability
being imposed upon or incurred by the Company or any Subsidiary exceeding One
Million Dollars ($1,000,000).
Section 2.10. Compliance with Applicable Law. Each of the Company and
the Subsidiaries holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of its
business (collectively, the "COMPANY PERMITS"), except as disclosed in Company
SEC Reports filed prior to the date hereof, or except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals that would not,
individually or in the aggregate, result in a Material Adverse Effect on the
Company and that have not resulted in any injunction or other equitable remedy
being imposed on the Company or any Subsidiary that would result in a Material
Adverse Effect on the Company. Each of the Company and the Subsidiaries is in
compliance with the terms of the Company Permits held by it, except as disclosed
in Company SEC Reports filed prior to the date hereof, or except where the
failure so to comply would not, individually or in the aggregate, result in a
Material Adverse Effect on the Company and that have not resulted in any
injunction or other equitable remedy being imposed on the Company or any
Subsidiary that would result in a Material Adverse Effect on the Company. The
businesses of the Company and the Subsidiaries are being conducted in compliance
with all applicable laws, ordinances and regulations of the United States or any
foreign country or any political subdivision thereof or of any Governmental
Entity, except as disclosed in Company SEC Reports filed prior to the date
hereof, or except for violations or possible violations of any United States or
foreign laws, ordinances or regulations that do not and will not result,
individually or in the aggregate, in a Material Adverse Effect on the Company
and that have not resulted in any injunction or other equitable remedy being
imposed on the Company or any Subsidiary that would result in a Material Adverse
Effect on the Company. No investigation or review by any Governmental Entity
with respect to the Company or any Subsidiary is pending nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same, except as disclosed in Company SEC Reports filed prior to the date
hereof.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Section 2.11(a) of the Disclosure Letter lists as of the
date hereof all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, health, life, or disability insurance, dependent care,
severance and other similar fringe or employee benefit plans, programs or
arrangements and any current employment or executive compensation or severance
agreements written or otherwise maintained or contributed to for the benefit of
or relating to any employee or former employee of the Company or any trade or
business (whether or not incorporated) that is a member of a controlled group
including the Company or that is under common control with the Company within
the meaning of Section 414 of the Code (an "ERISA AFFILIATE"), to the extent
12
that the Company or any ERISA Affiliate currently has or may incur liability for
payments or benefits thereunder, as well as each plan with respect to which the
Company or an ERISA Affiliate could incur liability under Section 4069 (if such
plan has been or were terminated) or Section 4212(c) of ERISA (together, the
"EMPLOYEE PLANS"). The Company has made available to Parent a copy of (i) the
two (2) most recent annual reports on Form 5500 filed with the Internal Revenue
Service (the "IRS") for each disclosed Employee Plan where such report is
required and (ii) the documents and instruments governing each such Employee
Plan (including where applicable, without limitation, the plan document, summary
plan description or other summary, most recent actuarial report, and trust or
other funding arrangement). No Employee Plan is subject to Title IV of ERISA or
Section 412 of the Code. Neither the Company nor any ERISA Affiliate has
incurred any material liability (contingent or otherwise) with respect to any
such Employee Plan (other than with respect to contributions required
thereunder); each Employee Plan has been maintained in all material respects in
accordance with its terms and with ERISA and the Code; and there has been no
material violation of any reporting or disclosure requirement imposed by ERISA
or the Code. Each Employee Plan intended to be qualified under Section 401(a) of
the Code, and each trust intended to be exempt under Section 501(a) of the Code,
has been determined to be so qualified or exempt by the IRS. For each Employee
Plan which has received such a determination, there has been no event, condition
or circumstance that has adversely affected or is likely to adversely affect
such qualified status. No "party in interest" (as defined on Section 3(14) of
ERISA) of any Employee Plan has participated in, engaged in or been a party to
any transaction that is prohibited under Section 4975 of the Code or Section 406
of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA
(or any administrative class or individual exemption issued thereunder),
respectively. With respect to any Employee Plan, (i) neither the Company, nor
any of its ERISA Affiliates has had asserted against it any claim for taxes
under Chapter 43 of Subtitle D of the Code and Section 5000 of the Code, or for
penalties under ERISA Section 502(c), (i) or (l), nor, to the knowledge of the
Company, is there a basis for any such claim, and (ii) no officer, director or
employee of the Company has committed a breach of any fiduciary responsibility
or obligation imposed by Title I of ERISA. Other than routine claims for
benefits, there is no claim or proceeding (including any audit or investigation)
pending or, to the knowledge of the Company, threatened, involving any Employee
Plan by any person, or by the IRS, the United States Department of Labor or any
other Governmental Entity against such Employee Plan or the Company or any ERISA
Affiliate.
(b) Section 2.11(b) of the Disclosure Letter sets forth a list
as of the date hereof of all (i) employment agreements with officers of the
Company or any ERISA Affiliate and (ii) agreements with consultants who are
individuals obligating the Company or any ERISA Affiliate to make annual cash
payments in an amount of Two Hundred Thousand Dollars ($200,000) or more and
(iii) severance agreements, programs and policies of the Company with or
relating to its employees, except such programs and policies required to be
maintained by law. The Company has made available to Parent copies of all such
agreements, plans, programs and other arrangements.
(c) Except as otherwise provided in Section 4.13, there will
be no payment, accrual of additional benefits, acceleration of payments or
vesting of any benefit under any Employee Plan or any other agreement or
arrangement to which the Company or any ERISA Affiliate is a party, and no
employee, officer or director of the Company or any ERISA Affiliate
13
will become entitled to severance, termination allowance or similar payments,
solely by reason of entering into or in connection with the transactions
contemplated by this Agreement.
(d) No Employee Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA provides benefits to former employees of the
Company or its ERISA Affiliates other than as required by Section 4980B of the
Code or similar state laws. The Company and its ERISA Affiliates have complied
in all material respects with the provisions of Part 6 of Title I of ERISA and
Sections 4980B, 9801, 9802, 9811 and 9812 of the Code.
(e) There are no controversies relating to any Employee Plan
or other labor matters pending or, to the knowledge of the Company, threatened
between the Company or any ERISA Affiliate and any of its employees, other than
controversies that would not, individually or in the aggregate, result in any
charge, assessment, levy, fine or other liability being imposed upon or incurred
by the Company or any Subsidiary exceeding One Million Dollars ($1,000,000).
Neither the Company nor any ERISA Affiliate is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any ERISA Affiliate nor does the Company nor any
ERISA Affiliate know of any activities or proceedings of any labor union to
organize any such employees. No strikes, work stoppage, grievance, claim of
unfair labor practice, or labor dispute against the Company or any ERISA
Affiliate has occurred, is pending or, to the knowledge of the Company or any
ERISA Affiliate, threatened, and to the knowledge of the Company and its ERISA
Affiliates there is no basis for any of the foregoing. To the knowledge of the
Company and its ERISA Affiliates, there is no organizational activity being made
or threatened by or on behalf of any labor union with respect to any employees
of the Company or any ERISA Affiliate.
(f) Neither the Company nor any of its ERISA Affiliates
sponsors or has ever sponsored, maintained, contributed to, or incurred an
obligation to contribute or incurred a liability (contingent or otherwise) with
respect to any Multiemployer Plan or to a Multiple Employer Plan. For these
purposes, "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
3(37) and 4001(a)(3) of ERISA, and "MULTIPLE EMPLOYER PLAN" means any Employee
Benefit Plan sponsored by more than one employer, within the meaning of Sections
4063 or 4064 of ERISA or Section 413(c) of the Code. Neither the Company nor any
of its ERISA Affiliates has, or reasonably could be expected to have, any
liability under Title IV of ERISA with respect to any other type of Employee
Plan. The Company has provided to Parent a written estimate of withdrawal
liability, if any, that would occur upon withdrawal from any Multiemployer Plan.
(g) To the extent permitted by applicable law and the
applicable Employee Plan, each Employee Plan (other than any stock option plan)
can be amended or terminated at any time, without consent from any other party
and without liability other than for benefits accrued as of the date of such
amendment or termination (other than charges incurred as a result of such
termination). The Company and its ERISA Affiliates have made full and timely
payment of all amounts required to be contributed or paid as expenses or accrued
such payments in accordance with normal procedures under the terms of each
Employee Plan and applicable law, and the Company and its ERISA Affiliates shall
continue to do so through the Closing.
14
(h) To the knowledge of the Company and its ERISA Affiliates,
no key employee, or group of employees, of the Company or any ERISA Affiliate
has expressed to the Company any plan to terminate employment with the Company
or any ERISA Affiliate. The Company and its ERISA Affiliates have complied in
all material respects with all laws relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity and
collective bargaining.
(i) With respect to each master and prototype tax-qualified
retirement plan ("M&P PLAN") sponsored or maintained by the Company and/or any
ERISA Affiliate, the Company and any such ERISA Affiliate has, on or before the
end of the 2001 plan year or such later date as permitted pursuant to applicable
IRS pronouncements, either adopted or certified in writing its intent to adopt
the required GUST amendments to each such M&P Plan, and to the knowledge of the
Company, an application for a GUST opinion letter for each such M&P Plan was
filed with the IRS by the M&P Plan sponsor on or before December 31, 2000. The
Company and each ERISA Affiliate has adopted or shall also adopt the
GUST-approved M&P Plan by the deadline specified in IRS Announcement 2001-104 or
subsequent IRS guidance. For purposes hereof, "GUST" means the statutes
referenced in IRS Announcement 2001-104. With respect to any individually
designed tax-qualified retirement plans sponsored or maintained by the Company
or any ERISA Affiliate, the Company and each such ERISA Affiliate has adopted
the required GUST amendments and submitted the plan to the IRS on or before
February 28, 2002 or such later date as permitted by applicable IRS
pronouncements for a favorable determination letter as to its tax qualified
status.
(j) The Company and its ERISA Affiliates have complied in all
material respects with the laws of any foreign jurisdiction with respect to any
employee benefit plan or arrangements maintained in such jurisdiction in which
the employees of the Company or any ERISA Affiliate participate.
(k) The Company has no commitment, intention or understanding
to create, terminate or adopt any Employee Plan that would result in any
additional liability to the Company. Since the beginning of the current fiscal
year of any Employee Plan, no event has occurred and no condition or
circumstance has existed that reasonably would be expected to result in an
increase in the benefits under or the expense of maintaining such Employee Plan
from the level of benefits or expense incurred for the most recently completed
fiscal year of such Employee Plan.
Section 2.12. Environmental Laws and Regulations.
(a) Except for matters which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, (i) no written notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no action, claim, suit, proceeding or review or,
to the knowledge of the Company, investigation is pending or, to the knowledge
of the Company or any Subsidiary, threatened by any Person against, the Company
or any Subsidiary with respect to any matters relating to or arising out of any
Environmental Law; (ii) the Company and any Subsidiary are in compliance with
all Environmental Laws, which compliance includes the possession by the Company
and any Subsidiary of all material permits required under applicable
Environmental Laws and
15
compliance with the terms and conditions thereof, and the Company and any
Subsidiary reasonably believe that each of them will, without the incurrence of
any material expense, timely attain and maintain compliance with all
Environmental Laws applicable to any of their current operations or properties
or to any of their planned operations; (iii) to the knowledge of the Company,
there has been no disposal, release or threatened release of any Hazardous
Substance by the Company or any Subsidiary on, under, in, from or about any
property currently or formerly owned or operated by the Company or any
Subsidiary, or otherwise related to the operations of the Company or any
Subsidiary, that has resulted or could reasonably be expected to result in any
Environmental Claim against the Company or any Subsidiary; (iv) neither the
Company nor any Subsidiary has entered into or agreed to or is subject to any
consent decree, order or settlement or other agreement in any judicial,
administrative, arbitral or other similar forum relating to its compliance with
or liability under any Environmental Law or (v) neither the Company nor any
Subsidiary has assumed or retained by contract or otherwise any liabilities of
any kind, fixed or contingent, known or unknown, under any applicable
Environmental Law (including, but not limited to, any liability from the
disposition of any of its real property).
(b) For purposes of this Agreement, the term "ENVIRONMENTAL
LAWS" means federal, state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits and governmental agreements relating to human health and
the environment, including, but not limited to, Hazardous Materials; and the
term "HAZARDOUS SUBSTANCE" means all substances, materials or wastes that are
listed, classified or regulated pursuant to any Environmental Law or which may
be the subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law including, but not limited to, (i) petroleum, asbestos or
polychlorinated biphenyls and (ii) in the United States, all substances defined
as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. section 300.5;
and the term "ENVIRONMENTAL CLAIM" means any claim, violation, or liability, by
any Person relating to liability or potential liability (including liability or
potential liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any Hazardous
Substance at any location and any exposure of Persons to such Hazardous
Substance at any location, (ii) circumstances forming the basis of any violation
or alleged violation of any Environmental Laws or permits, or (iii) otherwise
relating to obligations or liabilities under any Environmental Law.
Section 2.13. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) "TAX" (including "TAXES") means (A) all federal,
state, local, foreign and other taxes (including but not limited to withholding
taxes) and other governmental assessments, fees, duties or charges of any kind
or nature whatsoever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, (B) any liability for payment of
amounts described in clause (A) whether as a result of transferee or successor
liability, joint and several liability for being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise by
operation of law and (C) any liability for the
16
payment of amounts described in clause (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to pay or indemnify any other person; and
(ii) "TAX RETURN" means any return, declaration,
report, statement, information statement and other document required to be filed
with respect to Taxes, including any claims for refunds of Taxes and any
amendments or supplements of any of the foregoing.
(b) Tax Matters. Within the times and in the manner prescribed
by law, the Company and its Subsidiaries (and their predecessors) have properly
prepared and filed all Tax Returns required by law and have timely paid all
Taxes due and payable (whether or not shown on any Tax Return), except for such
improper preparation of Tax Returns or failure to file Tax Returns or to make
payment of Taxes that, in the aggregate, are not material. All such Tax Returns
are true, correct and complete in all material respects and accurately reflect
in all material respects the information pertaining to the tax attributes of the
Company and its Subsidiaries, including tax basis in assets and net operating
loss, capital loss and tax credit carryforwards. As of the Company's year ended
August 30, 2002, the consolidated net operating loss carryforward of the Company
and its Subsidiaries, for federal income tax purposes, was no less than
$24,000,000, and none of the carryforwards are subject to limitation under
Sections 269, 382 or 1502 of the Code or the regulations thereunder. The Company
and its Subsidiaries (and their predecessors) have complied in all material
respects with all applicable laws relating to Taxes. Neither the Company nor of
any of its Subsidiaries (or any predecessor thereof) (i) has filed a consent or
agreement pursuant to Section 341(f) of the Code, (ii) is a party to or bound by
any closing agreement, offer in compromise, gain recognition agreement or any
other agreement with any Tax authority or any Tax indemnity or Tax sharing
agreement with any person, (iii) has present or contingent liabilities for
Taxes, other than Taxes incurred in the ordinary course of business thereof and
reflected on the most recent balance sheet included in the Financial Statements
or incurred in the ordinary course of business since the date of the most recent
Financial Statements in amounts consistent with prior years, (iv) is a party to
an agreement that could give rise to an "excess parachute payment" within the
meaning of Section 280G of the Code or to remuneration the deduction for which
could be disallowed under Section 162(m) of the Code, (v) has issued options or
stock purchase rights (or similar rights) that purported to be governed by
Sections 421 or 423 of the Code that were not so governed when issued or (vii)
has ever been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code. There are no (i) proposed, threatened
or actual assessments, audits, examinations or disputes as to Taxes relating to
the Company or any Subsidiary (or their predecessors) which remain unsatisfied,
(ii) adjustments under Section 481 of the Code or any similar adjustments with
respect to the Company or any Subsidiary (or their predecessors) or (iii)
waivers or extensions of the statute of limitations with respect to Taxes for
which the Company or any Subsidiary could be held liable following the date
hereof. The Company does not know of any basis for the assertion by a taxing
authority of a material Tax deficiency against the Company or any Subsidiary (or
their predecessors). Neither the Company nor any Subsidiary (nor any predecessor
thereof) has been a "distributing corporation" or a "controlled corporation" in
connection with a distribution governed or intended to be governed by Section
355 of the Code. There is currently no limitation on the utilization of tax
attributes of the Company or any Subsidiary under Sections 269, 382, 383, 384 or
1502 of the Code (and comparable provisions of state, local or foreign law).
Neither the Company nor any Subsidiary
17
(nor any predecessor thereof) has been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, or a member of a
combined, consolidated or unitary group for state, local or foreign Tax
purposes, other than an affiliated group the common parent of which is the
Company. Section 2.13(b) of the Disclosure Letter sets forth, on an
entity-by-entity basis, all foreign jurisdictions in which the Company or each
Subsidiary is subject to Tax. Neither the Company nor any Subsidiary is, has
been, or has owned (whether directly or indirectly) an interest in, a passive
foreign investment company within the meaning of Section 1297 of the Code. No
Subsidiary that is not a United States person (i) has engaged (or been treated
as engaged) in the conduct of a trade or business within the United States and
(ii) has had an investment in "United States property" within the meaning of
Section 956(c) of the Code. Neither the Company nor any Subsidiary is, or at any
time has been, subject to (i) the dual consolidated loss provisions of the
Section 1503(d) of the Code, (ii) the overall foreign loss provisions of Section
904(f) of the Code or (iii) the recharacterization provisions of Section
952(c)(2) of the Code.
Section 2.14. Intellectual Property.
(a) Certain Definitions. As used herein, the term
"INTELLECTUAL PROPERTY" means all intellectual property rights arising from or
associated with the following, whether protected, created or arising under the
laws of the United States or any other jurisdiction: (i) trade names, trademarks
and service marks (registered and unregistered), domain names and other Internet
addresses or identifiers, trade dress and similar rights and applications
(including intent to use applications) to register any of the foregoing and
registrations therefor (collectively, "MARKS"); (ii) patents and patent
applications, including continuation, divisional, continuation-in-part,
reexamination and reissue patent applications and any patents issuing therefrom,
and rights in respect of utility models or industrial designs (collectively,
"PATENTS"); (iii) copyrights and registrations and applications therefor
(collectively, "COPYRIGHTS"); (iv) non-public know-how, inventions, discoveries,
improvements, concepts, ideas, methods, processes, designs, plans, schematics,
drawings, formulae, technical data, specifications, research and development
information, technology and product roadmaps, data bases and other proprietary
or confidential information, including customer lists, but excluding any
Copyrights or Patents that may cover or protect any of the foregoing
(collectively, "TRADE SECRETS") and (v) moral rights, publicity rights and any
other proprietary, intellectual or industrial property rights of any kind or
nature that do not comprise or are not protected by Marks, Patents, Copyrights,
or Trade Secrets.
(b) Company Intellectual Property. Section 2.14 of the
Disclosure Letter sets forth an accurate and complete list, as of the date
hereof, of all (i) pending applications and issued registrations for Marks, (ii)
Patents, and (iii) pending applications and issued registrations for Copyrights,
owned (in whole or in part) by the Company or any Subsidiary and used in or
related to the business as currently conducted and as reasonably anticipated to
be conducted in the future by the Company or any Subsidiary (collectively
"COMPANY INTELLECTUAL PROPERTY").
(c) Actions to Protect Intellectual Property. Each of the
Company and the Subsidiaries has taken commercially reasonable steps to protect
its rights in the Company Intellectual Property and maintain the confidentiality
of the Company Trade Secrets. Neither the Company nor any Subsidiary has
disclosed, nor is the Company or any Subsidiary under any contractual or other
obligation to disclose, to another person any of its Trade Secrets, except
18
pursuant to an enforceable confidentiality agreement or undertaking, and, to the
knowledge of the Company, no person has materially breached any such agreement
or undertaking.
(d) Adverse Ownership Claims. The Company owns exclusively all
right, title and interest in and to all of the Company Intellectual Property and
Company Trade Secrets free and clear of any and all liens, encumbrances or other
adverse ownership claims (other than licenses granted by the Company or a
Subsidiary to another person in the ordinary course of business listed under
Section 2.14(g) below), and neither the Company nor any Subsidiary has received
any notice or claim challenging the Company's or any Subsidiary's ownership of
the Company Intellectual Property or Company Trade Secrets or suggesting that
any other person has any claim of legal or beneficial ownership with respect
thereto, nor to the knowledge of the Company is there a reasonable basis for any
claim that the Company or any Subsidiary does not so own or license any of such
Company Intellectual Property or Company Trade Secrets.
(e) Validity and Enforceability. To the Company's knowledge,
the Company Intellectual Property is valid, enforceable and subsisting. Neither
the Company nor any Subsidiary has received any notice or claim challenging the
validity or enforceability of any of the Company Intellectual Property or
indicating an intention on the part of any person to bring a claim that any of
the Company Intellectual Property is invalid or unenforceable, and, with respect
to the Patents contained within the Company Intellectual Property, the Company
has disclosed relevant prior art in the prosecution of its Patents in accordance
with its obligations pursuant to 37 C.F.R. section 1.56.
(f) Status and Maintenance of Company Intellectual Property.
All material Company Intellectual Property has been registered or obtained in
accordance with all applicable legal requirements (including, in the case of the
Company's Marks, the timely post-registration filing of affidavits of use and
incontestability and renewal applications). The Company has timely paid all
filing, examination, issuance, post registration and maintenance fees, annuities
and the like associated with or required with respect to all of the material
Company Intellectual Property.
(g) License Agreements. Section 2.14(g)(1) of the Disclosure
Letter sets forth a complete and accurate list all agreements currently in
effect granting to the Company or any Subsidiary any right under or with respect
to any Intellectual Property other than standard desktop software applications
used generally in the Company or any Subsidiary's operations. Section
2.14(i)(2)of the Disclosure Letter sets forth a complete and accurate list of
all license agreements currently in effect under which the Company or any
Subsidiary licenses or grants any other rights under any Intellectual Property
to another person, excluding non-exclusive internal use licenses granted by the
Company or any Subsidiary to end user customers that have purchased or licensed
products.
(h) Sufficiency of the Company Intellectual Property. The
Company Intellectual Property and Company Trade Secrets constitute all the
material Intellectual Property rights necessary for the conduct of the Company's
and Subsidiaries' businesses as they are currently conducted and reasonably
anticipated to be conducted in the future.
19
(i) No Infringement by the Company or Third Parties; No
Violations. To the Company's knowledge, none of the products, processes,
services, or other technology or materials, or any Intellectual Property
currently used, or otherwise commercially exploited by or for the Company or any
Subsidiary, nor any other current activities or operations of the Company or any
Subsidiary, infringes upon, misappropriates, violates, dilutes or constitutes
the unauthorized use of, any Intellectual Property of any third party, and
neither the Company nor any Subsidiary has received any notice or claim
asserting or suggesting that any such infringement, misappropriation, violation,
dilution or unauthorized use is or may be occurring, nor, to the knowledge of
the Company, is there any reasonable basis therefor. No Company Intellectual
Property is subject to any outstanding order, judgment, decree, or stipulation
restricting the use thereof by the Company of such Subsidiary or, in the case of
any Company Intellectual Property licensed to others, restricting the sale,
transfer, assignment or licensing thereof by the Company or such Subsidiary to
any person. To the Company's knowledge, no third party is misappropriating,
infringing, diluting or violating in any material respect any Company
Intellectual Property.
(j) Restrictions on Employees. To the Company's knowledge, no
employee or independent contractor of the Company or any Subsidiary is obligated
under any agreement or subject to any judgment, decree or order of any court or
administrative agency, or any other restriction that would or may materially
interfere with such employee or contractor carrying out his or her duties for
the Company or that would materially conflict with the Company's business as
presently conducted and proposed to be conducted.
Section 2.15. Material Contracts.
(a) Section 2.15(a) of the Disclosure Letter sets forth a
complete and accurate list, as of the date hereof, of all written or oral
contracts, agreements, notes, bonds, indentures, mortgages, guarantees, options,
leases, licenses, sales and purchase orders, warranties, commitments and other
instruments of any kind (each, a "CONTRACT"), to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary, or any of their
respective assets and properties, is otherwise bound, as follows (each of the
following, a "MATERIAL CONTRACT" and, collectively, the "MATERIAL CONTRACTS"):
(i) each Contract of the Company or any Subsidiary pursuant to which the Company
or any Subsidiary received (or was entitled to receive) or paid (or was
obligated to pay) more than One Million, Five Hundred Thousand Dollars
($1,500,000) in the twelve (12) month period ended September 30, 2002 (provided
such Contract remains in effect as of the date hereof) and each customer
Contract in effect on the date of this Agreement under which the Company or any
Subsidiary received in the twelve (12) month period ended September 30, 2002 or
is entitled to receive thereafter more than One Million, Five Hundred Thousand
Dollars ($1,500,000); (ii) each Contract that requires payment by or to the
Company after September 30, 2002 of more than One Million, Five Hundred Thousand
Dollars ($1,500,000) per annum; (iii) each Contract that contains
non-competition restrictions, including any restrictions relating to the conduct
of the Company's or a Subsidiary's business or the sale of the Company's or any
Subsidiary's products or any geographic restrictions, in any case that would
prohibit or restrict the Surviving Company or any of its affiliates from
conducting the business of the Company or any Subsidiary as presently conducted;
(iv) any Contract that will be subject to default, termination, repricing or
renegotiation, in each case where the amounts involved under such Contract or
repricing exceeds
20
One Million, Five Hundred Thousand Dollars ($1,500,000), because of the
transactions contemplated hereby; (v) each Contract relating to the Company's or
any Subsidiary's sales with distributors; (vi) each Contract of the Company or
any Subsidiary relating to, and evidences of, indebtedness for borrowed money,
any mortgage, security agreement, or the deferred purchase price of property
(whether incurred, assumed, guaranteed or secured by any asset); (vii) each
partnership, joint venture, joint marketing or other similar Contract or
arrangement to which the Company or any Subsidiary is a party or by which it is
otherwise bound; (viii) each Contract granting to the Company or any Subsidiary
any material right under or with respect to any Company Intellectual Property;
(ix) each Contract under which the Company or any Subsidiary grants any material
right under or with respect to any Company Intellectual Property to another
person; (x) each Contract that requires the Company or any Subsidiary to grant
"most favored customer" pricing to any other person; and (xi) each Contract that
is otherwise material to the Company and the Subsidiaries, taken as a whole,
including, but not limited to, the Company's Contract with Major League Baseball
Properties Inc., the Company's Contract with 19 Minor Leagues of Baseball and
the Company's Contract with NCAA Baseball.
(b) (i) Each Material Contract is (A) a legal, valid and
binding obligation of the Company or a Subsidiary and, to the Company's
knowledge, each other person who is a party thereto and (B) enforceable against
the Company or such Subsidiary and, to the Company's knowledge, each such other
person in accordance with its terms, and (ii) neither the Company or any
Subsidiary nor, to the Company's knowledge, any other party thereto is in
material default under any Material Contract. Neither the Company nor any
Subsidiary knows of, or has received notice of, the existence of any event or
condition which constitutes, or, after notice or lapse of time or both, will
constitute, a material default or event of default or other material breach on
the part of the Company or any of its Subsidiaries under any such Material
Contract.
(c) Other than the Material Contracts, neither the Company nor
any Subsidiary has entered into, is a party to or is otherwise bound by, as of
the date hereof:
(i) any fidelity or surety bond or completion bond,
except as required pursuant to Section 412 of ERISA;
(ii) any Contract pursuant to which the Company or
any Subsidiary has agreed to provide liquidated damages in excess of One Million
Dollars ($1,000,000) for failure to meet performance or quality milestones;
(iii) any Contract pursuant to which the Company or
any Subsidiary has agreed to provide indemnification or guaranty to a third
party (other than the Outbound License Agreements and this Agreement);
(iv) any Contract relating to the disposition or
acquisition of assets, property or any interest in any business enterprise
outside the ordinary course of the Company's or any Subsidiary's business; or
(v) any distribution, joint marketing or development
Contract.
21
Section 2.16. Title to Properties; Absence of Liens and Encumbrances.
(a) The Company and its Subsidiaries have good and valid title
to all of their respective properties, interests in properties and assets, real
and personal, reflected on the Financial Statements, or, in the case of leased
properties and assets, valid leasehold interests in such properties and assets,
in each case free and clear of all Liens except for: (i) Liens reflected on the
Financial Statements, (ii) Liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or materially impair the use of, such property as it is presently
used, (iii) Liens for current Taxes, assessments or governmental charges or
levies on property not yet due or which are being contested in good faith and
for which appropriate reserves in accordance with United States generally
accepted accounting principles have been created and (iv) mechanic's,
materialmen's and similar Liens arising in the ordinary course of business or by
operation of law (collectively, "PERMITTED LIENS").
(b) Section 2.16(b) of the Disclosure Letter sets forth a
true, complete and correct list of all real property owned or leased by the
Company or any of its Subsidiaries. Each of the Company and its Subsidiaries is
in compliance in all material respects with the terms of all leases for real
property to which it is a party. Neither the Company nor any of its Subsidiaries
is a party to any lease, assignment or similar arrangement under which the
Company or any Subsidiary is a lessor, assignor or otherwise makes available for
use by any third party any portion of the owned or leased real property.
(c) The facilities, property and equipment owned, leased or
otherwise used by the Company or any of its Subsidiaries are in a good state of
maintenance and repair, free from material defects and in good operating
condition (subject to normal wear and tear) and suitable for the purposes for
which they are presently used.
(d) All tangible assets which are leased by the Company or any
of its Subsidiaries have been maintained with the manufacturers' standards and
specifications required by each such lease such that at each such termination of
the lease such assets can be returned to their owner without any further
material obligation on the part of the Company or any of its Subsidiaries with
respect thereto.
Section 2.17. Off Balance Sheet Liabilities. Except as disclosed in the
Company SEC Reports filed prior to the date hereof for transactions,
arrangements and other relationships otherwise specifically identified in the
Financial Statements, Section 2.17 of the Disclosure Letter sets forth a true,
complete and correct list, as of the date hereof, of all transactions,
arrangements and other relationships between and/or among the Company, any of
its affiliates, and any special purpose or limited purpose entity beneficially
owned by or formed at the direction of the Company or any of its affiliates.
Section 2.18. Promotions and Selling Arrangements. Except as disclosed
in the Company SEC Reports filed prior to the date hereof, since August 31, 2002
the Company has not recorded any material amount of revenues in connection with
sales made pursuant to new or unusual promotional programs, special selling
arrangements or concessions, rights of return or otherwise, or pursuant to new
or amended accounting practices or interpretations.
22
Section 2.19. Tax Treatment. Neither the Company nor, to the knowledge
of the Company, any of its affiliates has taken or agreed to take any action
that would prevent the Merger from qualifying as a reorganization under the
provisions of Section 368(a) of the Code.
Section 2.20. Affiliates. Except for the directors and executive
officers of the Company, each of whom is listed in Section 2.20 of the
Disclosure Letter, there are no persons who, to the knowledge of the Company,
may be deemed to be affiliates of the Company under Rule 145 of the Securities
Act.
Section 2.21. Suppliers and Customers. The documents and information
supplied by the Company to Parent or any of its representatives in connection
with this Agreement with respect to relationships and volumes of business done
with its significant suppliers, distributors and customers are accurate in all
material respects. During the last twelve (12) months, the Company has not
received any notice of termination or written threat of termination from any of
the ten (10) largest suppliers or the ten (10) largest customers of the Company
and its Subsidiaries, taken as a whole, or any information that any such
customer, distributor or supplier intends to materially decrease the amount of
business that it does with the Company or any Subsidiary.
Section 2.22. Opinion of Financial Adviser. ▇▇▇▇▇▇ ▇. ▇▇▇▇ & Company
(the "COMPANY FINANCIAL Adviser") has given the Company Board its opinion dated
the date of this Agreement to the effect that as of such date the Merger
Consideration is fair, from a financial point of view, to the holders of Shares.
Section 2.23. Brokers. No broker, finder or investment banker (other
than the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Acquisition or Parent) is entitled to any
brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.24. Interested Party Transactions. Except for transactions,
arrangements and other relationships specifically identified in the Company SEC
Reports filed prior to the date hereof, Section 2.24 of the Disclosure Letter
sets forth a true, complete and correct list, as of the date hereof, of any
transaction, arrangement or relationship involving an amount of $60,000 or more
that any director, officer or other affiliate of the Company has or has had in
the last three years, directly or indirectly relating to, (i) an economic
interest in any person that has furnished or sold, or furnishes or sells,
services or products that the Company or any Subsidiary furnishes or sells, or
proposes to furnish or sell, (ii) an economic interest in any person that
purchases from or sells or furnishes to, the Company or any Subsidiary, any
goods or services, (iii) a beneficial interest in any Contract included in
Section 2.14 or 2.15 of the Disclosure Letter or (iv) any contractual or other
arrangement with the Company or any Subsidiary; provided, however, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "economic interest in any
person" for purposes of this Section 2.24.
Section 2.25. Takeover Statutes. The Company Board has taken all
actions so that the restrictions contained in Section 203 of the DGCL applicable
to a "business combination" (as defined in such Section 203), and any other
similar applicable law, will not apply to Parent
23
during the pendency of this Agreement, including the execution, delivery or
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby and thereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company,
subject to the exceptions set forth in the Parent Disclosure Letter previously
delivered by Parent to the Company (the "PARENT DISCLOSURE LETTER") and
certified by a duly authorized officer of Parent (which exceptions shall
specifically identify the Section, subsection or paragraph, as applicable, to
which such exception relates), that:
Section 3.1. Organization.
(a) Section 3.1(a) of the Parent Disclosure Letter sets forth,
as of the date of this Agreement, a true and complete list of each person in
which Parent owns, directly or indirectly, fifty percent (50%) or more of the
voting interests or of which Parent otherwise has the right to direct the
management (each, a "PARENT SUBSIDIARY") together with the jurisdiction of
incorporation or organization of each Parent Subsidiary and the percentage of
each Parent Subsidiary's outstanding capital stock or other equity interests
owned directly or indirectly by Parent. All the outstanding capital stock or
other ownership interests of each Parent Subsidiary is owned by Parent, directly
or indirectly, free and clear of any Lien or any other limitation or
restriction. Parent and the Parent Subsidiaries are duly organized, validly
existing and in good standing under the laws of their states of incorporation,
and each has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted. Parent has
heretofore delivered to the Company's counsel accurate and complete copies of
the Certificate of Incorporation and bylaws, as currently in full force and
effect, of Acquisition.
(b) Each of Parent, and the Parent Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing does not, individually or in the aggregate, have a Material
Adverse Effect on Parent. For purposes hereof, the term "MATERIAL ADVERSE EFFECT
ON PARENT" means any circumstance involving, change in or effect on Parent or
any of its subsidiaries (i) that is, or is reasonably likely in the future to
be, materially adverse to the business operations, earnings, results of
operations, assets or liabilities (including contingent liabilities) or the
financial condition of Parent and its subsidiaries, taken as a whole, but
excluding from the foregoing any event, change or circumstance arising out of
(A) the compliance by the Company, Subsidiaries, Parent or Acquisition with the
terms and conditions of this Agreement, (B) the announcement or disclosure of
this Agreement or the subject matter hereof, (C) any stockholder class action
litigation arising directly out of allegations of a breach of fiduciary duty
relating to this Agreement or (D) to changes in applicable law or regulations or
in generally accepted accounting
24
principles; or (ii) that is reasonably likely to prevent or materially delay or
impair the ability of Parent to consummate the transactions contemplated by this
Agreement. Except as specifically set forth in this Agreement, all references to
Material Adverse Effect on Parent or Parent Subsidiaries contained in this
Agreement shall be deemed to refer solely to Parent and Parent Subsidiaries
without including its ownership of the Company and its Subsidiaries after the
Merger.
Section 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of (i)
forty million (40,000,000) shares of Parent Common Stock, $1.00 par value per
share, of which, as of September 30, 2002, approximately eighteen million, six
hundred seventy-nine thousand, one hundred forty-six (18,679,146) shares were
issued and outstanding (each together with a Parent Common Stock purchase right
(the "PARENT RIGHT") issued pursuant to the Rights Agreement dated as of July 1,
1999 between Parent and ▇▇▇▇▇▇ Trust Company of California), and (ii) twelve
million, five hundred thousand (12,500,000) shares of preferred stock, $1.00 par
value per share, none of which are outstanding. All of the outstanding shares of
Parent Common Stock have been validly issued and are fully paid, nonassessable
and not subject to any preemptive rights, and all shares of Parent Common Stock
issued pursuant to this Agreement will be, when issued, duly authorized and
validly issued, fully paid, nonassessable and not subject to any preemptive
rights. As of September 30, 2002 an aggregate of approximately four million,
five hundred sixty-five thousand, six hundred forty-one (4,565,641) shares of
Parent Common Stock were reserved for issuance and an aggregate of approximately
one million, one hundred seventy seventy-eight thousand, five hundred eleven
(1,298,511) shares of Parent Common Stock were issuable upon or otherwise
deliverable in connection with the exercise of outstanding options and warrants
and under purchase plans. On December 10, 2002, Parent entered into that certain
Securities Purchase Agreement with certain purchasers party thereto (the
"DEBENTURE TRANSACTION"), pursuant to which Parent has the right and obligation
under certain circumstances, to issue Twenty-five Million Dollars ($25,000,000)
of the Company's Convertible Subordinated Debentures due 2010 (the
"DEBENTURES"), together with warrants to purchase shares of Parent Common Stock
(the "WARRANTS"). Approximately two million, ninety-seven thousand, three
hundred sixteen (2,097,316) shares of Parent Common Stock were reserved for
issuance upon conversion of the Debentures and 524,364 shares of Parent Common
Stock were reserved for issuance upon exercise of the Warrants. Except as set
forth above, as of the date hereof, there are outstanding (i) no shares of
capital stock or other voting securities of Parent, (ii) no securities of Parent
or Parent Subsidiaries convertible into, or exchangeable for, shares of capital
stock, or voting securities of Parent, (iii) no options, warrants or other
rights to acquire from Parent or any Parent Subsidiaries and no obligations of
Parent or any Parent Subsidiaries to issue any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of Parent and (iv) no equity equivalent interests in the ownership or
earnings of Parent or any Parent Subsidiaries or other similar rights. All of
the outstanding shares of Parent Common Stock and options and warrants to
purchase shares of Parent Common Stock (collectively, "PARENT SECURITIES") were
issued in compliance with the Securities Act and applicable state securities
laws. As of the date hereof, other than in connection with Parent's authorized
stock repurchase program, there are no outstanding obligations of Parent or any
Parent Subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. There are no stockholder agreements, voting trusts or other
arrangements or understandings to which
25
Parent is a party or by which it or the Parent Board is bound, and to Parent's
knowledge there are no other agreements, voting trusts or other arrangements or
understandings, relating to the voting of any shares of capital stock or other
voting securities of Parent. No shares of Parent are issued and held by Parent
in its treasury as of the date hereof.
(b) The Parent Common Stock and Parent Rights constitute the
only classes of securities of Parent or any of its subsidiaries registered or
required to be registered under the Exchange Act.
Section 3.3. Authority Relative to this Agreement.
(a) Each of Parent and Acquisition has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby, subject in the case of the issuance of shares of Parent Common Stock
pursuant to the Merger to obtaining the approval of such issuance of shares by
an affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock in accordance with Rule 312.03 of the Listed Company Manual
of the NYSE (the "PARENT STOCKHOLDER APPROVAL"). The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Parent (the
"PARENT BOARD"), the Board of Directors of Acquisition and by Parent as the sole
stockholder of Acquisition. This Agreement has been duly and validly executed
and delivered by each of Parent and Acquisition and constitutes, assuming the
due authorization, execution and delivery hereof by the Company, a valid, legal
and binding agreement of each of Parent and Acquisition enforceable against each
of Parent and Acquisition in accordance with its terms, subject to any
applicable bankruptcy, insolvency (including all applicable laws relating to
fraudulent transfers), reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(b) The Parent's Board, at a meeting duly called and held, has
(i) determined that this Agreement and the transactions contemplated hereby
(including the Merger) are fair to and in the best interests of Parent's
stockholders, (ii) approved and adopted this Agreement and the transactions
contemplated hereby (including the Merger) and (iii) resolved (except to the
extent legally required for the discharge by Parent's Board of its fiduciary
duties as advised by Parent Board's counsel in writing) to recommend that
Parent's stockholders vote for the approval of the issuance of shares of Parent
Common Stock in the Merger.
Section 3.4. SEC Reports; Financial Statements. Parent has filed all
required forms, reports and documents with the SEC since January 1, 1999
("PARENT SEC REPORTS"), and each of such Parent SEC Reports complied at the time
of filing in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as applicable, in each case as in effect on
the dates such forms reports and documents were filed. None of the Parent SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading,
except to the extent superseded by a Parent SEC Report filed subsequently and
prior
26
to the date hereof. Each of the consolidated financial statements (including, in
each case, any related notes and schedules thereto) contained in the Parent SEC
Reports (the "PARENT FINANCIAL STATEMENTS") have been prepared in all material
respects in accordance with United States generally accepted accounting
principles consistently applied and maintained throughout the periods indicated,
except where noted therein, and fairly present in all material respects the
consolidated financial condition of Parent and the Parent Subsidiaries at their
respective dates and the results of their operations and changes in financial
position for the periods covered thereby, in each case in conformity with United
States generally accepted accounting principles (subject to, in each case,
normal year-end adjustments and except that unaudited financial statements do
not contain all footnotes required for audited financial statements).
Section 3.5. Information Supplied. None of the information supplied or
to be supplied by Parent or Acquisition for inclusion or incorporation by
reference in (i) the S-4 will at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Proxy Statement/Prospectus will at the date mailed to stockholders and
at the times of the meeting or 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. The S-4 will comply as
to form in all material respects with the provisions of the Securities Act and
the rules and regulations thereunder. Notwithstanding the foregoing, Parent
makes no representation, warranty or covenant with respect to any information
supplied or required to be supplied by the Company which is contained in or
omitted from any of the foregoing documents or which is incorporated by
reference therein.
Section 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents, and approvals as may be required under and
other applicable requirements of the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the HSR Act, and any filings under similar merger
notification laws or regulations of foreign Governmental Entities and the filing
and recordation of the Certificate of Merger as required by the DGCL, no filing
with or notice to, and no permit authorization consent or approval of any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Neither the execution, delivery and performance of this
Agreement by Parent or Acquisition nor the consummation by Parent or Acquisition
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate or Certificate of
Incorporation or bylaws of Parent or Acquisition; (ii) result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent, Acquisition or any Parent Subsidiary
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or
27
regulation applicable to Parent, Acquisition or any Parent Subsidiary or any of
their respective properties or assets except, in the case of the foregoing
clause (ii) or (iii), for violations, breaches or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 3.7. No Default. Neither Parent nor any Parent Subsidiary is in
breach, default or violation (and no event has occurred that with notice or the
lapse of time, or both, would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or its
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent or any of its subsidiaries is now a party or by which any of
them or any of their respective properties or assets may be bound or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent or any Parent Subsidiary or any of its respective properties or assets,
except, in the case of the foregoing clause (ii) or (iii), for violations,
breaches or defaults that would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
disclosed in the Parent SEC Reports filed prior to the date hereof and except
for the Debenture Transaction, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise that would be required by United States generally accepted
accounting principles to be reflected on a consolidated balance sheet of Parent
and its consolidated subsidiaries (including the notes thereto), other than
liabilities and obligations incurred since September 30, 2002, in the ordinary
course of business consistent with past practices. Except as disclosed in the
Parent SEC Reports filed prior to the date hereof, except for the Debenture
Transaction and except for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby, or as permitted by Section
4.2, since September 30, 2002, (i) Parent and Parent Subsidiaries have conducted
their business only in the ordinary course; (ii) through the date hereof, there
has not been any declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property in respect of Parent's capital stock,
except for dividends or other distributions on its capital stock publicly
announced prior to the date hereof; (iii) there has not been any action by
Parent or any Parent Subsidiaries during the period from September 30, 2002
through the date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time would constitute a breach of
Section 4.2; and (iv) except as required by United States generally accepted
accounting principles, there has not been any change by Parent in accounting
principles, practices or methods. Since September 30, 2002, there has not been a
Material Adverse Effect on Parent.
Section 3.9. Litigation. Except as disclosed in the Parent SEC Reports
filed prior to the date hereof, there are no suits, claims, actions, proceedings
or investigations pending or, to the knowledge of Parent, threatened, against
Parent or any Parent Subsidiaries or any of their respective properties or
assets before any Governmental Entity that, if decided adversely to Parent or
any such subsidiary, would, individually or in the aggregate, have a Material
Adverse Effect on Parent. Except as disclosed in the Parent SEC Reports filed
prior to the date hereof, neither Parent nor any Parent Subsidiary is subject to
any outstanding order, writ, injunction or decree of any Governmental Entity
that would, individually or in the aggregate, result in a Material Adverse
Effect on Parent.
28
Section 3.10. Compliance with Applicable Law. Each of Parent and the
Parent Subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (collectively, the "PARENT PERMITS"), except as
disclosed in the Parent SEC Reports filed prior to the date hereof, or except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals that would not, individually or in the aggregate, result in a Material
Adverse Effect on Parent and that have not resulted in any injunction or other
equitable remedy being imposed on Parent or any Parent Subsidiary that would
result in a Material Adverse Effect on Parent. Each of Parent and the Parent
Subsidiaries is in compliance with the terms of the Parent Permits held by it,
except as disclosed in the Parent SEC Reports filed prior to the date hereof, or
except where the failure so to comply would not, individually or in the
aggregate, result in a Material Adverse Effect on Parent and that have not
resulted in any injunction or other equitable remedy being imposed on Parent or
any Parent Subsidiary that would result in a Material Adverse Effect on Parent.
The business of Parent and the Parent Subsidiaries are being conducted in
compliance with all applicable laws, ordinances and regulations of the United
States or any foreign country or any political subdivision thereof or of any
Governmental Entity, except as disclosed in the Parent SEC Reports filed prior
to the date hereof, or except for violations or possible violations of any
United States or foreign laws, ordinances or regulations that do not and will
not result, individually or in the aggregate, in a Material Adverse Effect on
Parent and that have not resulted in any injunction or other equitable remedy
being imposed on Parent or any Parent Subsidiary that would result in a Material
Adverse Effect on Parent. No investigation or review by any Governmental Entity
with respect to Parent or any Parent Subsidiary is pending nor, to the knowledge
of Parent, has any Governmental Entity indicated an intention to conduct the
same, except as disclosed in the Parent SEC Reports filed prior to the date
hereof.
Section 3.11. Employee Benefit Plans; Labor Matters. With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan," as defined in Section 3(3) of
ERISA), maintained or contributed to by Parent or any of the Parent
Subsidiaries, or with respect to which Parent or any of its subsidiaries could
incur liability under Section 4069, 4212(c) or 4204 of ERISA (the "PARENT
BENEFIT PLANS"), no event has occurred and, to the knowledge of Parent, there
currently exists no condition or set of circumstances, in connection with which
Parent or any of the Parent Subsidiaries could be subject to any liability under
the terms of the Parent Benefit Plans, ERISA, the Code or any other applicable
law which would have a Material Adverse Effect on Parent. There is no pending or
threatened labor dispute, strike or work stoppage against Parent or any of its
subsidiaries which may reasonably be expected to have a Material Adverse Effect
on Parent.
Section 3.12. Environmental Laws and Regulations. Except for matters
which would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, (i) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
action, claim, suit, proceeding or review or, to the knowledge of Parent,
investigation is pending or, to the knowledge of Parent or any Parent
Subsidiary, threatened by any Person against, Parent or any Parent Subsidiary
with respect to any matters relating to or arising out of any Environmental Law;
(ii) Parent and any Parent Subsidiary are in compliance with all Environmental
Laws, which compliance includes the possession by Parent and any Parent
Subsidiary of all material permits required under applicable Environmental Laws
and
29
compliance with the terms and conditions thereof, and Parent and any Parent
Subsidiary reasonably believe that each of them will, without the incurrence of
any material expense, timely attain and maintain compliance with all
Environmental Laws applicable to any of their current operations or properties
or to any of their planned operations; (iii) to the knowledge of Parent, there
has been no disposal, release or threatened release of any Hazardous Substance
by Parent or any Parent Subsidiary on, under, in, from or about any property
currently or formerly owned or operated by Parent or any Parent Subsidiary, or
otherwise related to the operations of Parent or any Parent Subsidiary, that has
resulted or could reasonably be expected to result in any Environmental Claim
against Parent or any Parent Subsidiary; (iv) neither Parent nor any Parent
Subsidiary has entered into or agreed to or is subject to any consent decree,
order or settlement or other agreement in any judicial, administrative, arbitral
or other similar forum relating to its compliance with or liability under any
Environmental Law or (v) neither Parent nor any Parent Subsidiary has assumed or
retained by contract or otherwise any liabilities of any kind, fixed or
contingent, known or unknown, under any applicable Environmental Law (including,
but not limited to, any liability from the disposition of any of its real
property).
Section 3.13. Tax Matters. Parent and the Parent Subsidiaries have
accurately prepared and duly filed with the appropriate federal, state, local
and foreign taxing authorities all Tax Returns, information returns and reports
required to be filed with respect to Parent and the Parent Subsidiaries and have
paid in full or made adequate provision for the payment of all Taxes, except for
such improper preparation of Tax Returns or failure to file Tax Returns or to
make payment of Taxes that, in the aggregate are not material.
Section 3.14. Intellectual Property. Parent and the Parent Subsidiaries
owns, or possesses adequate Marks, Patents, Copyrights and Trade Secrets that
are material to its business as currently conducted (the "PARENT INTELLECTUAL
PROPERTY"). The conduct of business of Parent and the Parent Subsidiaries as now
conducted does not, to Parent's knowledge, infringe any valid Marks, Patents,
Copyrights or Trade Secrets of others. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of any Parent
Intellectual Property. To Parent's knowledge, the Parent Intellectual Property
is valid, enforceable and subsisting.
Section 3.15. Title to Property. Parent and each of the Parent
Subsidiaries have good and defensible title to all of their properties and
assets, free and clear of all liens, charges and encumbrances except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or in the
aggregate, would not have a Material Adverse Effect on Parent; and, to Parent's
knowledge, all leases pursuant to which Parent or any Parent Subsidiaries lease
from others real or personal property are in good standing, valid and effective
in accordance with their respective terms, and there is not, to the knowledge of
Parent, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default and in respect of which Parent or such Parent Subsidiary has
not taken adequate steps to prevent such a default from occurring) except where
the lack of such good standing, validity and effectiveness, or the existence of
such default or event of default would not have a Material Adverse Effect on
Parent.
30
Section 3.16. Brokers. No broker finder or investment banker (other
than The Mercanti Group, LLC, the financial adviser to Parent) is entitled to
any brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Acquisition.
Section 3.17. No Prior Activities of Acquisition. Acquisition was
formed for the purposes of the consummation of this Agreement and the
transactions contemplated hereby, and has engaged in no other business
activities of any type or kind whatsoever.
Section 3.18. Off Balance Sheet Liabilities. Except as disclosed in
Parent SEC Reports filed prior to the date hereof or for transactions,
arrangements and other relationships otherwise specifically identified in the
Financial Statements, Section 3.18 of the Disclosure Letter sets forth a true,
complete and correct list, as of the date hereof, of all transactions,
arrangements and other relationships between and/or among Parent, any of its
affiliates, and any special purpose or limited purpose entity beneficially owned
by or formed at the direction of Parent or any of its affiliates.
Section 3.19. Promotions and Selling Arrangements. Except as disclosed
in Parent SEC Reports filed prior to the date hereof or except as set forth on
Section 3.19 of the Disclosure Letter, since September 30, 2002 Parent has not
recorded any material amount of revenues in connection with sales made pursuant
to new or unusual promotional programs, special selling arrangements or
concessions, rights of return or otherwise, or pursuant to new or amended
accounting practices or interpretations.
Section 3.20. Tax Treatment. Neither Parent nor, to the knowledge of
Parent, any of its affiliates has taken or agreed to take action that would
prevent the Merger from qualifying as a reorganization under the provisions of
Section 368(a) of the Code.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company. Except (i) as
contemplated or permitted by this Agreement, (ii) as disclosed in Section 4.1 of
the Disclosure Letter, (iii) as required by law, or by a Governmental Entity of
competent jurisdiction, or (iv) to the extent that Parent shall otherwise
consent in writing, during the period from the date hereof to the earlier of the
Effective Time and the termination of this Agreement in accordance with its
terms, the Company will and will cause each Subsidiary to conduct its operations
in the ordinary course of business consistent with past practice and, to the
extent consistent therewith, and with no less diligence and effort than would be
applied in the absence of this Agreement, seek to preserve intact its current
business organizations, keep available the service of its current officers and
employees and preserve its relationships with customers and suppliers with the
intention that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except (i) as
otherwise permitted or contemplated by this Agreement, (ii) as disclosed in
Section 4.1 of the Disclosure Letter, (iii) as required by law, or by a
Governmental Entity of competent jurisdiction, or (iv) to the extent that Parent
shall otherwise consent in writing, during the period from the date hereof to
the earlier of the Effective Time,
31
and the termination of this Agreement in accordance with its terms, neither the
Company nor any Subsidiary will:
(a) amend its Certificate or Articles of Incorporation or
bylaws (or other similar governing document);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (except bank loans) or equity
equivalents (including any stock options or stock appreciation rights) except
for the issuance and sale of Shares pursuant to Company Stock Options granted
under the Company Plans;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any Subsidiary (other than the repurchase of restricted stock and
cancellation of Company Stock Options following termination of employment with
or provision of services to the Company or any Subsidiary);
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure of ownership of any
Subsidiary;
(f) (i) incur, assume or forgive any long-term or short-term
debt or issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business consistent with past practices or
trade payables arising in the ordinary course of business consistent with past
practices; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except for obligations of Subsidiaries incurred in the ordinary
course of business consistent with past practices; (iii) make any loans,
advances or capital contributions to or investments in any other person (other
than to Subsidiaries or customary loans or advances to employees in each case in
the ordinary course of business consistent with past practices); (iv) pledge or
otherwise encumber shares of capital stock of the Company or any Subsidiary or
any of the Other Interests or (v) mortgage or pledge any of its material
properties or assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon;
(g) except as may be required by law, (i) enter into, adopt,
amend in any manner or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, other than
offer letters, letter agreements and options to purchase Shares entered into
with new hires in the ordinary course of business consistent with past practice
and performance bonuses granted to employees on a basis consistent with the past
practices of the
32
Company, (ii) enter into, adopt, amend or terminate any pension, retirement,
deferred compensation, employment, health, life, or disability insurance,
dependent care, severance or other employee benefit plan agreement, trust, fund
or other arrangement for the benefit or welfare of any director, officer or
employee, other than in the ordinary course of the Company's business consistent
with past practice or (iii) increase in any manner the compensation or fringe
benefits of any director, officer or employee or consultant or pay any benefit
not required by any plan and arrangement as in effect as of the date hereof
(including the granting of stock appreciation rights or performance units),
except for normal increases in cash compensation in the ordinary course of
business consistent with past practice;
(h) (i) acquire, sell, lease, license or dispose of any assets
or properties in any single transaction or series of related transactions having
a fair market value in excess of One Million Dollars ($1,000,000) in the
aggregate, other than sales or licenses of its products in the ordinary course
of business consistent with past practices; (ii) enter into any exclusive
license, distribution, marketing, sales or other agreement; (iii) enter into a
"development services" or other similar agreement pursuant to which the Company
may purchase or otherwise acquire the services of another person, other than in
the ordinary course of business consistent with past practices; (iv) acquire,
sell, lease, license, transfer, encumber, enforce, or otherwise dispose of any
Company Intellectual Property, other than licenses or sales of its products or
services in the ordinary course of business consistent with past practices or
(v) knowingly, willfully, wantonly, or negligently infringe upon, misappropriate
or otherwise violate the rights of any third party intellectual property;
(i) unless required by a change in applicable law or in United
States generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(j) revalue any of its assets or properties, including writing
down the value of inventory or writing-off notes or accounts receivable, other
than in the ordinary course of business consistent with past practices;
(k) (i) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, limited liability company, partnership or
other person or any division thereof or any equity interest therein; (ii) enter
into any Contract other than in the ordinary course of business consistent with
past practices that would be material to the Company and its Subsidiaries, taken
as a whole; (iii) amend, modify or waive any right under any of its material
Contracts; (iv) modify its standard warranty terms for its products or services
or amend or modify any product or service warranties in effect as of the date
hereof in any material manner that is adverse to the Company or any Subsidiary;
(v) enter into any Contract that contains non-competition restrictions,
including any restrictions relating to the conduct of the Company's or any
Subsidiary's business or the sale of the Company's or any Subsidiary's products
or any geographic restrictions, in any case that would prohibit or restrict the
Surviving Company or any of its affiliates from conducting the business of the
Company or any Subsidiary as presently conducted or (vi) authorize any new
capital expenditure other than as set forth in Section 4.1(k) of the Parent
Disclosure Letter up to an aggregate amount equal to One Million Dollars
($1,000,000);
33
(l) make or rescind any express or deemed election relating to
Taxes or settle or compromise any Tax liability or enter into any closing or
other agreement with any Tax authority; or file or cause to be filed any amended
Tax Return, file or cause to be filed claim for refund of Taxes previously paid,
or agree to an extension of a statute of limitations with respect to the
assessment or determination of Taxes;
(m) fail to file any Tax Returns when due, fail to cause such
Tax Returns when filed to be true, correct and complete, prepare or fail to file
any Tax Return of the Company in a manner inconsistent with past practices in
preparing or filing similar Tax Returns in prior periods or, on any such Tax
Return, take any position, make any election, or adopt any method that is
inconsistent with positions taken, elections made or methods used in preparing
or filing similar Tax Returns in prior periods, in each case, except to the
extent required by applicable law; or fail to pay any Taxes when due;
(n) settle or compromise any pending or threatened suit,
action or claim that (i) relates to the transactions contemplated hereby or (ii)
the settlement or compromise of which would require the payment by the Company
or any Subsidiary of damages in excess of Five Hundred Thousand Dollars
($500,000) or involves any equitable relief;
(o) knowingly take any action that would result in a failure
to maintain trading of the Shares on the Nasdaq National Market;
(p) take any action that results in the acceleration of
vesting of any Company Stock Option, except as may be required pursuant to any
agreement in effect as of the date hereof;
(q) allow any Insurance Policy to be amended or terminated
without replacing such policy with a policy providing at least equal coverage,
insuring comparable risks and issued by an insurance company financially
comparable to the prior insurance company; or
(r) take or agree in writing or otherwise to take any of the
actions described in Sections 4.1(a) through 4.1(q).
Notwithstanding the foregoing and any other provision of this Agreement, neither
Parent nor Acquisition shall have the right to control or direct the Company's
operations prior to the Effective Time. Prior to the Effective Time, the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its operations.
Section 4.2. Conduct of Business of Parent. Except (i) as contemplated
or permitted by this Agreement, (ii) as disclosed in Section 4.2 of the Parent
Disclosure Letter, (iii) as required by law or by a Governmental Entity of
competent jurisdiction, or (iv) to the extent that the Company shall otherwise
consent in writing, during the period from the date hereof to the earlier of the
Effective Time and the termination of this Agreement in accordance with its
terms, Parent shall and shall cause each of the Parent Subsidiaries to conduct
their operations in the ordinary course of business consistent with past
practices and, to the extent consistent therewith, and with no less diligence
and effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organizations, keep available the service
of its current key officers and key employees and preserve its relationships
with customers and suppliers with
34
the intention that its goodwill and ongoing businesses shall be materially
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except (i) as otherwise permitted or contemplated by this Agreement,
(ii) as disclosed in Section 4.2 of the Parent Disclosure Letter, (iii) as
required by law or by a Governmental Entity of competent jurisdiction, or (iv)
to the extent that the Company shall otherwise consent in writing, during the
period from the date hereof to the earlier of the Effective Time and the
termination of this Agreement in accordance with its terms, neither Parent nor
any Parent Subsidiary will:
(a) amend its Certificate or Articles of Incorporation (other
than to increase the number of authorized shares of Parent Common Stock) or
Bylaws (or other similar governing document);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (except bank loans) or equity
equivalents (including any stock options or stock appreciation rights) except
for issuances of Parent Common Stock or securities convertible into shares of
Parent Common Stock totaling, in the aggregate, not more than five percent (5%)
of the total number of shares of Parent Common Stock outstanding on the date
hereof, and except for the issuance and sale of Shares in connection with the
Debenture Transaction or pursuant to Parent Derivatives and Parent Purchase
Plans;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any Parent Subsidiary (other than the repurchase of restricted
stock and cancellation of Parent Derivatives following termination of employment
with or provision of services to Parent or any Parent Subsidiary);
(d) adopt a plan of complete or partial liquidation or
dissolution;
(e) (i) incur or assume any long-term or short-term debt or
issue any debt securities except for (A) indebtedness incurred in connection
with the Debenture Transaction, (B) borrowings under existing lines of credit in
the ordinary course of business consistent with past practices, (C) borrowings,
including refinancings of existing indebtedness of Parent and the Parent
Subsidiaries, in the amounts described in Section 4.2(e) of the Parent
Disclosure Letter on terms not materially less favorable to Parent than the
terms described in Section 4.2(e) of the Parent Disclosure Letter, or (D) trade
payables arising in the ordinary course of business consistent with past
practices; or (ii) mortgage or pledge any of its material properties or assets,
tangible or intangible, or create or suffer to exist any material Lien thereupon
except to secure indebtedness permitted under clause (i) of this Section 4.2(f);
(f) sell, lease, license or dispose of any assets or
properties, including, without limitation Parent Intellectual Property, in any
single transaction or series of related transactions having a fair market value
in excess of Twenty-five Million Dollars ($25,000,000)
35
in the aggregate, other than (i) sales or licenses of its products in the
ordinary course of business consistent with past practices and (ii) sales of
assets or properties described in Section 4.2(f) of the Parent Disclosure
Letter;
(g) unless required by a change in applicable law or in United
States generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(h) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, limited liability company, partnership or other
person or any division thereof or any equity interest therein, other than (i)
the acquisitions described in Section 4.2(h) of the Parent Disclosure Letter and
(ii) any acquisition or series of related acquisitions having a fair market
value not in excess of Twenty-five Million Dollars ($25,000,000) in the
aggregate;
(i) knowingly take any action that would result in a failure
to maintain the trading of the Parent Common Stock on the NYSE; or
(j) take or agree in writing or otherwise to take any of the
actions described in Sections 4.2(a) through 4.2(i) or any action that would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect.
Notwithstanding the foregoing and any other provision of this
Agreement, the Company shall not have the right to control or direct Parent's
operations. Parent shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its operations.
Section 4.3. Preparation of S-4 and the Proxy Statement/Prospectus.
(a) As promptly as reasonably practicable following the date
hereof, the Company and Parent shall cooperate in preparing and each shall cause
to be filed with the SEC mutually acceptable proxy materials which shall
constitute the joint proxy statement/prospectus relating to the matters to be
submitted to the Company stockholders at the Company Stockholder Meeting and the
matters to be submitted to the Parent stockholders at the Parent Stockholder
Meeting (such joint proxy statement/prospectus, and any amendments or
supplements thereto, the "PROXY STATEMENT/PROSPECTUS"), which Proxy
Statement/Prospectus, subject to Section 4.4(d), shall include (i) the
recommendation of the Company Board that the stockholders of the Company vote in
favor of the approval and adoption of this Agreement and the approval of the
Merger, (ii) the written opinion of the Company Financial Advisor that the
Merger Consideration is fair, from a financial point of view, to the holders of
Shares and (iii) the recommendation of the Parent Board that the stockholders of
Parent vote in favor of the issuance of shares of Parent Common Stock in the
Merger. Parent shall prepare and file with the SEC the S-4. The Proxy
Statement/Prospectus will be included as a prospectus in and will constitute a
part of the S-4 as Parent's prospectus. Each of the Company and Parent shall use
their respective best efforts to have the Proxy Statement/Prospectus cleared by
the SEC, and promptly thereafter mail the Proxy Statement/Prospectus to the
stockholders of the Company and Parent. Each of Company and Parent shall use
their respective best efforts to have the S-4 declared effective by the SEC and
to keep the S-4 effective as long as is necessary to consummate the Merger and
any
36
other transactions contemplated thereby. The Company and Parent shall, as
promptly as practicable after receipt thereof, provide the other party copies of
any written comments, and advise the other party of any oral comments or
communications regarding the Proxy Statement/Prospectus or S-4 received from the
SEC. The Company and Parent shall cooperate and provide the other with a
reasonable opportunity to review and comment on any amendment or supplement to
the Proxy Statement/Prospectus or the S-4 prior to filing the same with the SEC,
and such parties will promptly provide each other with a copy of all such
filings made with the SEC. Notwithstanding any other provision herein to the
contrary, no amendment or supplement (including by incorporation by reference)
to the Proxy Statement/Prospectus or the S-4 shall be made without the approval
of both parties, which approval shall not be unreasonably withheld or delayed;
provided, however that with respect to documents filed by a party which are
incorporated by reference in the S-4 or Proxy Statement/Prospectus, this right
of approval shall apply only with respect to information relating to this
Agreement, the transactions contemplated hereby or the other party or its
business, financial condition or results of operations. Parent shall also (i)
take any action (other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock in
the Merger and upon the exercise of Company Stock Options and (ii) use all
commercially reasonable efforts to obtain all necessary state securities law or
"blue sky" permits and approvals required in connection with the Merger and to
consummate the other transactions contemplated by this Agreement and will pay
all expenses incident thereto, provided that the Company shall cooperate with
Parent in obtaining such permits and approvals as reasonably requested. The
Company shall furnish all information concerning the Company and the holders of
Shares as may be reasonably requested in connection with any such action.
(b) Company will use its reasonable best efforts to cause the
Proxy Statement/Prospectus to be mailed to the stockholders of Company, and
Parent will use its reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to the stockholders of Parent, in each case as
promptly as practicable after the S-4 is declared effective under the Securities
Act. Each of Parent and Company shall furnish all information concerning it and
the holders of its capital stock as may be reasonably requested in connection
with any such action. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the S-4 has become effective, the
issuance of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the S-4.
(c) If at any time prior to the Effective Time, any
information relating to Company or Parent, or any of their respective
affiliates, officers or directors, should become known by Company or Parent, or
Company, Parent or their respective subsidiaries shall take any action, which
should be disclosed in an amendment or supplement to either the S-4 or the Proxy
Statement/Prospectus, as the case may be, so that such documents would not
include any misstatement of a material fact or omit any material fact necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading, the party which obtains knowledge of such information
shall promptly notify the other party hereto and, to the extent required by law,
rules or regulations, Company and Parent shall cooperate to cause an
37
appropriate amendment or supplement disclosing such information promptly to be
filed with the SEC and disseminated to the shareholders of Company and the
stockholders of Parent.
(d) Parent shall duly take all lawful action to call, give
notice of, convene and hold a meeting of its stockholders on a date determined
in accordance with the mutual agreement of Parent and the Company (the "PARENT
STOCKHOLDER MEETING") for the purpose of obtaining the Parent Stockholder
Approval required to consummate the transactions contemplated by this Agreement
and shall take all lawful action to solicit the approval of the issuance of
Parent Common Stock pursuant to the Merger and the adoption of this Agreement.
(e) The Company shall duly take all lawful action to call,
give notice of, convene and hold a meeting of its stockholders on a date
determined in accordance with the mutual agreement of the Company and Parent
(the "COMPANY STOCKHOLDER MEETING") for the purpose of obtaining the Company
Stockholder Approval required to consummate the transactions contemplated by
this Agreement (including the Merger) and shall take all lawful action to
solicit the adoption of this Agreement.
Section 4.4. Other Potential Acquirers.
(a) For purposes of this Agreement, "THIRD PARTY ACQUISITION"
means the occurrence of any of the following events: (i) the acquisition by any
person (as such term is defined in Section 13(d)(3) of the Exchange Act) other
than Parent or any of its affiliates (a "THIRD PARTY") of any portion of the
assets of the Company and the Subsidiaries, taken as a whole, representing
twenty percent (20%) of more of the aggregate fair market value of the Company's
business immediately prior to such acquisition, other than the sale or license
of products in the ordinary course of business consistent with past practices;
(ii) the acquisition by a Third Party of twenty percent (20%) or more of the
outstanding Shares; (iii) the adoption by the Company of a plan of liquidation
or the declaration or payment of an extraordinary dividend (whether in cash or
other property); (iv) the repurchase by the Company or any Subsidiary of more
than ten percent (10%) of the outstanding Shares or (v) the acquisition by the
Company or any Subsidiary by merger, purchase of stock or assets, joint venture
or otherwise of a direct or indirect ownership interest or investment in any
person or business whose annual revenues or assets is equal to or greater than
twenty percent (20%) of the annual revenues or assets of the Company and the
Subsidiaries, taken as a whole, for and at the twelve (12) month period ended
September 30, 2002. For purposes of this Agreement, "SUPERIOR PROPOSAL" means
any bona fide proposal to acquire, directly or indirectly in one or a series of
related transactions contemplated by a proposed single agreement, for
consideration consisting of cash and/or securities, eighty percent (80%) or more
of the Shares then outstanding or eighty percent (80%) or more of the fair
market value of the assets of the Company or any material Subsidiary, and
otherwise on terms that the Company Board by a majority vote determines in its
good faith judgment (after receiving the advice of the Company Financial Advisor
or another financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger.
(b) The Company agrees that it and its affiliates and their
respective officers, directors and employees shall, and that it shall direct its
investment bankers, attorneys, accountants and other representatives and agents
to, cease any existing activities, discussions or
38
negotiations with any other persons with respect to any possible Third Party
Acquisition. Neither the Company nor any of its affiliates shall, nor shall the
Company authorize or permit any of its or their respective officers, directors,
employees, investment bankers, attorneys, accountants or other representatives
and agents to, directly or indirectly, (i) encourage, solicit, initiate or
knowingly facilitate the submission of any proposal for a Third Party
Acquisition; (ii) participate in or initiate any discussions or negotiations
regarding, or provide any non-public information with respect to, the Company or
any Subsidiary or their respective businesses, assets or properties (other than
Parent and Acquisition or any designees of Parent and Acquisition) in connection
with, or take any other action to knowingly facilitate any Third Party
Acquisition or any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Third Party Acquisition or (iii)
enter into any agreement with respect to any Third Party Acquisition.
Notwithstanding the foregoing, nothing in this Section 4.4 or any other
provision of this Agreement shall prohibit the Company Board from furnishing
information (including non-public information with respect to the Company or any
Subsidiary or their respective businesses, assets or properties) to, or renewing
or entering into discussions or negotiations with, any Third Party that makes an
unsolicited, bona fide written proposal for a Third Party Acquisition, if and to
the extent that (A) the Company is required to do so by the terms of that
certain Standstill Agreement dated November 21, 1997 between the Company and
Bull Run Corporation, as amended to date (the "STANDSTILL AGREEMENT") or (B) (i)
the Company Board, by a majority vote determines in its good faith judgment,
after consultation with independent legal counsel, that failure to do so would
be reasonably likely to constitute or result in a breach by the Company Board of
its fiduciary duty to the Company's stockholders under applicable law, (ii) the
Company Board, by a majority vote, reasonably determines in good faith that such
proposal for a Third Party Acquisition constitutes or is reasonably likely to
result in a Superior Proposal which, if accepted, is reasonably capable of being
consummated (after the receipt by the Third Party making such approval of
information requested by such Third Party and the revision of such proposal to
reflect such information), taking into account all legal, financial, regulatory
and other aspects of the proposal and the Third Party making the proposal and
(iii) prior to taking such action, (x) the Company promptly provides prior
written notice to Parent to the effect that it is proposing to take such action
and (y) receives from such person an executed confidentiality agreement in
reasonably customary form.
(c) The Company shall promptly (but in no case later than
twenty-four (24) hours after receipt) notify Parent if the Company, any
Subsidiary or any of their respective officers or other employees, directors,
investment bankers, attorneys, accountants or other representatives or agents
receives any proposal or inquiry concerning a Third Party Acquisition or request
for nonpublic information by any person who is making, or who has indicated that
it is considering making, a proposal for a Third Party Acquisition, including
all material terms and conditions thereof and the identity of the person
submitting such proposal. The Company shall provide Parent with a copy of any
written proposal for a Third Party Acquisition or amendments or supplements
thereto, and shall thereafter promptly provide to Parent such information as is
reasonably necessary to keep Parent informed of the status of any inquiries,
discussions or negotiations with such person proposing the Third Party
Acquisition, and any material changes to the terms and conditions of such
proposal for a Third Party Acquisition, and shall promptly provide to Parent a
copy of any information delivered to such person which has not previously been
made available to Parent.
39
(d) Except as set forth in this Section 4.4(d), the Company
Board shall not withdraw or adversely modify its recommendation of this
Agreement and the transactions contemplated hereby, or propose to withdraw or
modify, in a manner adverse to Parent, such recommendation, or approve or
recommend any Third Party Acquisition. Notwithstanding the foregoing, if (x) the
Company receives an unsolicited bona fide written proposal for a Third Party
Acquisition that the Company Board, by a majority vote, reasonably determines in
good faith constitutes a Superior Proposal which, if accepted, is likely to be
consummated taking into account all legal, financial, regulatory and other
aspects of the proposal and the Third Party making the proposal and (y) the
Company Board by a majority vote determines in its good faith judgment, after
consultation with independent legal counsel, that failure to do so would be
reasonably likely to constitute or result in a breach by the Company Board of
its fiduciary duties to the Company's stockholders under applicable law, the
Company Board may withdraw or adversely modify its recommendation of this
Agreement and the transactions contemplated hereby, recommend a Superior
Proposal or enter into an agreement with respect to a Superior Proposal, but in
each case only (i) after providing written notice to Parent advising Parent that
the Company Board has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal (a "NOTICE OF SUPERIOR PROPOSAL") and (ii) if Parent does
not, within three (3) business days after Parent's receipt of the Notice of
Superior Proposal, make an offer that the Company Board by a majority vote
determines in its good faith judgment (after receiving the advice of the Company
Financial Advisor or another financial advisor of nationally recognized
reputation) to be at least as favorable to the Company's stockholders as such
Superior Proposal; provided, however, that the Company shall not be entitled to
enter into an agreement with respect to a Superior Proposal unless and until
this Agreement is terminated pursuant to Section 6.1 and the Company has paid
the fees required by Section 6.3.
(e) Notwithstanding anything to the contrary herein, any
disclosure that the Company Board may be compelled to make with respect to the
receipt of a proposal for a Third Party Acquisition or otherwise in order to
comply with its fiduciary duties or Rule 14d-9 or 14e-2 under the Exchange Act
will not constitute a violation of this Agreement, provided that, other than as
required by applicable law, such disclosure states that no action will be taken
by the Company Board in violation of Section 4.4(d).
(f) Except as provided in Section 4.4(d) and Article 6,
nothing in this Section 4.4 shall permit the Company to terminate this Agreement
or affect any other obligations of the Company under this Agreement.
Section 4.5. Comfort Letter.
(a) The Company shall use all commercially reasonable efforts
to cause KPMG LLP to deliver a letter dated not more than five (5) days prior to
the date on which the S-4 shall become effective and addressed to itself and
Parent and their respective Boards of Directors in form and substance reasonably
satisfactory to Parent and customary in scope and substance for agreed-upon
procedures letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the S-4 and the
Proxy Statement/Prospectus.
40
(b) Parent shall use all commercially reasonable efforts to
cause Ernst & Young LLP to deliver a letter dated not more than five (5) days
prior to the date on which the S-4 shall become effective and addressed to
itself and the Company and their respective Boards of Directors in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for agreed-upon procedures letters delivered by independent public
accountants in connection with registration statements and proxy statements
similar to the S-4 and the Proxy Statement/Prospectus.
Section 4.6. Stock Exchange Listing. Parent shall use all commercially
reasonable efforts to cause the shares of Parent Common Stock to be issued in
the Merger and the shares of Parent Common Stock to be reserved for issuance
upon exercise of Company Stock Options to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Effective Time.
Section 4.7. Access to Information.
(a) Between the date hereof and the earlier of the termination
of this Agreement in accordance with its terms and the Effective Time, the
Company will provide Parent and its authorized representatives with reasonable
access to all employees, plants, offices, warehouses and other facilities and to
all books and records of the Company and the Subsidiaries as Parent may
reasonably require, and will cause its officers and those of the Subsidiaries to
furnish Parent and its authorized representatives with such financial and
operating data and other information with respect to the business and properties
of the Company and the Subsidiaries as Parent may from time to time reasonably
request. Between the date hereof and the Effective Time, Parent will provide the
Company and its authorized representatives with reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books and
records of Parent and Parent Subsidiaries as the Company may reasonably require,
and will cause its officers and those of the Parent Subsidiaries to furnish the
Company and its authorized representatives with such financial and operating
data and other information with respect to the business and properties of Parent
and Parent Subsidiaries as the Company may from time to time reasonably request,
taking into account the nature of the transactions contemplated by this
Agreement.
(b) Between the date hereof and the earlier of the termination
of this Agreement in accordance with its terms and the Effective Time, the
Company shall furnish to Parent (i) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each calendar month, commencing with December 2002), an unaudited balance
sheet as of the end of such month and the related statement of earnings, (ii)
within two (2) business days following preparation thereof (and in any event
within twenty (20) business days after the end of each fiscal quarter) an
unaudited balance sheet as of the end of such quarter and the related statements
of earnings, stockholders' equity (deficit) and cash flows for the quarter then
ended and (iii) within two (2) business days following preparation thereof (and
in any event within ninety (90) calendar days after the end of each fiscal
year), an audited balance sheet as of the end of such year and the related
statements of earnings, stockholders' equity (deficit) and cash flows, all of
such financial statements referred to in the foregoing clauses (i), (ii) and
(iii) to be prepared in accordance with United States generally accepted
accounting principles in conformity with the practices consistently applied by
the
41
Company with respect to such financial statements. All the foregoing shall be in
accordance with the books and records of the Company and shall fairly present
its financial position (taking into account the differences between the monthly,
quarterly and annual financial statements prepared by the Company in conformity
with its past practices) as of the last day of the period then ended.
(c) Between the date hereof and the earlier of the termination
of this Agreement in accordance with its terms and the Effective Time, Parent
shall furnish to the Company (i) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each calendar month, commencing with December 2002), an unaudited balance
sheet as of the end of such month and the related statement of earnings, (ii)
within two (2) business days following preparation thereof (and in any event
within twenty (20) business days after the end of each fiscal quarter) an
unaudited balance sheet as of the end of such quarter and the related statements
of earnings, stockholders' equity (deficit) and cash flows for the quarter then
ended, and (iii) within two (2) business days following preparation thereof (and
in any event within ninety (90) calendar days after the end of each fiscal
year), an audited balance sheet as of the end of such year and the related
statements of earnings, stockholders' equity (deficit) and cash flows, all of
such financial statements referred to in the foregoing clauses (i), (ii) and
(iii) to be prepared in accordance with United States generally accepted
accounting principles in conformity with the practices consistently applied by
Parent with respect to such financial statements. All the foregoing shall be in
accordance with the books and records of Parent and shall fairly present its
financial position (taking into account the differences between the monthly,
quarterly and annual financial statements prepared by Parent in conformity with
its past practices) as of the last day of the period then ended.
(d) Each of the parties hereto will hold, and will cause its
consultants and advisers to hold, in confidence all documents and information
furnished to it by or on behalf of another party to this Agreement in connection
with the transactions contemplated by this Agreement pursuant to the terms of
the Confidentiality Agreement, dated August 14, 2002, between the Company and
Parent and the Confidentiality Agreement, dated December 3, 2002, between the
Company and Parent (collectively, the "CONFIDENTIALITY AGREEMENT").
Section 4.8. Certain Filings; Reasonable Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
commercially reasonable efforts to take or cause to be taken all action and to
do or cause to be done all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to do the following: (i) cooperate in the preparation and
filing of the Proxy Statement/Prospectus and the S-4 and any amendments thereto,
any filings that may be required under the HSR Act and similar merger
notification laws or regulations of foreign Governmental Entities; (ii) obtain
consents of all third parties and Governmental Entities necessary, proper or
advisable for the consummation of the transactions contemplated by this
Agreement; (iii) contest any legal proceeding relating to the Merger and (iv)
execute any additional instruments necessary to consummate the transactions
contemplated hereby. Subject to the terms and conditions of this Agreement,
Parent and Acquisition agree to use all commercially reasonable efforts to cause
the Effective Time to occur as soon as practicable after the Company stockholder
vote with respect to the Merger. The Company agrees to use all commercially
reasonable efforts
42
to encourage its employees to accept any offers of employment extended by
Parent. If, at any time after the Effective Time, any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall take all such necessary action.
Section 4.9. Public Announcements. Parent, Acquisition and the Company,
as the case may be, will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation except (i) as may be required by applicable law, or by the rules
and regulations of, or pursuant to any listing agreement with, the NYSE or the
Nasdaq National Market, as determined by Parent, Acquisition or the Company, as
the case may be, or (ii) following a change, if any, of the Company Board's
recommendation of the Merger (in accordance with Section 4.4(d)), after which
event no such consultation shall be required. Notwithstanding the preceding
sentence, the first public announcement of this Agreement and the Merger shall
be a joint press release agreed upon by Parent and the Company.
Section 4.10. Indemnification and Directors' and Officers' Insurance.
(a) After the Effective Time, Parent shall cause the Surviving
Company to indemnify and hold harmless (and shall also advance expenses as
incurred to the fullest extent permitted under applicable law to), to the extent
not covered by insurance, each person who is now or has been prior to the date
hereof or who becomes prior to the Effective Time an officer or director of the
Company or any Subsidiary (the "INDEMNIFIED PERSONS") against (i) all losses,
claims, damages, costs, expenses (including counsel fees and expenses),
settlement, payments or liabilities arising out of or in connection with any
claim, demand, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was an officer or director of the Company or any Subsidiary, whether or not
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether or not asserted or claimed prior to or at or after the Effective
Time ("INDEMNIFIED LIABILITIES"); and (ii) all Indemnified Liabilities based in
whole or in part on or arising in whole or in part out of or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the fullest
extent required or permitted under applicable law. Nothing contained herein
shall make Parent, Acquisition, the Company or the Surviving Company, an
insurer, a co-insurer or an excess insurer in respect of any insurance policies
which may provide coverage for Indemnified Liabilities, nor shall this Section
4.10 relieve the obligations of any insurer in respect thereto. The parties
hereto intend, to the extent not prohibited by applicable law, that the
indemnification provided for in this Section 4.10 shall apply without limitation
to negligent acts or omissions by an Indemnified Person. Each Indemnified Person
is intended to be a third party beneficiary of this Section 4.10 and may
specifically enforce its terms. This Section 4.10 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's Certificate of Incorporation or bylaws
as presently in effect. Parent shall cause the Certificate of Incorporation and
Bylaws of the Surviving Entity to maintain in effect, for a period of six (6)
years after the Effective Time, the current provisions contained in the
Certificate of Incorporation and Bylaws of Acquisition regarding elimination of
liability of directors, indemnification of officers, directors and employees and
advancement of expenses.
43
(b) From and after the Effective Time, Parent will cause the
Surviving Company to fulfill and honor in all respects the obligations of the
Company pursuant to any indemnification agreements between the Company and its
directors and officers as of or prior to the date hereof and any indemnification
provisions under the Company's Certificate of Incorporation or bylaws as in
effect on the date hereof.
(c) For a period of six (6) years after the Effective Time,
Parent will maintain or cause the Surviving Company to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who, as of immediately prior to the Effective Time, are covered by the Company's
directors' and officers' liability insurance policy (the "INSURED PARTIES") on
terms no less favorable to the Insured Parties than those of the Company's
present directors' and officers' liability insurance policy; provided, however,
that in no event will Parent or the Surviving Company be required to expend in
excess of 200% of the annual premium currently paid by the Company for such
coverage (or such coverage as is available for 200% of such annual premium);
provided, further, that, in lieu of maintaining such existing insurance as
provided above, Parent may cause coverage to be provided under any policy
maintained for the benefit of Parent or any of the Parent Subsidiaries, so long
as the terms are not materially less advantageous to the intended beneficiaries
thereof than such existing insurance.
(d) The provisions of this Section 4.10 are intended to be for
the benefit of, and will be enforceable by, each person entitled to
indemnification hereunder and the heirs and representatives of such person.
Parent will not permit the Surviving Company to merge or consolidate with any
other person unless the Surviving Company will ensure that the surviving or
resulting entity assumes the obligations imposed by this Section 4.10.
Section 4.11. Notification of Certain Matters. The Company shall
provide prompt notice to Parent and Acquisition, and Parent and Acquisition
shall provide prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which has caused
or would be likely to cause any representation or warranty contained in this
Agreement to become untrue or inaccurate such that the conditions set forth in
Sections 5.2(a) and 5.3(a), as applicable, would not be satisfied and (ii) any
failure of the Company, Parent or Acquisition, as the case may be, to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it hereunder such that the conditions set forth
in Sections 5.2(b) and 5.3(b), as applicable, would not be satisfied; provided,
however, that the delivery of any notice pursuant to this Section 4.11 shall not
cure such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.12. Affiliates.
(a) The Company shall use all commercially reasonable efforts
to obtain as soon as practicable from all stockholders of the Company who may be
affiliates of the Company or Parent pursuant to Rule 145 under the Securities
Act ("COMPANY AFFILIATES"), after the date of this Agreement and on or prior to
the Effective Time, a letter agreement substantially in the form of Exhibit B.
44
(b) Parent shall not be required to maintain the effectiveness
of the S-4 for the purpose of resale by Company Affiliates of shares of Parent
Common Stock.
Section 4.13. Termination of 401(k) Plan. The Company and each ERISA
Affiliate that is a plan sponsor of a 401(k) plan agrees to adopt resolutions to
terminate its 401(k) plan and fully vest plan participants immediately prior to
the Closing, unless Parent, in its sole and absolute discretion, provides the
Company with written notice at least seven (7) days before the Closing Date,
that any such 401(k) plan shall be continued after the Closing Date. Unless such
notice is received, Parent shall receive from the Company evidence that the
Board of the relevant company has adopted resolutions to terminate the 401(k)
plan (the form and substance of which resolutions shall be subject to review and
approval of Parent), effective as of the day immediately preceding the Closing
Date but contingent on the Closing occurring.
Section 4.14. Lump Sum Distributions. In the event that the Company
terminates any plan pursuant to Section 4.13, the Company and each ERISA
Affiliate agrees to amend any Company or ERISA Affiliate sponsored profit
sharing plan that is intended to be qualified under Code Section 401(a),
including any 401(k) plan, to provide that plan distributions shall be made
solely in the form of a lump sum and any other forms of distribution shall cease
to be available after the ninety (90) day period described in United States
Income Tax Treasury Regulation section 1.411(e)(1)(ii)(A). Subject to the
preceding sentence, such amendment shall be adopted pursuant to the same
resolutions in Section 4.13 and shall be contingent on the occurrence of the
Closing.
Section 4.15. Employee Benefits.
(a) Parent agrees that, from and after the Effective Time,
except as explicitly provided herein, Parent shall assume and honor all employee
benefit plans, agreements and programs of the Company in accordance with their
terms as in effect immediately before the Effective Time, subject to any
amendment or termination thereof that may be permitted by such terms or as
otherwise permitted by applicable law. For a period of not less than one year
following the Effective Time, Parent shall provide, or shall cause to be
provided, to individuals who are employees of the Company and the Subsidiaries
immediately before the Effective Time (other than any employees subject to
collective bargaining agreements) and who continue to be employed by Parent or a
Parent Subsidiary after the Effective Time (the "COMPANY EMPLOYEES"),
compensation and employee benefits that are, in the aggregate, not less
favorable than those provided to Company Employees immediately before the
Effective Time (it being understood that any discretionary equity and equity
based awards will remain discretionary), as disclosed by Company to Parent
before the date of this Agreement; provided that, in lieu of any benefits under
Company benefit plans and programs, Parent may provide Company Employees with
compensation and employee benefits under Parent's employee benefit plans and
programs that are, in the aggregate, not less favorable than those provided to
similarly situated employees of Parent or the Parent Subsidiaries (it being
understood that discretionary equity and equity based awards will remain
discretionary). The foregoing shall not be construed to prevent the termination
of employment of any Company Employee or the amendment or termination of any
particular employee benefit plan or program to the extent permitted by its terms
as in effect immediately before the Effective Time or as otherwise permitted by
applicable law.
45
(b) The provisions of this Section 4.15 are not intended to
create rights of third party beneficiaries.
Section 4.16. Long Term Incentive Plan. Parent agrees that upon
termination of the Company's 1994 Long Term Incentive Plan, the employees of the
Company who become employees of Parent or any of the Parent Subsidiaries may
participate in Parent's 1999 Long-Term Incentive Plan, subject to the terms and
conditions of Parent's 1999 Long-Term Incentive Plan, and that service with the
Company shall be treated as service with Parent for determining eligibility of
the Company's employees under Parent's 1999 Long-Term Incentive Plan.
Section 4.17. Tax-Free Reorganization. Each of the Company and Parent
agrees to refrain from taking any action prior to, on or after the Effective
Time that would reasonably be expected to cause the Merger to fail to qualify as
a reorganization within the meaning of Section 368(a) of the Code. Parent shall
provide to ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP (or such other counsel reasonably
acceptable to Parent) and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP (or such other counsel
reasonably acceptable to the Company) a certificate containing representations
reasonably requested by counsel in connection with the opinions to be delivered
pursuant to Sections 5.2(d) and 5.3(d). The Company shall provide ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP (or such other counsel reasonably acceptable to Parent) and
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP (or such other counsel reasonably acceptable to the
Company) a certificate containing representations reasonably requested by
counsel in connection with the opinions to be delivered pursuant to Sections
5.2(d) and 5.3(d).
Section 4.18. Section 16 Matters. Prior to the Effective Time, the
Company Board shall adopt a resolution consistent with the interpretative
guidance of the SEC so that the assumption of Company Options held by Company
Insiders pursuant to this Agreement and the receipt by Company Insiders of
Parent Common Stock in exchange for Shares pursuant to the Merger, shall be
exempt transactions for purposes of Section 16 of the Exchange Act. For purposes
of this Section 4.18, a "COMPANY INSIDER" is any officer or director of the
Company who may become a covered person for purposes of Section 16 of the
Exchange Act of Parent, if any.
Section 4.19. Takeover Statutes. If any anti-takeover or similar
statute or regulation is or may become applicable to the transactions
contemplated hereby, each of the parties and its Board of Directors shall use
their respective reasonable best efforts to grant or secure any required
consents or approvals and take all such actions as are reasonable and legally
permissible so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects (including any resulting delays) of any such
statute or regulation on the transactions contemplated hereby.
Section 4.20. Company Rights Agreement. The Company shall either (a)
promptly redeem all preferred share purchase rights under the Company Rights
Agreement or (b) amend the Company Rights Agreement to exempt the Merger and the
transactions contemplated hereby from the Company Rights Agreement, and take all
other action to ensure that the Rights shall not become exercisable and no
Distribution Date (as such terms are defined in the Company Rights Agreement)
shall occur thereunder prior to the Closing Date.
46
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The obligation of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Company shall have obtained Company Stockholder Approval
by the stockholders of Company in connection with the adoption of this
Agreement;
(b) Parent shall have obtained the Parent Stockholder Approval
by the stockholders of Parent in connection with the issuance of Parent Common
Stock pursuant to this Agreement;
(c) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or other Governmental Entity having
jurisdiction over a party hereto that prohibits, restrains, enjoins or restricts
the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR
Act and similar merger notification laws or regulations of foreign Governmental
Entities shall have terminated or expired; and
(e) the S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a stop
order and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock in
exchange for Shares in the Merger.
Section 5.2. Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and
Acquisition contained in this Agreement that are qualified as to materiality or
Material Adverse Effect on Parent shall be true and correct, and any such
representations that are not so qualified shall be true and correct in all
material respects at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such representations
specifically related to an earlier date, in which case such representations
shall be true and correct in all material respects as of such earlier date) and,
at the Closing, Parent and Acquisition shall have delivered to the Company a
certificate to that effect, executed by two (2) executive officers of Parent and
Acquisition;
(b) each of the covenants and obligations of Parent and
Acquisition to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at or before the Effective Time and, at the Closing, Parent and Acquisition
shall have delivered to the Company a certificate to that effect, executed by
two (2) executive officers of Parent and Acquisition;
47
(c) there shall have not occurred and be continuing after the
date of this Agreement a Material Adverse Effect on Parent;
(d) the shares of Parent Common Stock issuable to the
Company's stockholders pursuant to this Agreement and such other shares required
to be reserved for issuance in connection with the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance;
(e) the Company shall have received a written opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel to the Company, to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, and (ii) each of Parent, Acquisition and the Company will be a party
to the reorganization within the meaning of Section 368(b) of the Code, and such
opinion shall not have been withdrawn; provided, however, that if ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP fails to deliver such opinion, then ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, counsel to Parent, may deliver such opinion in satisfaction of this closing
condition; provided, further, that any such opinion may rely on representations
as such counsel reasonably deems appropriate and on typical assumptions. Parent,
Acquisition, and the Company agree to provide to such counsel such
representations as such counsel reasonably requests in connection with rendering
such opinions.
Section 5.3. Conditions to the Obligations of Parent and Acquisition.
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company
contained in this Agreement (other than those contained in Section 2.22) that
are qualified as to materiality or Material Adverse Effect on Company shall be
true and correct, and any such representations that are not so qualified, shall
be true and correct in all material respects at and as of the Effective Time
with the same effect as if made at and as of the Effective Time (except to the
extent such representations specifically related to an earlier date, in which
case such representations shall be true and correct in all material respects as
of such earlier date) and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect, executed by two (2)
executive officers of the Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect, executed by two (2)
executive officers of the Company;
(c) there shall have not occurred and be continuing after the
date of this Agreement a Material Adverse Effect on the Company;
(d) Parent shall have received a written opinion of ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to Parent, to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
and (ii) each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, and such
48
opinion shall not have been withdrawn; provided, however, that if ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP fails to deliver such opinion, then ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP,
counsel to the Company, may deliver such opinion in satisfaction of this closing
condition; provided, further, that any such opinion may rely on representations
as such counsel reasonably deems appropriate and on typical assumptions. Parent,
Acquisition, and the Company agree to provide to such counsel such
representations as such counsel reasonably requests in connection with rendering
such opinions;
(e) Parent and the Company shall have obtained the consents,
approvals and waivers set forth in Section 5.3(e) of the Disclosure Letter; and
(f) Company shall have entered into an amendment of that
certain License Agreement between the Company and Asics Corporation, a
corporation existing under the laws of Japan, dated as of January 21, 1998,
substantially in the form set forth in Section 5.3(f) of the Disclosure Letter.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time whether before
or after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent and Acquisition or the Company if (i) any court
of competent jurisdiction or other Governmental Entity having jurisdiction over
a party hereto shall have issued a final order, decree or ruling, or taken any
other final action, permanently restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by July 30,
2003 (the "FINAL DATE"); provided that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that the Effective
Time shall not have occurred on or before such date;
(c) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any such representation or warranty of Parent or
Acquisition shall have become untrue, in both cases, such that the condition set
forth in Section 5.2(a) would be incapable of being satisfied by the Final Date,
provided that the Company has not breached any of its obligations hereunder in
any material respect which breach shall be continuing at such time; (ii) there
shall have been a material breach by Parent or Acquisition of any of its
covenants or obligations to be performed under this Agreement, and Parent or
Acquisition, as the case may be, has not cured such breach (if capable of being
cured) within twenty (20) business days after notice by the Company thereof,
provided that the Company has not breached any of its obligations hereunder in
any material respect which breach shall be continuing at such time; (iii) the
Company shall have convened a Company Stockholders Meeting and shall have failed
to obtain the Company Stockholder
49
Approval at such meeting (including any adjournments thereof); (iv) Parent shall
have convened a Parent Stockholders Meeting and shall have failed to obtain the
Parent Stockholder Approval at such meeting (including any adjournments
thereof); (v) Parent shall have failed to call the Parent Stockholders Meeting
in accordance with Section 4.3(d), (vi) if the Company receives a Superior
Proposal and resolves to accept such Superior Proposal, but only if (A) the
Company has acted in accordance with, and has otherwise complied with the terms
of, Section 4.4(b) hereof, including the notice provisions therein, and (B) the
Company has paid all amounts due to Parent pursuant to Section 6.3; or (vii) the
Parent Board shall have withdrawn or adversely modified its approval or
recommendation of the issuance of the Shares to be issued in the Merger, fails
to include such recommendation in the Proxy Statement/Prospectus or fails to
reconfirm such recommendation (including publicly, if requested) within three
(3) business days after a reasonable request by the Company such reconfirmation.
(d) by Parent and Acquisition if (i) there shall have been a
breach of any representation or warranty on the part of the Company set forth in
this Agreement, or if any such representation or warranty of the Company shall
have become untrue, in both cases, such that the condition set forth in Section
5.3(a) would be incapable of being satisfied by the Final Date, provided that
neither Parent nor Acquisition has breached any of its obligations hereunder in
any material respect which breach shall be continuing at such time; (ii) there
shall have been a material breach by the Company of any of its covenants or
obligations to be performed under this Agreement, and the Company has not cured
such breach (if capable of being cured) within twenty (20) business days after
notice by Parent or Acquisition thereof, provided that neither Parent nor
Acquisition has breached any of its obligations hereunder in any material
respect which breach shall be continuing at such time; (iii) the Company Board
shall have submitted or recommended to the Company's stockholders a Superior
Proposal; (iv) the Company Board shall have withdrawn or adversely modified its
approval or recommendation of this Agreement or the Merger, fails to include its
recommendation of this Agreement and the Merger in the Proxy
Statement/Prospectus or fails to reconfirm its recommendation of this Agreement
and the Merger (including publicly, if requested) within three (3) business days
after a reasonable request by Parent for such reconfirmation; (v) the Company
Board fails to reject a proposal for a Third Party Acquisition or fails to
recommend against a proposal for a Third Party Acquisition in any filing with
the SEC made pursuant to Rule 14d-9 or 14e-2 under the Exchange Act within ten
(10) days after such proposal is received by or on behalf of the Company or such
transaction has been launched, as the case may be; (vi) the Company shall have
convened a Company Stockholders Meeting and shall have failed to obtain the
Company Stockholder Approval at such meeting (including any adjournments
thereof); (vii) Parent shall have convened a Parent Stockholders Meeting and
shall have failed to obtain the Parent Stockholder Approval at such meeting
(including any adjournments thereof); (viii) the Company shall have failed to
call the Company Stockholders Meeting in accordance with Section 4.3(e); or (ix)
prior to the Company Stockholders Meeting if the average daily closing price per
share of Parent Common Stock as reported on the NYSE Composite Transactions
reporting system for any fifteen (15) consecutive trading days ending at least
two calendar days prior to the Company Stockholders Meeting is less than $8.00.
Section 6.2. Effect of Termination. Upon the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto, or any of its respective affiliates,
50
directors, officers or stockholders, other than the provisions of this Section
6.2 and Sections 4.8(c) and 6.3, and all of Article 7 except for Section 7.10.
Nothing contained in this Section 6.2 shall relieve any party from liability for
any breach of this Agreement prior to such termination.
Section 6.3. Fees and Expenses.
(a) If this Agreement is terminated pursuant to:
(i) Section 6.1(c)(vi), 6.1(d)(iii), 6.1(d)(iv),
6.1(d)(v) or 6.1(d)(viii); or
(ii) Section 6.1(c)(iii) or 6.1(d)(vi) and, at the
time of the Company Stockholders Meeting at which the Company failed to obtain
the requisite vote, there shall be outstanding at that time an offer by a Third
Party to consummate a Third Party Acquisition, there shall have been under
consideration by the Company a Third Party Acquisition or a Third Party shall
have publicly announced (and not withdrawn) a plan or proposal with respect to a
Third Party Acquisition and, within twelve months after such termination, (A)
the Company enters into an agreement with respect to a Company Acquisition or
(B) a transaction constituting a Company Acquisition occurs involving any party
(or any affiliate thereof) (x) with whom the Company (or its agents) had
negotiations with a view to a Third Party Acquisition or (y) who had submitted a
proposal or expressed an interest in a Third Party Acquisition, in the case of
each of clauses (x) and (y) after the date hereof and prior to such termination;
or
(iii) Section 6.1(d)(i) or (ii) as the result of a
willful breach by the Company and, within twelve months thereafter, (A) the
Company enters into an agreement with respect to a Company Acquisition, or (B) a
Company Acquisition occurs involving any party (or any affiliate thereof) (x)
with whom the Company (or its agents) had negotiations with a view to a Third
Party Acquisition or (y) who had submitted a proposal or expressed an interest
in a Third Party Acquisition, in the case of each of clauses (x) and (y) after
the date hereof and prior to such termination;
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages, the Company shall pay to Parent the amount of Two
Million, Nine Hundred Thousand Dollars ($2,900,000) as liquidated damages
immediately upon the occurrence of the event described in this Section 6.3(a)
giving rise to such damages (the "TERMINATION FEE"). Except for any claims or
causes of action based on fraud, in the event that the Termination Fee is paid
as required herein, such Termination Fee payment shall be the sole and exclusive
remedy with respect to such termination and all matters arising out of or in
connection with or in any way related to such termination or matters and neither
the Purchaser nor Acquisition nor their shareholders shall be entitled to any
further or other rights, claims or remedies. It is specifically agreed that the
amount to be paid pursuant to this Section 6.3(a) represents liquidated damages
and not a penalty. The Company hereby waives any right to set-off or
counterclaim against such amount.
For purposes of this Agreement, "COMPANY ACQUISITION" shall
mean any of the following transactions (other than the transactions contemplated
by this Agreement); (i) a
51
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction hold less
than fifty percent (50%) of the aggregate equity interests in the surviving or
resulting person of such transaction, (ii) a sale or other disposition by the
Company or any material Subsidiary of assets representing in excess of fifty
percent (50%) of the aggregate fair market value of the business of the Company
and the Subsidiaries, taken as a while, immediately prior to such sale or (iii)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares of
capital stock representing in excess of twenty-five percent (25%) of the voting
power of the then outstanding shares of capital stock of the Company.
(b) Except as provided in this Section 6.3, whether or not the
Merger is consummated, all expenses incurred in connection with this Agreement,
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that fees and expenses incurred in connection with (i) the
filing, printing and mailing of the Proxy Statement/Prospectus and the S-4 and
the solicitation of stockholder approval of this Agreement and the Merger, and
(ii) any filings required under the HSR Act and similar foreign merger
notification laws shall be shared equally by the Company and Parent.
Section 6.4. Amendment. This Agreement may be amended by action taken
by the Company, Parent and Acquisition at any time before or after approval of
the Merger by the stockholders of the Company but after any such approval no
amendment shall be made that requires the approval of such stockholders under
applicable law without such approval. This Agreement (including the Disclosure
Letter) may be amended only by an instrument in writing signed on behalf of the
parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by another party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement in accordance with its terms.
Section 7.2. Entire Agreement; Assignment. This Agreement (including
the Disclosure Letter, the Parent Disclosure Letter and the Exhibits and
Schedules hereto) and the Confidentiality Agreement (i) constitute the entire
agreement between the parties hereto with
52
respect to the subject matter hereof and supersede all other prior agreements
and understandings both written and oral between the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise; provided, however, that Acquisition may assign any or all of its
rights and obligations under this Agreement to any wholly owned subsidiary of
Parent, but no such assignment shall relieve Acquisition of its obligations
hereunder if such assignee does not perform such obligations.
Section 7.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
to each other party as follows:
if to Parent or Acquisition: K2 Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company to: Rawlings Sporting Goods Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chairman and Chief Executive
Officer
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
53
Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware without regard to
the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings; Section References. 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. All references herein to Articles, Sections, subsections, paragraphs
and clauses are references to Articles, Sections, subsections, paragraphs and
clauses of this Agreement unless specified otherwise.
Section 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided herein, including in
Sections 4.10 and 7.2, nothing in this Agreement is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement
the term:
(a) "AFFILIATE" means (except as otherwise provided in
Sections 2.20 and 4.12) a person that, directly or indirectly, through one or
more intermediaries controls, is controlled by or is under common control with
the first-mentioned person;
(b) "BUSINESS DAY" means any day other than a day on which (i)
banks in New York or California are required or authorized by law to be closed
or (ii) the NYSE is closed;
(c) "CAPITAL STOCK" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof;
(d) "KNOWLEDGE" or "KNOWN" means, with respect to any matter
in question, the actual knowledge of such matter of any executive officer of the
Company or Parent, as the case may be. Any such individual will be deemed to
have actual knowledge of a particular fact, circumstance, event or other matter
if (i) such fact, circumstance, event or other matter is reflected in one or
more documents (whether written or electronic, including e-mails sent to or by
such individual) in, or that have been in, such individual's possession,
including personal files of such individual; or (ii) such fact, circumstance,
event or other matter is reflected in one or more documents (whether written or
electronic) contained in books and records of the Company (in the case of
knowledge of the Company) or Parent (in the case of knowledge of Parent) that
would reasonably be expected to be reviewed by an individual who has the duties
and responsibilities of such individual in the customary performance of such
duties and responsibilities.
(e) "INCLUDE" or "INCLUDING" means "INCLUDE, WITHOUT
LIMITATION" or "INCLUDING, WITHOUT LIMITATION," as the case may be, and the
language following "INCLUDE" or "INCLUDING" shall not be deemed to set forth an
exhaustive list;
(f) "LIEN" means, with respect to any asset (including any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such
54
asset; provided, however, that the term "LIEN" shall not include (i) statutory
liens for Taxes, which are not yet due and payable or are being contested in
good faith by appropriate proceedings and, with respect to the Company,
disclosed in Section 2.13(b) of the Disclosure Letter, (ii) statutory or common
law liens to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented, (iii) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance, old age pension or other social security programs mandated under
applicable laws, (iv) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen to secure claims for labor, materials or
supplies and other like liens and (v) restrictions on transfer of securities
imposed by applicable state and federal securities laws; and
(g) "PERSON" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity, including any Governmental Entity.
Section 7.9. No Personal Liability. This Agreement shall not create or
be deemed to create or permit any personal liability or obligation on the part
of any direct or indirect stockholder of the Company, Parent or Acquisition or
any officer, director, employee, agent, representative or investor of any party
hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if a party
hereto is entitled to receive any payment or reimbursement of expenses pursuant
to Section 6.3(a) it shall not be entitled to specific performance to compel the
consummation of the Merger.
Section 7.11. Counterparts. This Agreement may be executed in one 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 7.12. Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement, and, therefore, waive the application of any applicable law, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
Section 7.13. Waiver of Jury Trial. EACH OF PARENT, ACQUISITION AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT,
ACQUISITION OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
55
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
K2 INC., A
DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
RAWLINGS SPORTING GOODS COMPANY, INC., A
DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
Title: Chairman and Chief Executive Officer
LARA ACQUISITION SUB, A
DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
56
EXHIBIT A
FORM OF CERTIFICATE OF MERGER
OF
LARA ACQUISITION SUB
(A DELAWARE CORPORATION)
WITH AND INTO
RAWLINGS SPORTING GOODS COMPANY, INC.
(A DELAWARE CORPORATION)
UNDER SECTION 251 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned corporation, Rawlings Sporting Goods Company, Inc.,
hereby certifies that:
FIRST: The names and state of incorporation of the constituent
corporations are: Lara Acquisition Sub, a Delaware corporation (the
"Disappearing Corporation"), and Rawlings Sporting Goods Company, Inc., a
Delaware corporation (the "Surviving Corporation").
SECOND: An agreement of merger has been approved, adopted, certified,
executed and acknowledged by the Disappearing Corporation and by the Surviving
Corporation in accordance with the provisions of Section 251 of the General
Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation is Rawlings Sporting
Goods, Inc.
FOURTH: Upon the effectiveness of the merger, the Certificate of
Incorporation of the Surviving Corporation shall be as attached hereto as
Exhibit A.
FIFTH: The executed agreement of merger is on file at the principal
place of business of the Surviving Corporation at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SIXTH: A copy of the agreement of merger will be furnished by the
Surviving Corporation on request and without cost, to any stockholder of the
Disappearing Corporation or the Surviving Corporation.
IN WITNESS WHEREOF, the undersigned has executed and subscribed to this
Certificate of Merger on behalf of Rawlings Sporting Goods Company, Inc. as its
authorized officer and hereby affirms, under penalty of perjury, that this
Certificate of Merger is the act and deed of such corporation and that the facts
stated herein are true.
DATED: Decemer _____, 2002
RAWLINGS SPORTING GOODS COMPANY, INC.,
A DELAWARE CORPORATION
By:
-----------------------------------
Name:
Title:
2
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RAWLINGS SPORTING GOODS COMPANY, INC.
3
EXHIBIT B
AFFILIATE AGREEMENT
____________ __, 200_
K2 Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of Rawlings Sporting Goods Company, Inc., a
Delaware corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant
to the terms of the Agreement and Plan of Merger, dated as of December 15, 2002
(the "
Merger Agreement"), among K2 Inc., a Delaware corporation ("Parent"), Lara
Acquisition Sub, a Delaware corporation and wholly owned subsidiary of Parent
("Acquisition"), and the Company, Acquisition will be merged with and into the
Company (the "Merger"). Capitalized terms used in this letter without definition
shall have the meanings assigned to them in the
Merger Agreement.
As a result of the Merger, I may receive Parent Common Stock
in exchange for shares of common stock, $0.01 par value per share, of the
Company that I own or that I may purchase upon exercise of stock options.
I hereby represent, warrant and covenant to Parent that in the
event I receive any Parent Common Stock as a result of the Merger:
a. I shall not make any sale, transfer or other disposition of
Parent Common Stock in violation of the Act or the Rules and Regulations.
b. I have carefully read this letter and the applicable
provisions of the
Merger Agreement and discussed its requirements and other
applicable limitations upon my ability to sell, transfer or otherwise dispose of
Parent Common Stock to the extent I believed necessary with my counsel.
c. I have been advised that the issuance of Parent Common
Stock to me pursuant to the Merger will be registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger will be submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of the
Company and the resale by me of the Parent Common Stock to be received by me in
the Merger has not been registered under the Act, I may therefore not sell,
transfer or otherwise dispose of Parent Common Stock issued to me in the Merger
unless (i) such sale, transfer or other disposition has been registered under
the Act, (ii) such sale, transfer or other disposition is made in conformity
with the volume and other limitations of Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably acceptable to
Parent, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
d. I understand that Parent is under no obligation to register
the sale, transfer or other disposition of Parent Common Stock by me or on my
behalf under the Act.
e. I also understand that stop transfer instructions will be
given to Parent's transfer agent with respect to shares of Parent Common Stock
issued to me and that there will be placed on the certificates for such shares
of Parent Common Stock issued to me, or any substitutions therefor, a legend
stating in substance:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold or otherwise disposed of unless registered under
the Securities Act pursuant to a Registration Statement in effect at
the time or unless the proposed sale or other disposition can be made
in compliance with Rule 145 or without registration in reliance on
another exemption therefrom. Reference is made to that certain letter
agreement dated _____________ __, 200__ between the Holder and the
Issuer, a copy of which is on file in the principal office of the
Issuer that contains further restrictions on the transferability of
this certificate and the shares represented hereby."
Parent agrees to cause this legend to be removed from the
certificates delivered to me evidencing the shares of Parent Common Stock
promptly at such time as the Parent Common Stock may be sold by me pursuant to
Rule 145(d)(3) under the Act or after Parent has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Parent,
or a "no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Act no longer apply to the undersigned.
The term "Parent Common Stock" as used in this letter shall
mean and include not only the common stock, $1.00 par value, of Parent as
presently constituted, but also any other stock that may be issued in exchange
for, in lieu of, or in addition to, all or any part of such Parent Common Stock.
2
Notwithstanding anything to the contrary contained in this
letter, I may, to the extent permitted by applicable law and with the written
consent of Parent (not to be unreasonably withheld): (i) transfer shares of
Parent Common Stock in payment of the exercise price of options to purchase
Parent Common Stock; (ii) transfer shares of Parent Common Stock to any
organization qualified under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended; (iii) transfer shares of Parent Common Stock to a trust
established for the benefit of myself and/or for the benefit of one or more
members of my family, or make a bona fide gift of shares of Parent Common Stock
to one or more members of my family, provided that in the case of a transfer or
gift pursuant to clause (ii) or (iii) hereof, a transferee of such shares agrees
to be bound by the limitations set forth in this letter.
Parent represents that it has filed all reports required under
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during the twelve (12) months preceding the date of the
Merger Agreement.
By its execution hereof, Parent agrees that it will, for a period of two (2)
years following the consummation of the transactions contemplated by the
Merger
Agreement, use all commercially reasonable efforts to make timely filings with
the Commission of all reports required to be filed by it pursuant to the
Exchange Act and will furnish upon a reasonable request by myself, a written
statement confirming that such reports have been filed.
3
I hereby acknowledge that the receipt of this letter by Parent
is an inducement and a condition to Parent's obligation to consummate the Merger
under the
Merger Agreement, and I understand the requirements of this letter and
the limitations imposed upon the transfer, sale, pledge or other disposition of
shares of Parent Common Stock that I may receive in the Merger.
Very truly yours,
---------------------------
Name (print):
Agreed and accepted this ___day
of ___________, 200__, by
K2 INC.
By:
----------------------------------
Name:
Title:
4
EXHIBIT C
Initial Officers of Lara Acquisition Sub
Chief Executive Officer ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
President ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Financial Officer ▇▇▇▇ ▇. ▇▇▇▇▇▇
Document8