AGREEMENT AND PLAN OF MERGER
by and among
HOLLYWOOD ENTERTAINMENT CORPORATION,
and
CARSO HOLDINGS CORPORATION
and
COSAR CORPORATION
Dated as of March 28, 2004
Table of Contents
Page
ARTICLE I DEFINITIONS 2
1.1. Definitions 2
ARTICLE II THE MERGER 10
2.1. The Merger 10
2.2. Organizational Documents 11
2.3. Directors and Officers 11
ARTICLE III CONVERSION OF SECURITIES AND RELATED MATTERS 11
3.1. Capital Stock of Acquiror 11
3.2. Cancellation of Parent and Acquiror-Owned Shares 12
3.3. Conversion of Company Shares 12
3.4. Exchange of Certificates 12
3.5. Company Stock Options 14
3.6. Adjustments 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 14
4.1. Corporate Existence and Power 14
4.2. Corporate Authorization 15
4.3. Governmental Authorization 16
4.4. Non-Contravention 16
4.5. Capitalization 16
4.6. Subsidiaries 17
4.7. Company SEC Documents 18
4.8. Financial Statements; No Material Undisclosed Liabilities 19
4.9. Internal Control over Financial Reporting; Disclosure
Controls and Procedures; Certifications 19
4.10. Absence of Certain Changes 20
4.11. Litigation 22
4.12. Taxes 23
4.13. Employee Benefits 24
4.14. Compliance with Laws; Licenses, Permits and
Registrations 26
4.15. Finders' Fees; Opinion of Financial Advisor 27
4.16. Affiliate Transactions 27
4.17. Intellectual Property 27
4.18. Material Contracts 29
4.19. Reserved 31
4.20. Real Estate 31
4.21. Accounts Payable and Inventory 31
4.22. Suppliers 32
4.23. Personnel, etc 32
4.24. Assets 32
4.25. Insurance 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR 33
5.1. Corporate Existence and Power 33
5.2. Corporate Authorization 33
5.3. Governmental Authorization 33
5.4. Non-Contravention 34
5.5. Employment Agreement 34
5.6. Financing 34
5.7. Finders' Fees 34
ARTICLE VI COVENANTS OF THE COMPANY 35
6.1. Company Interim Operations 35
6.2. Acquisition Proposals; Board Recommendation 38
6.3. The Notes Tender Offer 39
6.4. Real Property Holding Company 41
6.5. Change of Control Plan 41
ARTICLE VII COVENANTS OF PARENT AND ACQUIROR 41
7.1. Director and Officer Liability 41
7.2. Transfer Taxes 43
7.3. Repayment of Debt 43
7.4. Acknowledgment 43
7.5. Substitute Financing 43
ARTICLE VIII COVENANTS OF PARENT, ACQUIROR AND THE COMPANY 43
8.1. Efforts and Assistance/HSR Act 44
8.2. Shareholder Meeting/Proxy Statement and Schedule 13E-3 45
8.3. Public Announcements 46
8.4. Access to Information; Notification of Certain Matters 47
8.5. Further Assurances 48
8.6. Disposition of Litigation 48
8.7. Confidentiality Agreement 49
ARTICLE IX CONDITIONS TO MERGER 49
9.1. Conditions to the Obligations of Each Party 49
9.2. Conditions to the Obligations of the Company 49
9.3. Conditions to the Obligations of Acquiror 50
ARTICLE X TERMINATION 51
10.1. Termination 51
10.2. Effect of Termination 53
10.3. Fees and Expenses 55
ARTICLE XI MISCELLANEOUS 55
11.1. Notices 55
11.2. Survival 56
11.3. Amendments; No Waivers 56
11.4. Successors and Assigns 57
11.5. Counterparts; Effectiveness; Third Party Beneficiaries 57
11.6. Governing Law 57
11.7. Jurisdiction 57
11.8. Entire Agreement 57
11.9. Authorship 58
11.10. Severability 58
11.11. Waiver of Jury Trial 58
11.12. Headings; Construction 58
Exhibit A - Form of Voting Agreement
Exhibit B - Form of Option Exchange and Contribution Agreement
Exhibit C - Form of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit D - Articles of Incorporation of the Surviving Corporation
Exhibit E - Form of Consent Agreement with Senior Management
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of this 28th day of March 2004, by and among Hollywood
Entertainment Corporation, an Oregon corporation (the "Company"), Carso
Holdings Corporation, a Delaware corporation ("Parent"), and Cosar
Corporation, an Oregon corporation ("Acquiror") wholly owned by Parent.
WHEREAS, it is the intention of the parties that Acquiror shall
merge with and into the Company (the "Merger") with the Company being the
surviving corporation and a wholly owned subsidiary of Parent;
WHEREAS, the Special Committee of the Board of Directors (the
"Special Committee") and the Board of Directors of the Company, consisting of
a majority of directors who have no direct or indirect interest in the
transactions contemplated by this Agreement, other than ownership of Company
Shares (as defined below) and Company Options (as defined below), have
determined, by the unanimous vote of all of the directors voting on the
matter, that it is fair to and in the best interests of the Company and the
holders of the Company's common stock (the "Company Shares"), to enter into
this Agreement and to consummate the Merger upon the terms and subject to the
conditions set forth in this Agreement and in accordance with the Oregon
Business Corporation Act (the "OBCA");
WHEREAS, the Special Committee of the Board of Directors and the
Board of Directors of the Company, by resolutions unanimously adopted by all
of the directors voting on the matter, have (i) approved and declared
advisable this Agreement and the Merger and the other transactions
contemplated hereby, upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the OBCA; (ii) resolved that this
Agreement be submitted for a vote at a meeting of Company Shareholders and
(iii) resolved to recommend that the holders of Company Shares approve this
Agreement;
WHEREAS, the Board of Directors of Acquiror has unanimously (i)
determined that the Merger is fair to and in the best interests of Acquiror
and its shareholders, (ii) adopted resolutions approving and declaring
advisable this Agreement and the Merger and the other transactions
contemplated hereby, upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the OBCA and (iii) resolved to
recommend that the holders of Acquiror Common Shares (as defined below)
approve this Agreement;
WHEREAS, Parent, as the sole stockholder of Acquiror, has adopted
and approved this Agreement and approved the transactions contemplated
hereby;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to the willingness of Parent and Acquiror to
enter into this Agreement, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as a holder of Company Shares
(the "Principal Shareholder"), is entering into a voting agreement with
Parent in the form attached hereto as Exhibit A (the "Voting Agreement"),
pursuant to which, among other things, the Principal Shareholder will agree
to vote all of his Equity Interests (as defined below) in the Company in
favor of adopting and approving this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to the willingness of Parent and Acquiror to
enter into this Agreement, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is entering into an Option
Exchange, Contribution and Subscription Agreement with Parent substantially
in the form attached hereto as Exhibit B (the "Option Exchange and
Contribution Agreement"), pursuant to which, among other things, ▇▇. ▇▇▇▇▇▇▇
will exchange his Company Shares for Parent Common Shares (as defined below)
and Parent Junior Preferred Shares (as defined below) and exchange a portion
of his Company Options for options to acquire Parent Junior Preferred Shares,
in each case, immediately prior to the Effective Time.
NOW, THEREFORE, in consideration of the premises and promises
contained herein, and intending to be legally bound, the parties hereto agree
as set forth below.
ARTICLE I
DEFINITIONS
1.1. Definitions.
As used herein, the following terms have the meanings set forth
below:
"Acquiror" has the meaning specified in the recitals to this
Agreement.
"Acquiror Common Shares" means the common stock, par value
$0.0001 per share, of Acquiror.
"Acquiror Disclosure Schedule" has the meaning specified in the
preamble to Article V.
"Acquiror Material Adverse Effect" means any change or effect
that would prevent or materially impair the ability of Parent or Acquiror to
consummate the Merger and the other transactions contemplated hereby in a
timely manner.
"Acquisition Proposal" means any inquiry, offer or proposal from
any Person (whether or not in writing) (other than an offer or proposal by or
on behalf of Parent, Acquiror, LGP or any Affiliate of LGP, including the
Merger and the transactions contemplated hereby) relating to, or that could
reasonably be expected to lead to: (a) a transaction pursuant to which any
Person or group of Persons acquires or would acquire Beneficial Ownership of
more than fifteen percent (15%) of the outstanding voting power of the
Company, whether from the Company or pursuant to a tender offer, exchange
offer or otherwise, (b) a merger, consolidation, business combination,
reorganization, share exchange, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction which would
result in a Third Party acquiring fifteen percent (15%) or more of the fair
market value of the assets of the Company and its Subsidiaries, taken as a
whole, (c) any transaction which would result in a Third Party acquiring
fifteen percent (15%) or more of the fair market value of the assets
(including, without limitation, the capital stock of Subsidiaries) of the
Company and its Subsidiaries, taken as a whole, immediately prior to such
transaction (whether by purchase of assets, acquisition of stock of a
Subsidiary or otherwise), or (d) any combination of the foregoing.
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning specified in the preamble to this
Agreement.
"Ancillary Agreements" means the Option Exchange and Contribution
Agreement, the Voting Agreement and the Employment Agreement.
"Articles of Incorporation" means the Restated Articles of
Incorporation of the Company, as amended.
"Articles of Merger" has the meaning specified in Section 2.1(b).
"Audited Financial Statements" has the meaning specified in
Section 4.8(a).
"Balance Sheet Date" means December 31, 2003.
"Bank Commitment Letter" has the meaning specified in Section
5.6.
"Beneficial Ownership" shall have the meaning provided therefor
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated under such Section.
"Business Day" means any day, other than a Saturday, Sunday or
one on which banks are authorized by Law to be closed in New York, New York
or Portland, Oregon.
"By-laws" means the 1999 Restated By-laws of the Company.
"Certificate" has the meaning specified in Section 3.3.
"Change of Control Plan" means the Company's Change of Control
Plan for Senior Management, dated as of February 3, 2001.
"Closing" has the meaning specified in Section 2.1(d).
"Closing Date" has the meaning specified in Section 2.1(d).
"Code" means the U.S. Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
"Company" has the meaning specified in the preamble to this
Agreement.
"Company Balance Sheet" means the Company's consolidated balance
sheet included in the Company's Annual Report on Form 10-K relating to its
fiscal year ended on December 31, 2003.
"Company Contract" means any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, contract, commitment, arrangement,
Permit, concession, franchise, limited liability or partnership agreement, or
other instrument to which the Company or any of its Subsidiaries is a party,
or by which they or any of their respective properties, assets or business
activities may be bound.
"Company Disclosure Schedule" has the meaning specified in the
preamble to Article IV.
"Company Employee Plans" has the meaning assigned in Section
4.13(a).
"Company Material Adverse Effect" means any change, effect,
event, occurrence, state of facts or development which had or has a material
adverse effect on (a) the business, assets, liabilities, condition (financial
or otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole, or (b) the ability of the Company to perform its
obligations under this Agreement or any of the Ancillary Agreements to which
it is or will become a party. In no event, however, shall any of the
following, in and of itself, constitute a Company Material Adverse Effect:
(i) any change in the trading price of the Company Shares between the date
hereof and the Effective Time (it being understood that any fact or
development giving rise to or contributing to such change in the trading
price of the Company Shares may be the cause of a Company Material Adverse
Effect); (ii) any changes, effects, events, occurrences, states of facts or
developments resulting from any change in law or generally accepted
accounting principles that affect generally entities such as the Company;
(iii) any effect resulting from compliance by the Company with the terms of
this Agreement; (iv) the effect of any change that is generally applicable to
the United States economy or securities markets or the world economy or
international securities markets (it being understood that any fact or
development giving rise to or contributing to the state of such economy or
markets may be the cause of a Company Material Adverse Effect), (v) the
effect of any change arising in connection with earthquakes or acts of war,
sabotage or terrorism (it being understood that any such earthquake or acts
of war, sabotage or terrorism may be the cause of a Company Material Adverse
Effect), or (vi) any other effect of the public announcement of this
Agreement, the transactions contemplated hereby or the consummation of such
transactions.
"Company Options" means any options to purchase Company Shares
granted pursuant to the Company Option Plans.
"Company Option Plans" means the Company's 1993 Stock Incentive
Plan, as amended, the Company's 1997 Employee Nonqualified Stock Option Plan,
as amended and the Company's 2001 Stock Incentive Plan.
"Company Preferred Stock" has the meaning specified in Section
4.5(a).
"Company Proxy Statement" has the meaning specified in Section
8.2(c).
"Company Recommendation" has the meaning specified in Section
6.2(c).
"Company Returns" has the meaning specified in Section 4.12.
"Company SEC Documents" means each form, registration statement
(in the form declared effective by the SEC), prospectus, report, schedule,
definitive proxy statement or other document filed or otherwise furnished by
the Company or any of its Subsidiaries with or to the SEC since January 1,
2000 pursuant to the Securities Act or the Exchange Act, in each case
including all exhibits, appendices and attachments thereto, whether filed or
otherwise furnished therewith or incorporated by reference therein.
"Company Securities" has the meaning specified in Section 4.5(b).
"Company Shares" has the meaning specified in the recitals to
this Agreement.
"Company Shareholders" or "Shareholders" means the holders of
Company Shares.
"Company Shareholder Approval" has the meaning specified in
Section 4.2(a).
"Company Shareholder Meeting" has the meaning specified in
Section 8.2(b).
"Company Subsidiary" means a Subsidiary of the Company.
"Confidentiality Agreement" has the meaning specified in Section
8.4(a).
"Contributing Holders" means ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and any other holder
of Company Shares or Company Options who enters into an agreement with Parent
prior to the Effective Time providing for such holder to acquire shares of
capital stock, or options to acquire shares of capital stock, of Parent
immediately prior to the Effective Time.
"Current Policies" has the meaning specified in Section 7.1(a).
"Default" has the meaning specified in Section 4.18(c).
"Effective Time" has the meaning specified in Section 2.1(b).
"Employment Agreement" means the employment and non-competition
agreement, dated the date hereof, by and between the Acquiror and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ substantially in the form attached hereto as Exhibit C.
"End Date" has the meaning specified in Section 10.1(b)(i).
"Environmental Laws" has the meaning specified in Section
4.14(d).
"Equity Commitment Letter" has the meaning specified in Section
5.6.
"Equity Interest" means with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
or other equity interests (including, without limitation, partnership or
membership interests in a partnership or limited liability company or any
other interest or participation that confers on a Person the right to receive
a share of the profits and losses, or distributions of assets, of the issuing
Person) whether outstanding on the date hereof or issued after the date
hereof.
"ERISA" has the meaning specified in Section 4.13(a).
"ERISA Affiliate" has the meaning specified in Section 4.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning specified in Section 3.4(a).
"Exchange Fund" has the meaning specified in Section 3.4(a).
"Financing" has the meaning specified in Section 5.6.
"Financing Letters" has the meaning specified in Section 5.6.
"First Supplemental Indenture" shall mean the first supplemental
indenture relating to the Senior Subordinated Notes, dated as of December 18,
2002, among the Company, Hollywood Management Company and BNY Western Bank,
as trustee.
"GAAP" means United States generally accepted accounting
principles, applied on a consistent basis.
"Governmental Entity" means any supranational, federal, state,
local or foreign government, court, administrative agency or commission or
other governmental or regulatory authority or instrumentality.
"Hollywood Management Company" means Hollywood Management
Company, an Oregon corporation and a wholly owned Subsidiary of the Company.
"HSR Act" has the meaning specified in Section 4.3.
"Insurance Policies" has the meaning specified in Section 4.25.
"Intellectual Property" means (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all provisionals, reissuances, continuations,
continuations-in-part, divisions, revisions, extensions, and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos, brand names,
trade names, domain names and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrightable
works, all copyrights, any and all website content, and all applications,
registrations, and renewals in connection therewith, (iv) all mask works and
all applications, registrations, and renewals in connection therewith, (v)
all trade secrets and confidential business information (including research
and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, research records, records of inventions, test information,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (vi) all source code and object code versions
of computer software (including data and related documentation), (vii) all
moral rights, (viii) all other proprietary rights, and (ix) all copies and
tangible embodiments thereof (in whatever form or medium), any rights in or
licenses of any of the foregoing, and any claims or causes of actions
(pending or filed) arising out of or related to any infringement or
misappropriation of any of the foregoing.
"Knowledge" as used in this Agreement, knowledge shall refer to
the actual knowledge, after due inquiry, of each of the Persons listed on
Annex 1.1.
"Law" means any supranational, federal, state, local, or foreign
law, rule, regulation, judgment, code, ruling, statute, order, decree,
injunction, ordinance or other legal requirement (including any arbitral
decision or award).
"Leases" has the meaning specified in Section 4.20.
"LGP" has the meaning specified in Section 5.6.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind; provided,
however, that the term "Lien" shall not include (a) liens for utilities and
current Taxes not yet due and payable, (b) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens arising or
incurred in the ordinary course of business relating to claims not yet due or
payable or (c) liens for Taxes (not to exceed $500,000 in the aggregate)
being contested in good faith.
"Material Contract" and "Material Contracts" have the meanings
specified in Section 4.18(a).
"Merger" has the meaning specified in the recitals to this
Agreement.
"Merger Consideration" has the meaning specified in Section 3.3.
"Merger Funds" has the meaning specified in Section 5.6.
"Minimum Notes Condition" has the meaning specified in Section
6.3(b).
"Noteholders" has the meaning specified in Section 6.3(c).
"Notes Consents" has the meaning specified in Section 6.3(b)
"Notes Offer to Purchase" has the meaning specified in Section
6.3(a).
"Notes Tender Offer" has the meaning specified in Section 6.3(a).
"Notes Tender Offer Documents" has the meaning specified in
Section 6.3(c).
"Notes Tender Price" has the meaning specified in Section 6.3(a).
"Notice of Superior Proposal" has the meaning specified in
Section 6.2(b).
"OBCA" has the meaning specified in the recitals to this
Agreement.
"Option Exchange and Contribution Agreement" has the meaning
specified in the recitals to this Agreement.
"Parent" has the meaning specified in the preamble to this
Agreement.
"Parent Common Shares" means the common stock, par value $0.01
per share, of Parent.
"Parent Expense Reimbursement Amount" means all reasonable,
documented, out of pocket expenses and fees (including reasonable attorneys
fees) actually incurred by Parent and its Affiliates on or prior to the
termination of this Agreement in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements; provided that
this amount shall not be greater than $3,000,000.
"Parent Junior Preferred Shares" means the 10% junior cumulative
preferred stock, par value $0.01 per share, original liquidation preference
$1,000 per share, of Parent.
"Permits" has the meaning specified in Section 4.14.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization,
including any Governmental Entity.
"Premises" has the meaning specified in Section 8.4(c).
"Principal Shareholder" has the meaning specified in the recitals
to this Agreement.
"Proposed Amendments" has the meaning specified in Section
6.3(d).
"Real Property" has the meaning specified in Section 4.20.
"Record Holder" has the meaning specified in Section 3.4(b).
"Replacement Policies" has the meaning specified in Section
7.1(a).
"Representatives" has the meaning specified in Section 6.2(a).
"Schedule 13E-3" has the meaning specified in Section 8.2(c).
"SEC" means the United States Securities and Exchange Commission.
"Secretary of State" has the meaning specified in Section 2.1(b).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Subordinated Notes" means the Company's 9.625% Senior
Subordinated Notes due 2011 issued pursuant to the Senior Subordinated Notes
Indenture.
"Senior Subordinated Notes Indenture" means the indenture
relating to the Senior Subordinated Notes, dated as of January 25, 2002,
among the Company, Hollywood Management Company and BNY Western Bank, as
trustee, as supplemented by the First Supplemental Indenture.
"Special Committee" has the meaning specified in the recitals to
this Agreement.
"Subsidiary" means, with respect to any Person, any other Person
(including joint ventures) of which such Person, directly or indirectly, (a)
has the right or ability to elect, designate or appoint a majority of the
Board of Directors or other Persons performing similar functions for such
Person, whether as a result of the beneficial ownership of Equity Interests,
contractual rights or otherwise or (b) beneficially owns a majority of the
voting Equity Interests or a majority of the economic interests.
"Substitute Financing" has the meaning specified in Section 7.5.
"Superior Proposal" means any bona fide written Acquisition
Proposal (with all of the percentages included in the definition of
Acquisition Proposal increased to 50% for purposes of this definition) that a
majority of the members of the Company's Board of Directors or Special
Committee determines in good faith by resolution duly adopted, after
consultation with its outside legal counsel and a nationally recognized
investment banking firm, (a) provides to the Company's Shareholders
consideration with a value per Company Share that exceeds the value per
Company Share of the consideration provided for in this Agreement (after
taking into account any revisions made or proposed by Parent or Acquiror) and
(b) is reasonably capable of being consummated on the terms proposed (taking
into account all legal, financial, regulatory and other relevant
considerations).
"Supplemental Indenture" has the meaning specified in Section
6.3(d).
"Surviving Corporation" has the meaning specified in Section
2.1(a).
"Takeover Statute" means any restrictive provision or any
applicable "fair value," "control share acquisition," "interested
shareholder" or other similar anti-takeover statute or regulation, including
Sections 60.801 through 60.816 of the OBCA and Sections 60.825 through 60.845
of the OBCA.
"Taxes" means all United States federal, state, local or foreign
income, profits, estimated gross receipts, windfall profits, environmental
(including taxes under Section 59A of the Code), severance, property,
intangible property, occupation, production, sales, use, license, excise,
emergency excise, franchise, escheat, capital gains, capital stock,
employment, withholding, social security (or similar), disability, transfer,
registration, stamp, payroll, goods and services, value added, alternative or
add-on minimum tax, estimated, or any other tax, custom, duty or governmental
fee, or other like assessment or charge of any kind whatsoever, together with
any interest, penalties, fines, related liabilities or additions to taxes
that may become payable in respect therefor imposed by any Governmental
Entity, whether disputed or not.
"Termination Fee" means, in respect of any termination of this
Agreement, a cash amount equal to $26,500,000.
"Third Party" means any Person (or group of Persons) other than
Parent, Acquiror or any of their Affiliates. For the avoidance of doubt, the
Principal Shareholder shall be deemed a Third Party.
"Third Party Acquisition" means the consummation by a Third Party
of any transaction or series of transactions described in clauses (a) through
(d) of the definition of "Acquisition Proposal."
"Transfer Taxes" has the meaning specified in Section 7.2.
"UBS" means UBS Securities LLC.
"Voting Agreement" has the meaning specified in the recitals to
this Agreement.
ARTICLE II
THE MERGER
2.1. The Merger.
(a) At the Effective Time, Acquiror shall be merged with and
into the Company in accordance with the terms and conditions of this
Agreement and the OBCA, at which time the separate corporate existence of
Acquiror shall cease and the Company shall continue its existence as the
surviving corporation. In its capacity as the corporation surviving the
Merger, this Agreement sometimes refers to the Company as the "Surviving
Corporation."
(b) As soon as practicable on or after the Closing Date, the
Company will file articles of merger or other appropriate documents (the
"Articles of Merger") with the Secretary of State of the State of Oregon (the
"Secretary of State") and make all other filings or recordings required by
the OBCA in connection with the Merger. The Merger shall become effective
when the Articles of Merger are duly filed with and accepted by the Secretary
of State, or at such later time as is agreed upon by the parties and
specified in the Articles of Merger (such time as the Merger becomes
effective is referred to herein as the "Effective Time").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in the applicable provisions of the OBCA. Without
limiting the generality of the foregoing, at the Effective Time, without
further act or deed, all the property, rights, immunities, privileges,
powers, franchises and licenses of the Company and Acquiror shall vest in the
Surviving Corporation and all debts, liabilities, obligations, restrictions
and duties of each of the Company and Acquiror shall become the debts,
liabilities, obligations, restrictions and duties of the Surviving
Corporation.
(d) The closing of the Merger (the "Closing") shall be held
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or such other place as agreed by the parties) not later
than the third Business Day following the date on which all of the conditions
set forth in Article IX are satisfied or waived (other than those conditions
to be satisfied at the Closing, but subject to the satisfaction or waiver
thereof), unless the parties hereto agree to another date. The date upon
which the Closing occurs is hereinafter referred to as the "Closing Date."
2.2. Organizational Documents.
(a) At the Effective Time, the Articles of Incorporation of
the Company as in effect immediately prior to the Effective Time shall be
amended to read in their entirety as set forth in Exhibit D hereto, and as so
amended shall be the Articles of Incorporation of the Surviving Corporation
until thereafter amended in accordance with its terms and as provided in the
OBCA.
(b) At the Effective Time, the By-laws of the Company as in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation until thereafter amended in accordance with their terms
and as provided by the OBCA and the Articles of Incorporation of the
Surviving Corporation.
2.3. Directors and Officers.
(a) From and after the Effective Time, the directors of
Acquiror shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be, in accordance with the
Articles of Incorporation and By-laws of the Surviving Corporation, the OBCA
and this Agreement.
(b) From and after the Effective Time, the officers of the
Company shall be the officers of the Surviving Corporation until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, the OBCA and this
Agreement.
ARTICLE III
CONVERSION OF SECURITIES AND RELATED MATTERS
3.1. Capital Stock of Acquiror. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, each
Acquiror Common Share that is issued and outstanding immediately prior to the
Effective Time shall be converted into one newly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
3.2. Cancellation of Parent and Acquiror-Owned Shares. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Company Share, each Company Share owned by Parent, Acquiror
or any Company Subsidiary, if any, immediately prior to the Effective Time
shall be canceled and retired and shall cease to exist, and no payment shall
be made or consideration delivered in respect therefor.
3.3. Conversion of Company Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Company Share, each Company Share issued and outstanding immediately prior to
the Effective Time other than any Company Shares to be cancelled pursuant to
Section 3.2 shall be canceled, retired and shall cease to exist and shall be
converted automatically into the right to receive an amount in cash equal to
Fourteen Dollars ($14.00) (the "Merger Consideration"), payable to the holder
thereof upon surrender of the certificate (a "Certificate") which immediately
prior to the Effective Time represented any such Company Shares in the manner
provided in Section 3.4; and no other consideration shall be delivered or
deliverable on or in exchange therefor.
3.4. Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
appoint a bank or trust company reasonably acceptable to the Company as agent
(the "Exchange Agent") for the benefit of holders of Company Shares for the
purpose of exchanging, pursuant to this Article III, Certificates
representing Company Shares for the Merger Consideration. On or before the
Closing Date, Parent will deposit or cause to be deposited with the Exchange
Agent the aggregate Merger Consideration to be paid in respect of all Company
Shares pursuant to this Article III (the "Exchange Fund"), and except as
contemplated by Section 3.4(e), Section 3.4(f) or Section 3.4(g) hereof, the
Exchange Fund shall not be used for any other purpose. The Exchange Agent
shall invest such Merger Consideration as directed by Parent. Any interest
and other income resulting from such investments shall be paid to Parent.
All fees, costs and expenses of the Exchange Agent shall be borne by Parent.
(b) Exchange Procedures. As promptly as practicable after
the Effective Time (but not later than five (5) Business Days after the date
on which the Effective Time occurs), the Surviving Corporation shall send, or
shall cause the Exchange Agent to send, to each record holder of Certificates
("Record Holder") immediately prior to the Effective Time, a letter of
transmittal and instructions (which shall be in customary form and specify
that delivery shall be effected, and risk of loss and title shall pass, only
upon delivery of the Certificates to the Exchange Agent), for use in the
exchange contemplated by this Section 3.4. Upon surrender of a Certificate
to the Exchange Agent, together with a duly executed letter of transmittal,
the holder shall be entitled to receive in exchange therefor, the Merger
Consideration as provided in this Article III in respect of the Company
Shares represented by the Certificate (after giving effect to any required
withholding Tax). Until surrendered as contemplated by this Section 3.4,
each such Certificate representing Company Shares shall be deemed, after the
Effective Time, to represent only the right to receive the Merger
Consideration. No interest shall be paid on any such delivery of cash to be
paid pursuant to this Article III upon such delivery.
(c) No Further Rights in Company Shares. Holders of Company
Shares shall cease to be, and shall have no rights as, shareholders of the
Company, other than to receive (i) any dividend or other distribution with
respect to the Company Shares with a record date occurring prior to the
Effective Time and (ii) the Merger Consideration provided in Section 3.3.
All cash paid upon surrender of Certificates in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to Company Shares represented thereby. As of the Effective Time,
the stock transfer books of the Company shall be closed and there shall be no
further registration of transfers on the Company's stock transfer books of
any Company Shares, other than transfers that occurred before the Effective
Time. If, after the Effective Time, Certificates representing Company Shares
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Section 3.4.
(d) Alternate Endorsement. If payment of the Merger
Consideration in respect of Company Shares is to be made to a Person other
than the Person in whose name a surrendered Certificate is registered, it
shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or shall be otherwise in proper form for transfer
and that the Person requesting such payment shall have paid any transfer and
other Taxes required by reason of such payment in a name other than that of
the registered holder of the Certificate surrendered or shall have
established to the satisfaction of Parent or the Exchange Agent that such
Taxes either have been paid or are not payable.
(e) Return of Merger Consideration. Upon demand by Parent,
the Exchange Agent shall deliver to Surviving Corporation any portion of the
Merger Consideration made available to the Exchange Agent pursuant to this
Section 3.4 (with any interest and earnings thereon) that remains
undistributed to Record Holders twelve (12) months after the Effective Time.
Record Holders who have not complied with this Section 3.4 prior to the
demand by Parent shall thereafter look only to Surviving Corporation for
payment of any claim to the Merger Consideration without any interest
thereon. Any Merger Consideration remaining unclaimed as of a date which is
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity shall, to the extent permitted by
applicable Law, become the property of Surviving Corporation free and clear
of any claims or interest of any Person previously entitled thereto.
(f) No Liability. None of the Surviving Corporation, Parent
or the Exchange Agent shall be liable to any Person in respect of amounts
paid to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
(g) Withholding Rights. Parent, Surviving Corporation and
the Exchange Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable hereunder to any holder of any Certificate
any amounts that it is required to deduct and withhold with respect to
payment under any provision of federal, state, local or foreign Tax Law. To
the extent that amounts are so withheld, the withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of such Certificate.
(h) Lost Certificates. If any Certificate has been or is
claimed to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming that a Certificate has been
lost, stolen or destroyed and, if required by Parent, the posting by such
Person of a bond, in such reasonable amount as the Surviving Corporation may
direct, as indemnity against any claim that may be made against it with
respect to that Certificate, the Exchange Agent will deliver to such Person
in exchange for such lost, stolen or destroyed Certificate, the proper amount
of the Merger Consideration.
(i) Exchange of Acquiror Stock Certificates. Immediately
after the Effective Time, the Surviving Corporation shall deliver to Parent
in exchange for the certificates which immediately prior to the Effective
Time represented all the outstanding Acquiror Common Shares that were
converted into the right to receive shares of common stock of the Surviving
Corporation in accordance with Section 3.1, share certificates registered in
the name of Parent, representing the number of shares of common stock of the
Surviving Corporation to which Parent is so entitled by virtue of
Section 3.1.
3.5. Company Stock Options. With respect to each outstanding
Company Option, except to the extent otherwise provided for by the Option
Exchange and Contribution Agreement, the Board of Directors shall provide a
30-day period prior to the consummation of the Merger during which time each
outstanding Company Option shall be exercisable to the extent vested. At the
Effective Time, each unexercised Company Option (whether vested or unvested)
shall be cancelled with the holder thereof becoming entitled to receive an
amount in cash equal to the excess, if any, of (i) the Merger Consideration
over (ii) the per share exercise price of such Company Option, multiplied by
the number of Company Shares subject to such cancelled Company Options, as
such amount may be reduced by any applicable withholding Taxes.
3.6. Adjustments. If between the date of this Agreement and the
Effective Time the number of outstanding Company 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-
up, combination, exchange of shares or the like other than pursuant to the
Merger, the amount of Merger Consideration shall be correspondingly adjusted
and, if and as appropriate, all other appropriate corresponding adjustments
shall be made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company disclosure schedule delivered
by the Company to the Acquiror prior to the execution of this Agreement (the
"Company Disclosure Schedule") with specific reference to the particular
Section or subsection of this Agreement to which the information set forth in
such disclosure schedule relates (it being understood that any information
set forth in a particular section of the Company Disclosure Schedule shall be
deemed to apply to each other section or subsection thereof or hereof to
which its relevance is clearly apparent on its face), the Company represents
and warrants to Parent and Acquiror as set forth below:
4.1. Corporate Existence and Power.
(a) The Company is a corporation, duly incorporated and
validly existing under the Laws of the State of Oregon, and has all corporate
power and authority required to own, lease and operate its properties, to
carry on its business as now conducted and (assuming this Agreement is duly
approved and adopted at the Company Shareholder Meeting) to consummate the
Merger and the other transactions contemplated hereby.
(b) The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned, leased or operated by it or the nature of
its activities makes qualification necessary, except where the failure to be
so qualified has not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) The Company has made available to Acquiror a complete
and correct copy of the Articles of Incorporation and By-laws (or other
constituent documents) of the Company and each of the Company Subsidiaries.
The corporate records and minute books of the Company and each of the Company
Subsidiaries reflect all material action taken and authorizations made at
meetings of such companies' Boards of Directors or any committees thereof and
at any shareholders' meetings thereof.
4.2. Corporate Authorization.
(a) The execution, delivery and performance by the Company
of this Agreement and the consummation by the Company of the Merger and the
other transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and, except for approval of this
Agreement by the vote of holders of a majority of the outstanding Company
Shares (the "Company Shareholder Approval"), no other corporate proceedings
on the part of the Company are necessary to authorize or consummate this
Agreement or to consummate the other transactions contemplated hereby (other
than the filing and recordation of the appropriate documents with respect to
the Merger in accordance with the OBCA).
(b) On or prior to the date hereof, the Company's Board of
Directors has (i) determined that this Agreement, the Voting Agreement and
the transactions contemplated hereby and thereby, including the Merger, are
fair to and in the best interests of the Company and its Shareholders, (ii)
adopted resolutions approving this Agreement and the transactions
contemplated hereby and thereby, including the Merger, (iii) adopted
resolutions declaring this Agreement and the Merger advisable, (iv) adopted
resolutions directing that this Agreement be submitted to a vote at a meeting
of Company Shareholders; (v) adopted resolutions recommending to the Company
Shareholders that they vote in favor of approving this Agreement in
accordance with the terms hereof; and (vi) adopted resolutions approving this
Agreement, the Merger and the Voting Agreement, prior to the date on which,
to the Knowledge of the Company, any Person that is a party to this Agreement
or the Voting Agreement became an "interested shareholder" as such term is
defined in Section 60.825 of the OBCA. Neither the execution, delivery or
performance of this Agreement or any of the Ancillary Agreements, nor the
consummation of the Merger or any of the other transactions contemplated
hereby or thereby constitute (a) a control share acquisition under Sections
60.801 through 60.816 of the OBCA or any applicable Takeover Statute or (b) a
prohibited business combination under Section 60.835 of the OBCA or any
applicable Takeover Statute. To the Knowledge of the Company, no other
Takeover Statute applies or purports to apply to this Agreement, any of the
Ancillary Agreements, the Merger or any of the transactions contemplated
hereby or thereby. No provision of the Articles of Incorporation or the By-
laws of the Company or similar governing instruments of any Company
Subsidiary would, directly or indirectly, restrict or impair the ability of
Parent to vote, or otherwise to exercise the rights of a shareholder with
respect to, any shares of the Company and any Company Subsidiary that may be
acquired or controlled by Parent.
(c) This Agreement has been duly and validly executed and
delivered by the Company and, assuming that this Agreement constitutes the
valid and binding obligation of Parent and Acquiror, constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization, arrangement or similar
laws affecting creditors' rights generally and by general principles of
equity
4.3. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the Merger and the other transactions contemplated hereby do not
and will not require any consent, approval, action, order, authorization, or
permit of, or registration or filing with, any Governmental Entity, other
than (a) the filing of (i) the Articles of Merger in accordance with the OBCA
and (ii) the appropriate documents with respect to the Company's
qualification to do business with the relevant authorities of other states or
jurisdictions in which the Company is qualified to do business; (b)
compliance with any applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (c)
compliance with any applicable requirements of the Exchange Act; (d) such as
may be required under any applicable state securities or blue sky Laws; and
(e) other consents, approvals, actions, orders, authorizations,
registrations, declarations, filings and permits which, if not obtained or
made, have not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
4.4. Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
Merger and the other transactions contemplated hereby do not and will not (a)
contravene, breach or conflict with the Company's Articles of Incorporation
or By-laws, (b) assuming compliance with the matters referred to in Section
4.3, contravene, breach or conflict with or constitute a violation of any
provision of any Law binding upon or applicable to the Company or its
Subsidiaries or by which any of their respective properties is bound or
affected, (c) constitute a default under (or an event that with notice or
lapse of time or both could reasonably be expected to become a default) or
give rise (with or without notice or lapse of time or both) to a right of
termination, amendment, cancellation or acceleration under any Material
Contract, or (d) result in the creation or imposition of any material Lien on
any asset of the Company or any Company Subsidiary, other than, in the case
of clauses (b) or (c) any items that have not had, and would not be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
4.5. Capitalization.
(a) The authorized capital stock of the Company consists
solely of 100,000,000 Company Shares and 25,000,000 shares of preferred stock
(the "Company Preferred Stock"). As of March 25, 2004, (i) 59,846,411
Company Shares were issued and outstanding, all of which have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued free of preemptive or similar rights, (ii) no Company Shares were held
by Subsidiaries of the Company, (iii) 9,074,000 Company Shares were issuable
upon the exercise of Company Options then outstanding, (iv) 4,468,751 Company
Shares were reserved for issuance upon the grant of options reserved and
available under the Company Option Plans, and (v) no shares of Company
Preferred Stock were issued and outstanding. Since December 31, 2003, the
Company has not (i) declared, set aside or paid any dividend or distribution
(whether in cash, stock or property) or capital return in respect of any of
its Equity Interests including, without limitation, Company Shares, (ii)
repurchased, redeemed or otherwise acquired any Company Securities (as
defined below), or (iii) amended any material term of any outstanding Company
Securities, and its Board of Directors has not resolved to do any of the
foregoing. Since March 25, 2004, the Company has not issued, sold or
disposed of any Company Securities other than upon exercise of Company
Options outstanding on such date.
(b) Except as set forth in this Section 4.5, the Company has
not issued, or reserved for issuance, any (i) Equity Interests of the
Company, (ii) securities of the Company convertible into or exchangeable for
Equity Interests of the Company or (iii) options, warrants or other rights to
acquire from the Company, or obligations of the Company to issue, any Equity
Interests of the Company or securities convertible into or exchangeable for,
or requiring payments based on the value of, Equity Interests of the Company
(the items in clauses (i), (ii) and (iii) being referred to collectively as
the "Company Securities"). There are no outstanding agreements or other
obligations of the Company or any Company Subsidiary to issue, sell,
repurchase, redeem or otherwise acquire any Company Securities.
(c) Section 4.5(c) of the Company Disclosure Schedule sets
forth a complete and accurate list of all outstanding Company Options as of
the date hereof, which list sets forth the name of the holders thereof and,
to the extent applicable, (i) the exercise price or purchase price thereof,
(ii) the number of Company Shares subject thereto, and (iii) the expiration
date thereof.
(d) On or prior to the date hereof, the Company's Board of
Directors has duly and validly authorized all corporate actions required to
be taken by the Company to (i) effect the actions set forth in Section 3.5
hereof and (ii) permit the transfer of Company Options by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
Parent pursuant to the terms and conditions of the Option Exchange and
Contribution Agreement. The terms and provisions of Section 3.5 hereof (i)
do not conflict with or violate any of the terms or provisions of the Company
Option Plans and (ii) do not require the prior approval or consent of the
holders of any Company Options.
4.6. Subsidiaries.
(a) Section 4.6(a) of the Company Disclosure Schedule lists
each Company Subsidiary together with the jurisdiction of incorporation of
each Subsidiary. Except for the Equity Interests in each Company Subsidiary,
and as set forth in Section 4.6(a) of the Company Disclosure Schedule, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any other Person.
(b) Each Company Subsidiary (i) is a corporation duly
incorporated and is validly existing and in good standing under the Laws of
its jurisdiction of incorporation, and has all powers and authority required
to own, lease or operate its properties, to carry on its business as now
conducted, (ii) has all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, and (iii) is
duly qualified to do business as a foreign corporation or entity and is in
good standing in each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes such
qualification necessary, except, in the case of clauses (ii) or (iii) above,
where the failure to have such licenses, authorizations, consents and
approvals or to be so qualified has not had, and would not be reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect. All of the outstanding Equity Interests in each Company
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive or similar rights. All of the
Equity Interests in each Company Subsidiary are beneficially owned, directly
or indirectly, by the Company. Since December 31, 2003, no Company
Subsidiary has (i) declared, set aside or paid any dividend or distribution
(whether in cash, stock or property) or capital return in respect of any of
its Equity Interests, (ii) repurchased, redeemed or otherwise acquired any of
its Equity Interests or other securities, or (iii) amended any material term
of any outstanding security of the Company Subsidiary, and its Board of
Directors has not resolved to do any of the foregoing. Since March 25, 2004,
the Company Subsidiary has not issued, sold or disposed of any Equity
Interests.
(c) Except as set forth in Section 4.6(c) of the Company
Disclosure Schedule, such Equity Interests in each Company Subsidiary are
owned free and clear of any Lien and free of any other limitation or
restriction (including any limitation or restriction on the right to vote,
sell or otherwise dispose of the stock or other ownership interests). There
are no outstanding (i) securities of the Company or any Company Subsidiary
convertible into or exchangeable or exercisable for Equity Interests in any
Company Subsidiary, (ii) options, warrants or other rights to acquire from
the Company or any Company Subsidiary, or obligations of the Company or any
Company Subsidiary to issue, any Equity Interests in, or any securities
convertible into or exchangeable or exercisable for any Equity Interests in,
any Company Subsidiary or (iii) agreements, obligations or arrangements of
the Company or any Company Subsidiary to issue, sell, repurchase, redeem or
otherwise acquire any Equity Interests of any Company Subsidiary.
(d) None of the Company or any Company Subsidiary is in
violation of any provision of its articles of incorporation or by-laws or
equivalent organizational documents.
4.7. Company SEC Documents.
(a) The Company has timely filed or otherwise furnished all
forms, registration statements, prospectuses, reports, schedules, definitive
proxy statements or other documents required to be filed with or furnished to
the SEC by the Company since January 1, 2000. No Company Subsidiary
currently is, and no Company Subsidiary at any time since January 1, 2000 has
been, required to file or otherwise furnish any form, report, registration
statement or prospectus or other document with or to the SEC.
(b) As of their respective filing dates, each Company SEC
Document including, without limitation, any financial statements or schedules
included or incorporated by reference therein, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (i) complied in all
material respects with all applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) The Company will file with the SEC and promptly will
make available to Acquiror true and complete copies of each form,
registration statement, report, schedule, proxy or information statement and
other documents (including exhibits thereto) required to be filed with the
SEC under the Securities Act or the Exchange Act.
4.8. Financial Statements; No Material Undisclosed Liabilities.
(a) Each of the audited consolidated financial statements
(including the notes thereto) (the "Audited Financial Statements") and
unaudited consolidated interim financial statements of the Company included
in the Company SEC Documents were prepared in conformity with GAAP throughout
the periods involved, and each fairly presents, in all material respects, the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and statement of cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements, which adjustments shall not be material).
(b) There are no liabilities or obligations of the Company
or any Company Subsidiary, which, individually or in the aggregate, would be
material to the Company and its Subsidiaries taken as a whole, of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise and would be required by GAAP to be reflected on a consolidated
balance sheet of the Company (including the notes thereto) other than: (i)
liabilities or obligations disclosed or provided for in the Company Balance
Sheet or disclosed in the notes thereto; (ii) liabilities or obligations
incurred after December 31, 2003 in the ordinary course of business
consistent with past practice; and (iii) liabilities under this Agreement or
incurred in connection with the transactions contemplated hereby.
4.9. Internal Control over Financial Reporting; Disclosure
Controls and Procedures; Certifications.
(a) The Company and each of its Subsidiaries maintain a
process of internal control over financial reporting sufficient to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and that includes policies and
procedures that: (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.
(b) The Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) under the
Exchange Act), which (i) are designed to ensure that material information
relating to the Company, including its consolidated Subsidiaries, is made
known to the Company's principal executive officer and its principal
financial officer by others within those entities, particularly during the
periods in which the periodic reports required under the Exchange Act are
being prepared; (ii) have been evaluated for effectiveness (A) as of a date
within 90 days prior to the filing date of each of the Company's quarterly or
annual reports filed since January 1, 2003 and prior to August 14, 2003, and
(B) as of the end of each quarterly or annual period of the Company since
August 14, 2003; and (iii) are effective in all material respects to perform
the functions for which they were established.
(c) The Company is not aware of (i) any significant
deficiency in the design or operation of internal controls which could
adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls; or
(ii) any fraud, whether or not material, that involves management or other
present employees who have a significant role in the Company's internal
controls. Since the most recent evaluation of the Company's disclosure
controls and procedures described in Section 4.9(b) above, there have been no
significant changes in internal control over financial reporting or, to the
Company's Knowledge, in other factors that could significantly affect
internal control over financial reporting.
(d) The Chief Executive Officer and the Chief Financial
Officer of the Company have signed, and the Company has furnished to the SEC,
all certifications required by Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002; such certifications contain no qualifications or exceptions to the
matters certified therein, except as to knowledge, and have not been modified
or withdrawn; and neither the Company nor any of its officers has received
notice from the SEC or any other Governmental Entity questioning or
challenging the accuracy, completeness, content, form or manner of filing or
submission of such certifications.
4.10. Absence of Certain Changes. Since December 31, 2003,
except as set forth in Section 4.10 of the Company Disclosure Schedule or
otherwise expressly contemplated by this Agreement, the Company and each
Company Subsidiary has conducted its business in the ordinary course
consistent with past practice. Neither the Company nor any Company
Subsidiary has engaged in any transaction or series of transactions material
to the Company or any Company Subsidiary other than in the ordinary course of
business and consistent with past practices, and there has not been any
action, event, occurrence, development or state of circumstances or facts
that, individually or in the aggregate, constitutes or would be reasonably
expected to have, a Company Material Adverse Effect. Without limiting the
generality of the foregoing, and except as set forth by the Company on
Section 4.10 of the Company Disclosure Schedule or otherwise expressly
contemplated by this Agreement, since December 31, 2003, there has not been:
(i) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or
assets of the Company or any Company Subsidiary that has had or
would be reasonably expected to have a Company Material Adverse
Effect;
(ii) any amendment or change in the Company's Articles of
Incorporation or By-laws;
(iii) any material change by the Company or any Company
Subsidiary in its accounting methods, principles or practices
(other than changes required by GAAP or Law);
(iv) any material Tax election, any change in method of
accounting with respect to Taxes or any compromise or settlement
of any proceeding with respect to any material Tax liability;
(v) any sale, assignment, transfer, lease or other
disposition or agreement to sell, assign, transfer, lease or
otherwise dispose of any of the assets of the Company or any
Company Subsidiary other than in the ordinary course of business
consistent with past practices;
(vi) any acquisition (by merger, consolidation, or
acquisition of stock or assets) by the Company or any Company
Subsidiary of any corporation, partnership or other business
organization or division thereof or any Equity Interest therein
for consideration;
(vii) any (A) incurrence of, (B) guarantee with respect to,
or (C) provision of credit support for, any indebtedness by the
Company or any Company Subsidiary other than pursuant to the
Company's existing credit facilities in the ordinary course of
business or any creation or assumption by the Company or any
Company Subsidiary of any Lien on any material asset;
(viii) (A) any employment, deferred compensation, severance
or similar agreement entered into or amended by the Company or
any Company Subsidiary and any employee, (B) any increase in the
compensation payable or to become payable by it to any of its
directors or officers or generally applicable to all or any
category of the Company's or any Company Subsidiary's employees,
(C) any increase in the coverage or benefits available under any
vacation pay, company awards, salary continuation or disability,
sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any of the directors
or officers of the Company or any Company Subsidiary or generally
applicable to all or any category of the Company's or any Company
Subsidiary's employees or (D) any severance pay arrangements made
to, for or with such directors, officers or employees other than,
in the case of clauses (B) and (C) above and only with respect to
employees who are not officers or directors of the Company or any
Company Subsidiary, increases in the ordinary course of business
consistent with past practices and that, in the aggregate, have
not resulted in a material increase in the benefits or
compensation expense of the Company or any Company Subsidiary;
(ix) any loan, advance or capital contribution made by the
Company or any Company Subsidiary to, or investment in, any
Person other than loans, advances or capital contributions, or
investments of the Company or any Company Subsidiary made in the
ordinary course of business consistent with past practices;
(x) any waiver, direct or indirect, by the Company or any
Company Subsidiary of (A) any right or rights of material value
or (B) any payment of any material debt, liability or other
obligation, except for non-material waivers and payments made in
the ordinary course of business consistent with past practices;
(xi) any payment, loan or advance of any amount to or in
respect of, or the sale, transfer or lease of any properties or
assets (whether real, personal or mixed, tangible or intangible)
to any officer, director, or employee of the Company, any Company
Subsidiary or any Affiliate of any of them, or any business or
entity in which the Company, any Company Subsidiary or any
Affiliate of any of them, or relative of any such Person, has any
material, direct or indirect, interest, except for (A) directors'
fees (B) compensation to the officers and employees of the
Company in the ordinary course of business consistent with past
practices and (C) advancement or reimbursement of expenses in the
ordinary course of business consistent with past practices;
(xii) any amendment, alteration or modification in the
terms of any currently outstanding options, warrants or other
rights to purchase any capital stock or Equity Interest in the
Company or any securities convertible into or exchangeable for
such capital stock or Equity Interest, including, without
limitation, any reduction in the exercise or conversion price of
any such rights or securities, any change to the vesting or
acceleration terms of any such rights or securities, or any
change to terms relating to the grant of any such rights or
securities;
(xiii) any action which, if it had been taken after the date
hereof, would have required the consent of Acquiror under Section
6.1 hereof; or
(xiv) any agreement to take any of the actions specified in
this Section 4.10, except for this Agreement.
4.11. Litigation. Except as set forth in Section 4.11 of the
Company Disclosure Schedule, there is no action, suit, claim, investigation,
arbitration or proceeding pending, or to the Knowledge of the Company
threatened, against the Company or any Company Subsidiary or any of their
respective assets or properties before any arbitrator or Governmental Entity
that has had, or would be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect. To the Knowledge of the
Company, there is no basis for any such action, suit, claim, investigation,
arbitration or proceeding. Neither the Company, nor any Company Subsidiary,
any officer, director or employee of the Company or any Company Subsidiary
has been permanently or temporarily enjoined by any order, judgment or decree
of any arbitrator or any Governmental Entity from engaging in or continuing
any conduct or practice in connection with the business or assets of the
Company or any Company Subsidiary nor, to the Company's and the Company
Subsidiaries' Knowledge, is the Company, any Company Subsidiary or any
officer, director or employee of the Company or any Company Subsidiary under
investigation by any Governmental Entity related to the conduct of the
Company's or any Company Subsidiaries' business. To the Knowledge of the
Company, there is not in existence any order, judgment or decree of any
arbitrator or Governmental Entity that is applicable to the Company or any
Company Subsidiary enjoining or requiring the Company or any Company
Subsidiary to take or refrain from taking any action of any kind with respect
to its business or assets.
4.12. Taxes. Except as set forth in Section 4.12 of the Company
Disclosure Schedule, (a) all material Tax returns, statements, reports and
forms required to be filed with any taxing authority by, or with respect to,
the Company and each Company Subsidiary (collectively, the "Company Returns")
has been timely filed in accordance with all applicable Laws; (b) the Company
and each Company Subsidiary has timely paid all material Taxes due and
payable and the Company Returns are true, correct and complete in all
material respects; (c) the Company and each Company Subsidiary has withheld
and paid all material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party; (d) there is no
action, suit, proceeding, audit or claim proposed, pending or in progress
against the Company or any Company Subsidiary in respect of any Taxes; (e)
neither the Company nor any Company Subsidiary is party to, bound by, or has
any obligation under, any Tax sharing agreement or similar contract or
arrangement or any agreement that obligates any of them to make any payment
computed by reference to the Taxes, taxable income or taxable losses of any
other Person; (f) there are no Liens with respect to Taxes on any of the
assets or properties of the Company or any Company Subsidiary except with
respect to Taxes not yet due and payable; (g) neither the Company nor any
Company Subsidiary (1) is, or has been, a member of an affiliated,
consolidated, combined or unitary group, other than one of which the Company
was the common parent or (2) has any liability for the Taxes of any Person
(other than the Company and the Company Subsidiaries) under Section 1.1502-6
of the Treasury regulations promulgated under the Code (or any similar
provision of state, local or foreign Law), or as a transferee or successor,
by contract or otherwise; (h) no consent under Section 341(f) of the Code has
been filed with respect to the Company or any Company Subsidiary; (i) neither
the Company nor any Company Subsidiary has agreed to make or is required to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (j) no waivers of statutes of limitation with
respect to any Company Returns have been given by or requested from the
Company or a Company Subsidiary; (k) all material deficiencies asserted or
assessments made as a result of any examinations of the Company Returns have
been fully paid, or are fully reflected as a liability in the Company Balance
Sheet, or are being contested and an adequate reserve therefor has been
established and is fully reflected in the Company Balance Sheet; (l) none of
the Company or any of the Company Subsidiaries has received written notice
from any governmental agency in a jurisdiction in which such entity does not
file a Tax return stating that such entity is or may be subject to taxation
by that jurisdiction; (m) none of the assets of the Company or any Company
Subsidiary is property required to be treated as being owned by any other
Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code; (n) none of the assets of the Company or any Company
Subsidiary directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code; (o) none of the assets of the
Company or any Company Subsidiary is "tax-exempt use property" within the
meaning of Section 168(h) of the Code; and (p) neither the Company nor any
predecessor of the Company by merger or consolidation has within the past
three years been a party to a transaction intended to qualify under Section
355 of the Code or under so much of Section 356 of the Code as relates to
Section 355 of the Code.
4.13. Employee Benefits.
(a) Except as set forth in Section 4.13(a) of the Company
Disclosure Schedule, none of the Company or any ERISA Affiliate (as defined
below) maintains, administers, sponsors or otherwise has any liability with
respect to any "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
employment, severance or similar contract, plan, arrangement or policy or any
other plan or arrangement (written or oral) whether or not subject to ERISA
(including any funding mechanism therefore now in effect or required)
providing for compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and
post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) which covers any employee or
former employee or director of the Company or any Company Subsidiary. The
Company has delivered to Parent (i) current, accurate and complete copies (or
to the extent no such copy exists, an accurate description of the material
features) of each Company Employee Plan (as defined below and, if applicable,
related trust agreements), (ii) all amendments thereto and written
interpretations thereof and (iii) if applicable, for the two most recent
years (A) the Form 5500 and attached schedules, (B) audited financial
statements and (C) actuarial valuation reports. The plans required to be
listed on Section 4.13(a) of the Company Disclosure Schedule are referred to
collectively herein as the "Company Employee Plans." An "ERISA Affiliate"
means any Person which would be treated as a single employer with the Company
or any Company Subsidiary under Section 414 of the Code.
(b) None of the Company Employee Plans are subject to Title
IV of ERISA. None of the Company, any Company Subsidiary, or any ERISA
Affiliate has incurred any liability (whether absolute or contingent) with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA) under
Title IV of ERISA, and no events have occurred and no circumstances exist
that could reasonably be expected to result in any such liability to the
Company, any Company Subsidiary or any ERISA Affiliate.
(c) Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust forming
a part thereof is exempt from Tax pursuant to Section 501(a) of the Code and
nothing has occurred, whether by action or failure to act, that could
reasonably be expected to cause the loss of such qualification. The Company
has furnished to Acquiror copies of the most recent Internal Revenue Service
determination letters with respect to each Company Employee Plan. Each
Company Employee Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations, including ERISA and the Code, which are applicable to such
Company Employee Plan. Further, nothing has been done or omitted to be done
and no transaction or holding of any asset under or in connection with any
Company Employee Plan has occurred that could reasonably be expected to make
the Company or any Company Subsidiary, or, to the Knowledge of the Company,
any officer or director of the Company or any Company Subsidiary, subject to
any liability under Section 502(i) or 502(l) of ERISA or liable for any Tax
pursuant to Section 4975 of the Code (assuming the taxable period of any such
transaction expired as of the date hereof).
(d) (i) Except as set forth on Section 4.13(d) of the
Company Disclosure Schedule, no Company Employee Plan exists that could
result in the payment to any present or former employee of the Company or any
Company Subsidiaries of any money or other property or accelerate or provide
any other rights or benefits to any present or former employee of the Company
or any Company Subsidiaries as a result of the transactions contemplated by
this Agreement and (ii) there is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company or any Company
Subsidiary that, individually or collectively, would give rise to the payment
of any amount that would not be deductible pursuant to the terms of Sections
162(m) or 280G of the Code. Section 4.13(a) of the Company Disclosure
Schedule sets forth the maximum aggregate amount payable in respect of any
and all payments, costs, excise taxes, fees and expenses due, payable, owed
or forgiven as a result of termination pursuant to any severance agreement,
contract, benefit plan or other arrangement existing on the date hereof
pursuant to which the Company or any Company Subsidiary has any obligation or
liability in connection with the termination of any officer of the Company.
(e) Except as set forth in Section 4.13(e) of the Company
Disclosure Schedule, there has been no amendment to, written interpretation
or announcement (whether or not written) relating to, or change in employee
participation or coverage under, any Company Employee Plan, other than as
required by applicable Law, which could reasonably be expected to increase
the expense of maintaining such Company Employee Plan above the level of the
expense incurred in respect thereof for the year ended December 31, 2003.
(f) Neither the Company nor any Company Subsidiary has or
has ever had any obligations to provide retiree health and life insurance
under any Company Employee Plan, other than benefits mandated by Section
4980B of the Code or under applicable Law, and each Company Employee Plan may
be amended or terminated without incurring any liability thereunder.
(g) No Company Employee Plan is under audit or is the
subject of an audit or investigation by the Internal Revenue Service, the
Department of Labor or any other Governmental Entity, nor is any such audit
or investigation pending, to the Knowledge of the Company, and (ii) with
respect to any Company Employee Plan, (A) no actions, suits, termination
proceedings or claims (other than routine claims for benefits in the ordinary
course) are pending or, to the Knowledge of the Company, threatened and (B)
to the Knowledge of the Company, no facts or circumstances exist that could
reasonably be expected to give rise to any such actions, suits or claims.
4.14. Compliance with Laws; Licenses, Permits and Registrations.
(a) Neither the Company nor any Company Subsidiary is in
violation of, or has violated, any applicable provisions of any Laws, except
for violations which have not had, and would not be reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
The Company has not been given notice of, and to the Knowledge of the
Company, the Company is not being investigated with respect to, and has not
been threatened to be charged with, any material violation of any applicable
Law.
(b) None of the Company, any of its Subsidiaries or, to
Knowledge of the Company, any directors, officers, agents or employees of the
Company or any of its Subsidiaries has (on behalf of the Company or any
Subsidiary) (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or (iii) made any other unlawful payment. Neither the Company nor
any of its Subsidiaries has participated in any boycotts.
(c) Except as set forth in Section 4.14(c) of the Company
Disclosure Schedule, the Company and each Company Subsidiary has, maintains
in full force and effect, and is in compliance with, all material permits,
licenses, easements, variances, exemptions, consents, certificates,
approvals, authorizations of and registrations (collectively, "Permits") with
and under all federal, state, local and foreign Laws and all Environmental
Laws, and from all Governmental Entities required by the Company and each
Company Subsidiary to carry on their respective businesses as currently
conducted, except as would not have, individually or in the aggregate, a
Company Material Adverse Effect.
(d) Except as set forth on Section 4.14(d) of the Company
Disclosure Schedule, the respective businesses of the Company and each
Company Subsidiary are, and have been, conducted in compliance with all
applicable federal, state, local and foreign statutes, laws, ordinances,
orders, judgments, rules or regulations relating to the protection of the
environment or occupational safety and health ("Environmental Laws") except
as would not have a Company Material Adverse Effect.
(e) Except as set forth in Section 4.14(e) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has (i)
received any request for information, or been notified that it may be a
"potentially responsible party", related to any property on the Superfund
National Priorities List, or any state equivalent list, (ii) created or
assumed any liabilities, guaranties, obligations or indemnifications under
any Environmental Law, consent decree or contract with any third party,
including any Governmental Entity, related to any property currently or
formerly owned, operated or leased by the Company or the Company
Subsidiaries; (iii) received, or been subject to, any complaint, summons,
citation, notice, order, claim, litigation, investigation, judicial or
administrative proceeding, or judgment from any third party, including, any
Governmental Entity, regarding any actual or alleged violations of, or actual
or potential liability under, any Environmental Laws, nor has any Knowledge
of any basis for such violations or liability; or (iv) any responsibility or
liability under Environmental Law for any compliance, cleanup or remediation
related to any hazardous materials or waste.
(f) Except as set forth in Section 4.14(f) of the Company
Disclosure Schedule, to the Knowledge of the Company, none of the Real
Property contains any asbestos containing material or mold that may be in a
condition, location or form that (i) is reasonably likely to pose a risk to
human health or the environment, (ii) may require any abatement, containment
or remediation or (iii) may otherwise be regulated under Environmental Law.
(g) Neither the Company nor any Company Subsidiary is in
conflict with, or in Default of any Company Contract, except to the extent
that any such conflict or Default does not constitute a Company Material
Adverse Effect.
4.15. Finders' Fees; Opinion of Financial Advisor.
(a) Other than UBS Investment Bank and Lazard Freres & Co.
LLC, whose fees are set forth in Section 4.15 of the Company Disclosure
Schedule, all of which fees and expenses will be borne by the Company, there
is no investment banker, financial advisor, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf
of, the Company or any Company Subsidiary which might be entitled to any fee
or commission from the Company, Parent, Acquiror or any of their respective
Affiliates upon consummation of the Merger or any of the other transactions
contemplated by this Agreement.
(b) The Special Committee of the Board of Directors of the
Company has received the opinion of Lazard Freres & Co. LLC, dated the date
of this Agreement, and subject to the qualifications stated therein, to the
effect that the Merger Consideration to be received by the holders of Company
Shares (other than Parent, the Contributing Holders and each of their
respective Affiliates) is fair, from a financial point of view, to such
holders.
4.16. Affiliate Transactions. Except as set forth in Section
4.16 of the Company Disclosure Schedule, and except for employment agreements
with officers of the Company set forth on Section 4.18(vi) of the Company
Disclosure Schedule, to the Knowledge of the Company, there are no Company
Contracts with any (i) present or former officer or director of the Company
or any Company Subsidiary or any of their immediate family members (including
their spouses), (ii) record or beneficial owner of five percent or more of
any voting securities of the Company or (iii) Affiliate of any such officer,
director, family member or beneficial owner.
4.17. Intellectual Property.
(a) Set forth on Section 4.17(a) of the Company Disclosure
Schedule are all (i) issued patents and pending patent applications, (ii)
trademark and service ▇▇▇▇ registrations and applications for registration
thereof, (iii) copyright work registrations and applications for registration
thereof, and (iv) internet domain name registrations and applications and
reservations therefor, in each case that are owned by or on behalf of the
Company or any of the Company Subsidiaries. Except as disclosed in Section
4.17(a) of the Company Disclosure Schedule, with respect to each item of
Intellectual Property required to be identified in Section 4.17(a) of the
Company Disclosure Schedule: (i) the Company is the sole owner and possesses
all right, title, and interest in and to such item, free and clear of any
Lien; (ii) such item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge of which the Company has received notice;
(iii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand of which the Company has received notice is pending or, to
the Knowledge of the Company, is threatened that challenges the legality,
validity, enforceability, registrations, use, or ownership of such item; and
(iv) the Company has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect
to such item, excluding any of the foregoing which would not reasonably be
expected to result in a Company Material Adverse Effect.
(b) Set forth on Section 4.17(b) of the Company Disclosure
Schedule is a list of all material agreements under which the Company or any
Company Subsidiary licenses from a third party material Intellectual Property
that is currently being used by the Company or such Subsidiary in the conduct
of its business except for off-the-shelf software programs that the Company
and its Subsidiaries use in the ordinary course of business (such agreements
being referred to as "License-In Agreements"). The Company has delivered to
Parent correct and complete copies of all License-In Agreements (as amended
to date). To the Knowledge of the Company, (i) each License-In Agreement is
valid, binding, and in full force and effect; (ii) each License-In Agreement
will continue to be valid, binding, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby;
(iii) neither the Company nor any of the Company Subsidiaries is in Default
of any such License-In Agreement, and no event has occurred that with notice
or lapse of time would constitute a Default or permit termination,
modification, or acceleration thereunder; (iv) neither the Company nor any
Company Subsidiary has repudiated any provision of any License-In Agreement;
and (v) neither the Company nor any of the Company Subsidiaries has granted
any sublicense or similar right with respect to any License-In Agreement in
the case of each of clauses (i), (ii), (iii) and (iv), except for any of the
foregoing that have not had, and are not reasonably expected to have, a
Company Material Adverse Effect.
(c) The Company and the Company Subsidiaries own or have the
right to use, without payments to any other Person except pursuant to a
License-In Agreement that is specified in Section 4.17(b) of the Company
Disclosure Schedule, all Intellectual Property actually used in, the
operation of the business of the Company and the Company Subsidiaries as and
where the business is presently conducted. Each item of Intellectual
Property (except for off-the-shelf software programs that the Company and its
Subsidiaries use in the ordinary course of business) owned or used by the
Company and the Company Subsidiaries immediately prior to the Closing
hereunder will be owned or available for use by the Company and the Company
Subsidiaries on identical terms and conditions immediately subsequent to the
Closing hereunder, excluding any item of such Intellectual Property, the
absence of which would not reasonably be expected to have a Company Material
Adverse Effect. The Company and the Company Subsidiaries are taking or have
taken all commercially reasonable actions that are required to maintain, and
all commercially reasonable actions that they reasonably believe are required
to protect, each item of Intellectual Property that they own or use,
excluding any item of such Intellectual Property, the absence of which would
not reasonably be expected to have a Company Material Adverse Effect.
(d) Neither the Company nor any of the Company Subsidiaries
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and except
as set forth in Section 4.17(d) of the Company Disclosure Schedule, neither
the Company nor any of the Company Subsidiaries has received any written
charge, complaint, claim, demand, or notice during the past two (2) years,
(or earlier, if not resolved) alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company or any
Company Subsidiary must license or refrain from using any Intellectual
Property rights of any third party), excluding any of the foregoing that
would not reasonably be expected to have a Company Material Adverse Effect.
To the Knowledge of the Company, except as set forth in Section 4.17(d) of
the Company Disclosure Schedule, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company or any of the Company
Subsidiaries during the past two (2) years (or earlier if not resolved),
excluding any such interference, infringement or misappropriation that would
not reasonably be expected to have a Company Material Adverse Effect.
(e) The Company and the Company Subsidiaries have used
reasonable efforts to maintain the confidentiality of all non-public
information of the kind described in clause (v) or (vi) of the definition of
"Intellectual Property" hereunder that (i) is owned by the Company and/or any
Company Subsidiary and (ii) that derives material economic value from not
being generally known to other person who can obtain economic value from its
disclosure or use in accordance with protection procedures believed by the
Company and the Company Subsidiaries to be adequate for protection.
(f) As of the Effective Time, no former or current
shareholder, employee, director or officer of the Company or any Company
Subsidiary will have, directly or indirectly, any interest in any
Intellectual Property used in or pertaining to the business of the Company
and the Company Subsidiaries, nor will any such Person have any rights to
past or future royalty payments or license fees from the Company or any
Company Subsidiary, deriving from licenses, technology agreements or other
agreements, whether written or oral, between any such Person and the Company
and/or any Company Subsidiary.
(g) The transactions contemplated hereunder will not violate
any privacy policy or other terms of use relating to any web sites of the
Company or the Company Subsidiaries. The Company and each of the Company
Subsidiaries' use and dissemination of any and all data and information
concerning users of such web sites are in all material respects in compliance
with their privacy policies and terms of use, and all applicable laws and
regulations.
4.18. Material Contracts.
(a) Section 4.18 of the Company Disclosure Schedule sets
forth a complete and accurate list of all Company Contracts (other than
contracts, undertakings, commitments or agreements for employee benefit
matters set forth in Section 4.13 of the Company Disclosure Schedule and real
property leases set forth in Section 4.20(i) of the Company Disclosure
Schedule) of the following categories (collectively, and together with the
contracts, undertakings, commitments or agreements for employee benefit
matters set forth in Section 4.13 of the Company Disclosure Schedules and the
real property leases set forth in Section 4.20(ii) of the Company Disclosure
Schedules, the "Material Contracts" and each a "Material Contract"):
(i) Company Contracts requiring annual expenditures
by or liabilities of any party thereto in excess of
$2,500,000 which have a remaining term in excess of
ninety (90) days or are not cancelable (without material
penalty, cost or other liability) within ninety (90) days;
(ii) Company Contracts containing covenants limiting
the freedom of the Company or any Company Subsidiary or
other Affiliate of the Company (including Parent and its
Affiliates after the Effective Time) to engage in any line
of business or compete with any Person, in any product line
or line of business, or operate at any location;
(iii) promissory notes, loans, agreements,
indentures, evidences of indebtedness or other instruments
and contracts providing for the borrowing or lending of
money, in an amount in excess of $1,000,000, whether as
borrower, lender or guarantor;
(iv) joint venture, alliance or partnership
agreements or joint development or similar agreements with
any Third Party;
(v) all material licenses, sublicenses, consent,
royalty or other agreements concerning Intellectual
Property;
(vi) (A) employment contracts and other contracts
with current or former officers, directors, consultants,
independent contractors or agents and (B) all severance,
change in control or similar arrangements with any current
or former directors, officers, employees, consultants,
independent contractors or agents that, in the case of
either (A) or (B), will result in any obligation (absolute
or contingent) of the Company or any Company Subsidiary to
make any payment to any current or former directors,
officers, employees, consultants, independent contractors
or agents as a result of either the consummation of the
transactions contemplated hereby, termination of employment
(or the relevant relationship), or both;
(vii) Company Contracts with Affiliates of the
Company
(viii) Company Contracts with any Governmental
Entity which have a remaining term in excess of one year or
are not cancelable (without material cost, penalty or other
liability) within one hundred eighty (180) days; or
(ix) Company Contracts pending for the acquisition
or sale, directly or indirectly (by merger or otherwise),
of assets (whether tangible or intangible) in excess of
$1,500,000 in market or book value with respect to any
contract or the capital stock of another Person, in each
case in an amount in excess of $1,500,000.
(b) True and complete copies of the written Material
Contracts and descriptions of verbal Material Contracts, if any, have been
delivered or made available to the Acquiror. Each of the Material Contracts
is a valid and binding obligation of the Company and, to the Company's
Knowledge, the other parties thereto, enforceable against the other parties
thereto in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization, arrangement or similar
laws affecting creditors' rights generally and by general principles of
equity. Except for the consummation of the transactions contemplated hereby
and by the Ancillary Agreements, no event has occurred which would, on notice
or lapse of time or both, entitle the holder of any indebtedness issued
pursuant to a Material Contract identified on Schedule 4.18 of the Company
Disclosure Schedules in response to paragraph (a)(iii) above to accelerate,
or which does accelerate, the maturity of any such indebtedness.
(c) Neither the Company nor any Company Subsidiary is, or
has received any notice that any other party is, in breach, default or
violation (each a "Default") (and no event has occurred or not occurred
through the Company's or the Company Subsidiary's inaction or, to the
Knowledge of the Company, through the action or inaction of any Third
Parties, which with notice or the lapse of time or both would constitute a
Default) of any term, condition or provision of any Material Contract to
which the Company or any Company Subsidiary is a party or by which any of
them or any of their respective properties or assets may be bound, except for
Defaults which have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
4.19. Reserved.
4.20. Real Estate. Except as has not had, and would not be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect: (i) all of the leases, licenses, tenancies,
subleases and all other occupancy agreements ("Leases") in which the Company
or any Company Subsidiary is a tenant, subtenant, landlord or sublandlord
(the leased and subleased space or parcel of real property thereunder being,
collectively, the "Real Property"), are in full force and effect,
(ii) neither the Company (or the applicable Company Subsidiary), nor to the
Knowledge of the Company, any other party to any Lease, is in default under
the Leases, and no event has occurred which, with notice or lapse of time,
would constitute a Default by the Company (or such Subsidiary) under the
Leases and (iii) the Company (or the applicable Company Subsidiary) enjoys
peaceful and undisturbed possession under the Leases. The Company does not
currently own and has not owned in the past, and no Company Subsidiary
currently owns or has owned in the past, any real property or any interests
(other than the Leases) therein. All of the Leases of the Company and its
Subsidiaries are set forth on Section 4.20 of the Company Disclosure
Schedules.
4.21. Accounts Payable and Inventory. Since December 31, 2003,
the Company has (i) discharged its material accounts payable and other
material current liabilities and obligations in accordance with past
practice, and (ii) purchased and maintained inventory in an amount which it
reasonably believes to be appropriate for normal requirements of the
Company's business and current business conditions consistent with its past
practices.
4.22. Suppliers. Set forth in Section 4.22 of the Company
Disclosure Schedule is a list of the ten largest suppliers of the Company
based on the dollar value of products purchased by the Company for the fiscal
year ended December 31, 2003. Since such date, there has not been, nor as a
result of the Merger is there reasonably anticipated to be, any material
change in relations with any of the major suppliers of the Company and its
Subsidiaries.
4.23. Personnel, etc.
(a) Set forth in Section 4.23 of the Company Disclosure
Schedules is a list setting forth: (i) the name of each officer of the
Company and each of the Company's Subsidiaries, specifying the title of each
such Person; and (ii) the name of each director of the Company and each of
the Company's Subsidiaries.
(b) The Company has heretofore provided Acquiror with a
complete and accurate schedule of compensation which each of the officers
referred to in clause (a) above is currently entitled to receive.
4.24. Assets. The assets and properties of the Company and the
Company Subsidiaries, considered as a whole, constitute all of the material
assets and properties which are reasonably required for the business and
operations of the Company and its Subsidiaries as presently conducted. The
Company and its Subsidiaries have good title to or a valid leasehold estate
in, free and clear of any Liens, all personal properties and assets reflected
on the Company Balance Sheet at the Balance Sheet Date (except for properties
or assets subsequently sold in the ordinary course of business consistent
with past practices).
4.25. Insurance. Each of the Company and its Subsidiaries
maintains insurance policies (the "Insurance Policies") against all risks of
a character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Section 4.25 of the
Company Disclosure Schedules contains a complete and accurate list of all
Insurance Policies of the Company and its Subsidiaries. Each Insurance
Policy is in full force and effect and is valid, outstanding and enforceable,
and all premiums due thereon have been paid in full, in each case without any
exception other than those which have not had, and would not be reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect. None of the Insurance Policies will terminate or lapse (or
be affected in any other materially adverse manner) by reason of the
transactions contemplated by this Agreement, in each case without any
exception other than those which have not had, and would not be reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect. Each of the Company and its Subsidiaries has complied in all
material respects with the provisions of each Insurance Policy under which it
is the insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to the Company's
Knowledge, indicated any intent to do so or not to renew any such policy, in
each case without any exception other than those which have not had, and
would not be reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect. All material claims under the Insurance
Policies have been filed in a timely fashion. Since the Company's formation,
there have been no historical gaps in insurance coverage of the Company
and/or its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
Except as disclosed in the disclosure schedule delivered by
Parent and the Acquiror to the Company prior to the execution of this
Agreement (the "Acquiror Disclosure Schedule") with specific reference to the
particular Section or subsection of this Agreement to which the information
set forth in such disclosure schedule relates, Parent and Acquiror jointly
and severally represent and warrant to the Company that:
5.1. Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the Laws of the
State of Delaware, and Acquiror is a corporation duly incorporated and
validly existing under the Laws of the State of Oregon. Each of Parent and
Acquiror has all corporate powers and authority required to own, lease and
operate its respective properties and carry on its respective business as now
conducted and to consummate the Merger and the other transactions
contemplated hereby. Each of Parent and Acquiror is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned, leased or operated by
it or the nature of its activities makes qualification necessary, except
where the failure to be so qualified has not had, and would not be reasonably
expected to have, individually or in the aggregate, an Acquiror Material
Adverse Effect.
5.2. Corporate Authorization. The execution, delivery and
performance by Parent and the Acquiror of this Agreement, the Ancillary
Agreements, as applicable, and the consummation by Parent and the Acquiror of
the Merger and the other transactions contemplated hereby and thereby, as
applicable, are within the corporate powers of Parent and the Acquiror and
have been duly and validly authorized by all necessary corporate action, as
applicable, and no other corporate proceedings on the part of Parent or the
Acquiror are necessary to authorize this Agreement, the Ancillary Agreements
or to consummate the transactions contemplated hereby and thereby. This
Agreement and the Ancillary Agreements have been duly and validly executed
and delivered by Parent and the Acquiror, as applicable, and assuming that
this Agreement and the Ancillary Agreements constitute the valid and binding
obligation of the Company and/or the other parties thereto, this Agreement
and the Ancillary Agreements constitute valid and binding obligations of
Parent and the Acquiror, as applicable, each enforceable in accordance with
their terms.
5.3. Governmental Authorization. The execution, delivery and
performance by Parent and the Acquiror of this Agreement and the Ancillary
Agreements, as applicable, and the consummation by Parent and the Acquiror of
the transactions contemplated hereby and thereby, as applicable, will not
require any consent, approval, action, order, authorization, or permit of, or
registration or filing with, any Governmental Entity, other than (a) the
filing of the Articles of Merger in accordance with the OBCA; (b) compliance
with any applicable requirements of the HSR Act; (c) compliance with any
applicable requirements of the Exchange Act; (d) such as may be required
under any applicable state securities or blue sky Laws; and (e) other
consents, approvals, actions, orders, authorizations, registrations,
declarations, filings and permits which, if not obtained or made, have not
had, and would not be reasonably expected to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
5.4. Non-Contravention. The execution, delivery and performance
by Parent and the Acquiror of this Agreement, the Ancillary Agreements and
the consummation by Parent and the Acquiror of the Merger and the other
transactions contemplated hereby and thereby, as applicable, do not and will
not (a) contravene or conflict with Parent's Certificate of Incorporation or
By-laws or Acquiror's Articles of Incorporation or By-laws, (b) assuming
compliance with the matters referred to in Section 5.3, contravene or
conflict with or constitute a violation of any provision of any Law binding
upon or applicable to Parent or the Acquiror or by which any of their
respective properties is bound or affected, (c) constitute a Default under
(or an event that with notice or lapse of time or both could reasonably be
expected to become a Default) or give rise (with or without notice or lapse
of time or both) to a right of termination, amendment, cancellation or
acceleration under any agreement, contract, note, bond, mortgage, indenture,
lease, franchise, Permit or other similar authorization or joint venture,
limited liability or partnership agreement or other instrument binding upon
Acquiror, other than, in the case of clauses (b) and (c) any items that have
not had, and would not be reasonably expected to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
5.5. Employment Agreement. Parent has caused Acquiror to enter
into the Employment Agreement. Neither Parent nor Acquiror will take any
action to cause the Employment Agreement not to be in full force and effect
on and as of the Effective Time.
5.6. Financing. Acquiror has delivered to the Company (i) signed
counterpart(s) of the commitment letter of UBS, dated as of the date hereof,
pursuant to which UBS has agreed, subject to the terms and conditions set
forth therein, to provide or cause to be provided up to an aggregate of $1.0
billion of debt financing in connection with the transactions contemplated
hereby and up to $75.0 million of revolving credit (the "Bank Commitment
Letter") and (ii) the signed commitment letter of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners,
L.P. ("LGP") pursuant to which LGP has agreed, subject to the terms and
conditions set forth therein, to make or cause to be made an equity
investment in Parent of an amount (the "Equity Commitment Letter" and,
together with the Bank Commitment Letter, the "Financing Letters") of at
least $219.0 million as provided in the Equity Commitment Letter. The
Financing Letters have not been amended and are in full force and effect as
of the date hereof. The funds in the amounts set forth in the Financing
Letters would be sufficient to enable Acquiror and the Company to pay the
Merger Consideration, to make all other necessary payments by them in
connection with the Merger (including the repayment of certain outstanding
indebtedness of the Company) and to pay all of the related fees and expenses,
in each case as contemplated by the Financing Letters (collectively, the
"Merger Funds"); provided that the Minimum Notes Condition shall be satisfied
at the Notes Tender Price. The financing referred to in the Financing
Letters is herein referred to as the "Financing."
5.7. Finders' Fees. Other than LGP, all of whose fees and
expenses will be borne by the Surviving Corporation at the Closing and whose
fees are set forth on Section 5.7 of the Acquiror Disclosure Schedule, there
is no investment banker, financial advisor, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf
of, the Parent, Acquiror or any Affiliate thereof, which might be entitled to
any fee or commission from the Parent, Acquiror, Company, any Company
Subsidiary, or of any of their respective Affiliates upon consummation of the
Merger or the other transactions contemplated by this Agreement or the
Ancillary Agreements.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees as set forth below:
6.1. Company Interim Operations. Except as set forth in the
Company Disclosure Schedule or as otherwise expressly permitted by any other
provision of this Agreement, without the prior consent of Acquiror (which
shall not be unreasonably withheld or delayed), from the date hereof until
the Effective Time, the Company shall, and shall cause its Subsidiaries to,
conduct their respective businesses only in the ordinary and usual course
consistent with past practice, and shall use reasonable best efforts, to (i)
preserve intact its present business organization, (ii) keep available the
services of its key employees and those of each Company Subsidiary, and (iii)
preserve existing relationships with its material suppliers and other Persons
with which the Company or any Company Subsidiary has significant business
relationships. Without limiting the generality of the foregoing, and as an
extension thereof, except as set forth in the Company Disclosure Schedule or
as otherwise expressly contemplated by this Agreement, from the date hereof
until the Effective Time, without the prior consent of Acquiror (which shall
not be unreasonably withheld or delayed), the Company shall not and shall not
permit its Subsidiaries, directly or indirectly, to:
(a) propose or adopt any change in its Articles of
Incorporation or By-laws (or equivalent organizational or governing
documents);
(b) (i) split, combine or reclassify any shares of capital
stock or amend the terms of any rights, warrants or options to acquire its
securities, (ii) except for ordinary course dividends by a Company
Subsidiary, declare, set aside or pay any dividend (including, without
limitation, an extraordinary dividend) or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its Equity
Interests, or (iii) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any of its securities or any rights,
warrants or options to acquire its securities;
(c) issue, deliver, sell, grant, pledge, encumber or
transfer or authorize the issuance, delivery, sale, grant, pledge,
encumbrance or transfer of, or agree to commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) its Equity Interests or any
securities convertible into or exercisable for its Equity Interests, other
than the issuance of Company Shares pursuant to the exercise of Company
Options outstanding on March 23, 2004;
(d) merge with or acquire (by merger, consolidation,
acquisition of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment) in one transaction or series of
related transactions any Person, for an aggregate consideration in excess of
$5,000,000, any Equity Interests or other securities of any Person, any
division or business of any Person or all or substantially all of the assets
of any Person;
(e) sell, lease, encumber or otherwise dispose of any assets
or securities with carrying value in excess of $5,000,000;
(f) (i) (A) incur any indebtedness for borrowed money,
except to fund operations of the business in the ordinary course consistent
with past practice under the Company's existing credit facility, (B) issue or
sell any debt securities of the Company or any Company Subsidiary; (C) make
any loans, advances or capital contributions to, or, except as permitted by
Section 6.1(d), investments in, any other Person, other than in the ordinary
course of business consistent with past practices, in no event in an
aggregate principal amount in excess of $3,000,000, (D) assume, guarantee or
endorse, or otherwise become liable or responsible (whether directly,
contingently or otherwise) for, the obligations of any Person (other than
obligations of Subsidiaries and the endorsements of negotiable instruments
for collection in each such case in the ordinary course of business
consistent with past practice), or (E) alter or amend in any way any
compensation (including without limitation, any commission schedule) or other
payments due to employees or independent contractors of the Company (other
than, with respect to employees who are not officers or directors of the
Company or any Company Subsidiary, increases in the ordinary course of
business consistent with past practice and that, in the aggregate, will not
result in a material increase in benefits or compensation expense of the
Company or any Company Subsidiary) or (ii) enter into or materially amend any
contract, agreement, commitment or arrangement to effect any of the
transactions prohibited by this Section 6.1(f);
(g) (i) except as required by Law or any existing agreement,
increase the amount of compensation of any director or officer of the Company
or any Company Subsidiary, (ii) except as required by Law, an agreement
existing on the date hereof or pursuant to a Company severance policy
existing on the date hereof, grant any severance or termination pay to any
director, employee, consultant, independent contractor or agent of the
Company or any Company Subsidiary, (iii) adopt any additional employee
benefit plan, (iv) provide for the payment of any amounts as a result of the
consummation of the transactions contemplated by this Agreement, (v) except
as may be required by Law or as necessary to comply with the terms of this
Agreement, amend in any material respect any Company Employee Plan or
(vi) pay any bonuses except to the extent provided on Section 6.1(g) of the
Company Disclosure Schedule;
(h) authorize any single capital expenditure or any
expenditures not in the ordinary course of business in excess of $5,000,000
or aggregate capital expenditures and other expenditures not in the ordinary
course of business in excess of $10,000,000, except as set forth on Section
6.1(h) of the Company Disclosure Schedule;
(i) make any changes in its accounting methods, principles
or practices currently in effect, except as required by changes in GAAP or by
Regulation S-X of the Exchange Act, in each case as concurred in by its
independent public accountants;
(j) except as set forth on Section 6.1(j) of the Company
Disclosure Schedule, (i) settle, pay or discharge, any litigation,
investigation, arbitration, proceeding or other claim, liability or
obligation arising from the conduct of business in the ordinary course for an
amount in excess of $2,000,000 or (ii) settle, pay or discharge any claim
against the Company with respect to or arising out of the transactions
contemplated by this Agreement for an amount in excess of $2,000,000 in the
aggregate;
(k) (i) make any material Tax election or take any position
on any Company Return filed on or after the date of this Agreement or adopt
any method of accounting therein that is materially inconsistent with
elections made, positions taken or methods of accounting used in preparing or
filing similar returns in prior periods unless such position, election or
method is required by changes in applicable Law, (ii) enter into any
settlement or compromise of any material Tax liability, (iii) file any
amended Company Return with respect to any material Tax, (iv) change any
annual Tax accounting period, (v) enter into any closing agreement relating
to any material Tax, (vi) surrender any right to claim a material Tax refund
or (vii) give or request any waiver of a statute of limitation with respect
to any Company Return;
(l) (i) make any expenditures or commitments for such
expenditures in connection with the entry or proposed entry into any new line
of business, or (ii) make any expenditures or commitments for such
expenditures, in either case, in a material amount, in connection with the
entry or proposed entry into any extension of an existing line of business
not set forth on Section 6.1(l) of the Company Disclosure Schedule;
(m) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than the
Merger);
(n) grant any loan, advance, extensions of credit to
current or former employees or forgiveness or deferral of any loans due from
any employee, other than any loan, advance or extension of credit to a
current employee in circumstances and in amounts consistent with past
practice, in any event not to exceed $50,000 for any one employee and
$250,000 in the aggregate;
(o) effect new programs or change existing programs that
relate to employment contracts, severance benefits, change in control
benefits, bonuses, commissions, base salaries, phantom stock grants,
incentive trips, prizes and awards, 401-k and pension benefits, vacation and
PTO benefits, health and medical benefits or any other remuneration of any
kind to any employee, except (i) as required by applicable Law or (ii) in the
ordinary course of business consistent with past practice;
(p) enter into any contract or agreement 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;
(q) amend, modify or waive in any material respects any
material right under any Material Contract of the Company or any of its
Subsidiaries, other than in the ordinary course of business consistent with
past practice;
(r) take any action that would result in any representation
or warranty of the Company contained in this Agreement which is qualified as
to materiality becoming untrue as of the Effective Time or any representation
or warranty not so qualified becoming untrue in any material respect as of
the Effective Time;
(s) except as required by applicable Law or GAAP, revalue in
any material respect any of its assets, including writing down the value of
inventory in any material manner, or writing-off notes or accounts receivable
in any material manner;
(t) alter through merger, liquidation, reorganization or
restructuring or any other fashion the corporate structure or ownership of
any Company Subsidiary;
(u) permit to lapse any registrations or applications for
material Intellectual Property owned by the Company or its Subsidiaries;
(v) sell, assign, license or encumber any material
Intellectual Property of the Company or of any of the Company Subsidiaries,
other than in the ordinary course of business, consistent with past practice;
or
(w) authorize, agree or commit to do any of the foregoing.
6.2. Acquisition Proposals; Board Recommendation.
(a) The Company shall not, and the Company shall cause its
Subsidiaries and its and their respective officers, directors, employees,
attorneys, accountants, advisors, representatives and agents
("Representatives") not to, (i) solicit or initiate or knowingly encourage
any proposal that constitutes, or could reasonably be expected to lead to, an
Acquisition Proposal, (ii) participate or engage in discussions or
negotiations with, or disclose or provide any non-public information relating
to the Company or its Subsidiaries to, or afford access to any of the
properties, books or records of the Company or its Subsidiaries to, any
Person with respect to an Acquisition Proposal, (iii) enter into any
agreement or agreement in principle with any Person with respect to an
Acquisition Proposal, or (iv) grant any waiver or release under any
standstill or similar agreement by any Person who has made an Acquisition
Proposal, provided, however, that prior to obtaining the Company Shareholder
Approval, the Company and its Representatives may take any of the actions
described in clause (ii) of this subsection (a) in response to any Person
that has made a bona fide written Acquisition Proposal if, but only if, (A)
such Person has submitted an unsolicited written Acquisition Proposal which
did not result from a violation by the Company of its obligations under this
Section 6.2, (B) such Person has entered into a confidentiality agreement
with the Company on terms that are no less favorable to the Company than the
Confidentiality Agreement, (C) the Board of Directors or Special Committee
has determined in good faith by resolution duly adopted, after consultation
with outside legal counsel and a financial advisor of nationally recognized
reputation, that such Acquisition Proposal constitutes or could reasonably be
expected to lead to a Superior Proposal, and (D) prior to, or substantially
concurrent with, disclosing or providing any such non-public information, the
Company shall disclose or provide all such information to Acquiror.
(b) The Company shall promptly advise Parent and Acquiror,
telephonically and in writing, of the Company's receipt of any Acquisition
Proposal or any proposal, inquiry or request related to, or that could
reasonably be expected to lead to, or that contemplates the possibility of,
any Acquisition Proposal. The Company shall promptly provide Parent and
Acquiror, in writing, with the terms and conditions of any such Acquisition
Proposal, or such proposal, inquiry or request, and the identity of the
Person making the same. Immediately upon determination by the Board of
Directors of the Company that an Acquisition Proposal constitutes a Superior
Proposal, the Company shall deliver to Parent and Acquiror a written notice
(a "Notice of Superior Proposal") advising them that the Board of Directors
of the Company has so determined, specifying the terms and conditions of such
Superior Proposal and the identity of the Person making such Superior
Proposal, and providing Parent and Acquiror with a copy of the Superior
Proposal.
(c) The Board of Directors of the Company has adopted a
resolution recommending the approval of this Agreement and the Merger by the
Company's Shareholders (the "Company Recommendation"), and, except as
provided in the next sentence, the Board of Directors of the Company shall at
all times recommend approval of this Agreement and the Merger by the
Company's Shareholders. The Board of Directors or the Special Committee of
the Company shall be permitted to (i) withdraw or modify in a manner adverse
to Parent and Acquiror (or not to continue to make) the Company
Recommendation (ii) approve or recommend a Superior Proposal, and/or (iii)
enter into an agreement regarding such Superior Proposal if, but only if, (a)
a majority of the Board of Directors of the Company or the Special Committee
has reasonably determined in good faith, following consultation with outside
counsel, that taking such action is required in order for the members of the
Board of Directors of the Company or the Special Committee to comply with
their fiduciary duties to the Company's Shareholders under applicable law,
(b) the Company has given Parent and Acquiror three (3) Business Days' prior
written notice of its intention to take such action, the Company shall have
considered in good faith any proposed changes to this Agreement proposed by
Parent or Acquiror so that the Superior Proposal of such Person no longer
constitutes a Superior Proposal (it being understood and agreed that any
material amendment to the financial or other material terms of such Superior
Proposal shall require a new three (3) Business Day period to afford Parent
and Acquiror the opportunity to negotiate with the Company as contemplated
above), (c) the Company has fully complied with its obligations under this
Section 6.2, and (d) the Company shall have terminated this Agreement in
accordance with the provisions of Section 10.1(f) and shall have paid Parent
the Parent Expense Reimbursement Amount in accordance with Section 10.2(b)
and the Termination Fee in accordance with Section 10.2(c). Nothing in this
Section 6.2 shall prohibit the Company or its Board of Directors or the
Special Committee from taking and disclosing to the shareholders of the
Company a position, or any information, with respect to an Acquisition
Proposal by a Third Party to the extent required under applicable law
(including Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act) or
stock exchange regulation; provided that unless and until this Agreement is
terminated in accordance with Section 10.1 hereof, nothing in this sentence
shall affect the obligations of the Company and its Board of Directors under
any other provision of this Agreement, including Section 8.2(b).
6.3. The Notes Tender Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 10.1, the Company will commence a
tender offer (the "Notes Tender Offer") in respect of the $225,000,000
million aggregate principal amount at maturity of the Senior Subordinated
Notes as promptly as reasonably practicable after the date hereof, but in no
event later than the mailing of the Company Proxy Statement. The aggregate
consideration payable to each holder of Senior Subordinated Notes pursuant to
the Notes Tender Offer shall be an amount in cash that the Parent and the
Company are advised by the nationally recognized investment banking firm
managing such tender to be customary for tenders of this type (as market
conditions exist as of the date of this Agreement) (the "Notes Tender
Price"). The Notes Tender Offer shall be made pursuant to an Offer to
Purchase and Consent Solicitation Statement prepared by the Company in
connection with the Notes Tender Offer in form and substance reasonably
satisfactory to Parent (as amended from time to time, the "Notes Offer to
Purchase").
(b) As part of the Notes Tender Offer, the Company shall
solicit the consent of the holders of the Senior Subordinated Notes to amend,
eliminate or waive certain sections (as selected by Parent and reasonably
acceptable to the Company) of the Senior Subordinated Notes Indenture (the
"Notes Consents"). The Company's obligation to accept for payment and pay
for the Senior Subordinated Notes tendered pursuant to the Notes Tender Offer
shall be subject to the conditions that (i) the aggregate principal amount of
Senior Subordinated Notes validly tendered and not withdrawn prior to the
expiration of the Notes Tender Offer constitutes at least a majority of the
aggregate principal amount of Senior Subordinated Notes outstanding at the
expiration of the Notes Tender Offer excluding, for purposes of such
determination, any Senior Subordinated Notes not considered outstanding for
purposes of concurrence in any direction, waiver, amendment or consent, as
provided in Section 1.09 entitled "Treasury Notes" of the First Supplemental
Indenture to the Senior Subordinated Notes Indenture in respect of the Senior
Subordinated Notes (the "Minimum Notes Condition"), (ii) the Company receives
Notes Consents from Noteholders (as that term is defined below) of at least a
majority of the aggregate principal amount of Senior Subordinated Notes,
(iii) the other conditions set forth in Article IX below shall have been
satisfied or waived, (iv) the simultaneous occurrence of the Effective Time
and (v) such other conditions as are customary for transactions similar to
the Notes Tender Offer. Subject to the terms and conditions of the Notes
Tender Offer (including, without limitation, the Minimum Notes Condition),
the Company agrees to accept for payment and to pay for, as promptly as
practicable after expiration of the Notes Tender Offer, the Senior
Subordinated Notes validly tendered and not withdrawn. The Company will not
waive any of the conditions to the Notes Tender Offer without the consent of
Parent, which consent shall not be unreasonably withheld.
(c) The Company shall prepare, as promptly as practicable,
the Notes Offer to Purchase, together with related letters of transmittal and
similar ancillary agreements (such documents, together with all supplements
and amendments thereto, being referred to herein collectively as the "Notes
Tender Offer Documents"), relating to the Notes Tender Offer and to
disseminate to the record holders of the Senior Subordinated Notes, and to
the extent known by the Company, the beneficial owners of the Senior
Subordinated Notes (collectively, the "Noteholders"), the Notes Tender Offer
Documents; provided, however, that prior to the dissemination thereof, the
Company shall consult with Parent with respect to the Notes Tender Offer
Documents and shall afford Parent reasonable opportunity to comment thereon.
Parent and the Acquiror shall provide the Company with any information for
inclusion in the Notes Tender Offer Documents which may be required under
applicable Law and which is reasonably requested by the Company. If at any
time prior to the acceptance of Senior Subordinated Notes pursuant to the
Notes Tender Offer any event should occur that is required by applicable Law
to be set forth in an amendment of, or a supplement to, the Notes Tender
Offer Documents, the Company will prepare and disseminate such amendment or
supplement; provided, however, that prior to such dissemination, the Company
shall consult with Parent with respect to such amendment or supplement and
shall afford Parent reasonable opportunity to comment thereon. The Company
will notify Parent at least 48 hours prior to the dissemination of the Notes
Tender Offer Documents, or 24 hours prior to the mailing of any amendment or
supplement thereto, to the Noteholders.
(d) At such time as the Company receives consents from
Noteholders holding at least a majority of the aggregate principal amount of
Senior Subordinated Notes, the Company agrees to execute, and to cause all of
the guarantors that are a party to the Senior Subordinated Notes Indenture to
execute, and will use reasonable best efforts to cause the trustee under the
Senior Subordinated Notes Indenture to execute, a supplemental indenture (the
"Supplemental Indenture") in order to give effect to the amendments of the
Senior Subordinated Notes Indenture contemplated in the Notes Tender Offer
Documents; provided, however, that notwithstanding the fact that the
Supplemental Indenture will become effective upon such execution, the
proposed amendments set forth therein (the "Proposed Amendments") will not
become operative unless and until the Minimum Notes Condition is satisfied or
waived and all other conditions to the Notes Tender Offer have been satisfied
or waived by the Company and the Company accepts the Senior Subordinated
Notes (and related consents) validly tendered for purchase and payment
pursuant to the Notes Tender Offer. In such event, the parties hereto agree
that the Proposed Amendments will be deemed operative as of immediately prior
to such acceptance for payment, and the Company will thereafter be obligated
to make all payments for the Senior Subordinated Notes (and related consents)
so tendered.
6.4. Real Property Holding Company. The Company shall provide to
Parent, at the Effective Time, a certificate from an officer of the Company,
signed under penalty of perjury, to the effect that the Company is not, and
has not been at any time during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
6.5. Change of Control Plan. Prior to the Effective Time, the
Board of Directors shall adopt a resolution that amends the Change of Control
Plan as set forth on Annex 6.5 hereto to the extent effective. Prior to the
Effective Time, the Company shall use its reasonable best efforts to obtain
the written consent of all senior management of the Company covered by the
Change of Control Plan to such amendment to the Change of Control Plan in the
form attached hereto as Exhibit E.
ARTICLE VII
COVENANTS OF PARENT AND ACQUIROR
Parent and Acquiror, jointly and severally, agree as set forth
below:
7.1. Director and Officer Liability.
(a) From and after the Effective Time, Parent shall cause
the Surviving Corporation to honor all of the Company's obligations to
indemnify and hold harmless the present and former officers and directors of
the Company in respect of acts or omissions occurring at or prior to the
Effective Time to the extent provided under the Company's Articles of
Incorporation and By-laws in effect on the date hereof (to the fullest extent
permitted by applicable Law), and shall not amend (in a manner adverse to
such present and former officers) the provisions relating to indemnification,
exculpation or the liability of directors in the Company's Articles of
Incorporation or By-laws for at least six (6) years after the Effective Time;
provided, however, that the Surviving Corporation shall have no obligation to
provide such indemnification to the extent that it is ultimately determined
that such indemnification is prohibited under applicable Law. In respect of
any matter for which a present or former director or officer may be entitled
to indemnification, subject to receipt by the Surviving Corporation of a
writing that sets forth (i) that such person has a good faith belief that the
person is entitled to indemnification and (ii) an undertaking from such
person to repay any amount advanced hereunder if it is ultimately determined
that the person is not entitled to indemnification, the Surviving Corporation
shall advance to such person all reasonable costs and expenses incurred by
him or her within twenty (20) days after receipt by the Surviving Corporation
of a written request for such advance. The Surviving Corporation shall not
require any security for any such undertaking. For a period of six (6) years
after the Effective Time, Parent shall cause the Surviving Corporation to
maintain the current policies of officers' and directors' liability insurance
maintained by the Company (the "Current Policies") (provided that the
Surviving Corporation may substitute therefore policies with reputable and
financially sound carriers of at least the same coverage and amount
containing terms and conditions that are no less favorable (the "Replacement
Policies")) in respect of acts or omissions occurring prior to the Effective
Time covering each such Person currently covered by such Current Policies;
provided, however, that in no event shall the Surviving Corporation be
required to expend, per annum, 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 if the
annual premium required to provide the foregoing insurance exceeds 200% of
the annual premium currently paid by the Company (which the Company
represents and warrants is equal to $1,200,000 per annum), the Company shall
provide as much of such insurance as can be purchased for such premium, and,
any present or former officer or director, upon reasonable written notice
thereof from the Surviving Corporation, who desires to be covered by the
Current Policies may so elect and shall be covered by the Current Policies so
long as such former offer or director pays the portion of the premium for
such Current Policies in excess of the amount which the Surviving Corporation
is obligated to pay pursuant to this Section 7.1. Alternatively, with the
consent of Parent, which consent shall not be unreasonably withheld, the
Company may purchase "tail" insurance coverage covering a period of six (6)
years after the Effective Time, at a cost no greater than that set forth
above, that provides coverage identical in all material respects to the
coverage described above. The insurance purchased pursuant to this Section
7.1 shall be prepaid at the Effective Time and shall be non-cancelable.
(b) This Section 7.1 shall survive the consummation of the
Merger and is intended to be for the benefit of, and shall be enforceable by,
present or former officers or directors, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
successors and assigns and the covenants and agreements contained herein
shall not be deemed exclusive of any other rights to which any present or
former officer or director is entitled, whether pursuant to Law, contract or
otherwise.
(c) If the Surviving Corporation or any of it successors or
assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each case, to the extent
reasonably necessary, proper provision shall be made so that the successors
and assigns of the Surviving Corporation shall assume the obligations set
forth in this Section 7.1.
(d) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to directors' and
officers' insurance claims under any policy that is or has been in existence
with respect to the Company or any of its officers, directors or employees,
it being understood and agreed that the indemnification provided for in this
Section 7.1 is not prior to or in substitution for any such claims under such
policies.
7.2. Transfer Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, applications,
questionnaires or other documents, regarding any real property transfer,
stamp, recording, documentary, gains, sales, use, value added, stock transfer
and any other fees and similar taxes which become payable in connection with
the Merger (collectively, "Transfer Taxes"). From and after the Effective
Time, the Surviving Corporation shall pay or cause to be paid all Transfer
Taxes.
7.3. Repayment of Debt. Parent or Acquiror shall take any and
all necessary action to provide the funds to, or to cause the funds to be
provided to, the Company to enable the Company to consummate the Notes Tender
Offer at the Effective Time, provided that the conditions to the Merger and
the Notes Tender Offer have been satisfied or waived.
7.4. Acknowledgment. If, having complied with its obligations
under Section 6.2, the Company receives an unsolicited Acquisition Proposal
prior to obtaining the Company Shareholder Approval and the Board of
Directors or the Special Committee of the Board of Directors determines,
after consultation with outside legal counsel and a financial advisor of
nationally recognized reputation, that such Acquisition Proposal constitutes
or could reasonably be expected to lead to a Superior Proposal, Parent and
Acquiror shall permit UBS (a) to enter into discussions and/or negotiations
with the Person making such Acquisition Proposal with respect to UBS
providing financing to such Person on substantially similar terms as the
terms available to Parent and Acquiror (i.e., on a "staple" basis) for such
Acquisition Proposal and (b) to provide financing commitment letters and
related financing to any Person, on substantially similar terms as the terms
available to Parent and Acquiror, who has made an Acquisition Proposal which
constitutes or could be reasonably be expected to lead to a Superior
Proposal.
7.5. Substitute Financing. If funds in the amounts set forth in
the Bank Commitment Letter, or any portion thereof, become unavailable to
Acquiror on the terms and conditions set forth therein, then Parent and
Acquiror shall use their commercially reasonable efforts to obtain substitute
financing on terms and conditions reasonably satisfactory to Parent and
Acquiror ("Substitute Financing").
ARTICLE VIII
COVENANTS OF PARENT, ACQUIROR AND THE COMPANY
The parties hereto agree as set forth below:
8.1. Efforts and Assistance/HSR Act.
(a) Subject to the terms and conditions hereof, each party
will use its commercially reasonable best efforts to take, or cause to be
taken, all actions, to file, or caused to be filed, all documents and to do,
or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement and the
Ancillary Agreements as promptly as practicable, including, without
limitation, obtaining all necessary consents, waivers, approvals,
authorizations, Permits or orders from all Governmental Entities or other
Third Parties. Each party shall also refrain from taking, directly or
indirectly, any action which would impair such party's ability to consummate
the Merger and the other transactions contemplated by this Agreement and the
Ancillary Agreements. Without limiting the foregoing, the Company shall use
commercially reasonable best efforts to (i) take all action necessary or
desirable so that no Takeover Statute or similar statute or regulation is or
becomes applicable to the Merger or any of the other transactions
contemplated by this Agreement and the Ancillary Agreements and (ii) if any
Takeover Statute or regulation becomes applicable to any of the foregoing,
take all action necessary so that the Merger and the other transactions
contemplated by this Agreement and the Ancillary Agreements may be
consummated as promptly as practicable on the terms contemplated in this
Agreement and/or the Ancillary Agreements, as the case may be, and otherwise
to minimize the effect of such statute or regulation on the Merger and such
other transactions. Each of the Company and Acquiror will use their
reasonable best efforts to ensure that neither the execution, delivery and
performance of this Agreement or any of the Ancillary Agreements nor the
consummation of the Merger or any of the other transactions contemplated
hereby or thereby constitute (a) a control share acquisition under Sections
60.801 through 60.816 of the OBCA or any applicable Takeover Statute or (b) a
prohibited business combination under Section 60.835 of the OBCA or any
applicable Takeover Statute.
(b) The Company, Parent and Acquiror shall cooperate with
one another in determining whether any action by or in respect of, or filing
with, any Governmental Entity is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any Material
Contracts, in connection with the consummation of the transactions
contemplated by this Agreement. Each of the Company, Parent and Acquiror
will, and will cause its respective Subsidiaries, if any, to take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, approval, waiver, authorization, order or approval
of, or any exemption by, any Governmental Entity or other public or private
Third Party required to be obtained or made by the Company, Parent and
Acquiror or any of their respective Subsidiaries, if any, in connection with
the Merger or the taking of any action contemplated by this Agreement or the
Ancillary Agreements.
(c) The Company, Parent and Acquiror shall furnish all
information required to be included in any application or other filing to be
made pursuant to the rules and regulations of any Governmental Entity in
connection with the transactions contemplated by this Agreement. Parent,
Acquiror and the Company shall have the right to review in advance, and to
the extent reasonably practicable each will consult the other on, all the
information relating to the other and each of their respective Subsidiaries,
that appears in any filing made with, or written materials submitted to, any
Third Party or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement or the Ancillary
Agreements.
(d) If required, each of the Company, Parent and Acquiror
shall take all reasonable action necessary to file as soon as practicable
notifications under the HSR Act and to respond as promptly as practicable to
any inquiries from the Federal Trade Commission and the Antitrust Division of
the Department of Justice for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received
from any state attorney general or other Governmental Entity in connection
with antitrust matters related to the Merger or the other transactions
contemplated by this Agreement and the Ancillary Agreements.
8.2. Shareholder Meeting/Proxy Statement and Schedule 13E-3.
(a) The Company, Parent and Acquiror shall use their
respective reasonable best efforts to take or cause to be taken such actions
as may be required to be taken under the Exchange Act, the Securities Act and
any other federal securities laws, and under any applicable state securities
or blue sky Laws in connection with the Merger and the other transactions
contemplated hereby and by the Ancillary Agreements.
(b) The Company shall duly provide notice to each record
holder of the outstanding Company Shares, and shall duly hold a meeting of
its Shareholders (the "Company Shareholder Meeting") as promptly as
practicable for the purpose of obtaining the Company Shareholder Approval,
and the Company shall use its best efforts to hold the Company Shareholder
Meeting as soon as practicable after the date on which the Company Proxy
Statement is cleared by the SEC. Nothing in this Section 8.2(b) shall be
deemed to prevent the Company from taking any action it is permitted to take
under, and in compliance with, Section 6.2 hereof.
(c) In connection with the Merger and the Company
Shareholder Meeting, the Company shall prepare and file with the SEC, as
promptly as practicable, a proxy statement relating to the Company
Shareholder Meeting (together with any amendments thereof or supplements
thereto and any other required proxy materials, the "Company Proxy
Statement") and a Rule 13E-3 Transaction Statement on Schedule 13E-3
(together with any amendments thereof or supplements thereto, the "Schedule
13E-3") relating to the Merger and the other transactions contemplated by
this Agreement and the Ancillary Agreements and shall use its reasonable best
efforts to respond to the comments of the SEC and to cause the Company Proxy
Statement to be mailed to the Company Shareholders as promptly as
practicable; provided, however, that prior to the filing of the Company Proxy
Statement and the Schedule 13E-3, the Company shall consult with Parent and
the Acquiror with respect to such filings and shall afford Parent and the
Acquiror reasonable opportunity to comment thereon. Parent and the Acquiror
shall provide the Company with any information for inclusion in the Company
Proxy Statement and the Schedule 13E-3 which may be required under applicable
Law and which is reasonably requested by the Company. The Company shall
promptly notify Parent and the Acquiror of the receipt of comments of the SEC
and of any request from the SEC for amendments or supplements to the Company
Proxy Statement or the Schedule 13E-3 or for additional information, and will
promptly supply Parent and the Acquiror with copies of all correspondence
between the Company or any of its Representatives, on the one hand, and the
SEC or members of its staff, on the other hand with respect to the Company
Proxy Statement, the Schedule 13E-3 or the Merger. If at any time prior to
the Company Shareholder Meeting any event should occur which is required by
applicable Law to be set forth in an amendment of, or a supplement to, the
Company Proxy Statement or the Schedule 13E-3, the Company will prepare and
mail such amendment or supplement; provided, however, that prior to such
mailing, the Company shall consult with Parent and the Acquiror with respect
to such amendment or supplement and shall afford Parent and the Acquiror
reasonable opportunity to comment thereon. The Company will notify Parent
and the Acquiror at least 48 hours prior to the mailing of the Company Proxy
Statement or any amendment or supplement thereto to the Company's
Shareholders. Subject to the provisions of Section 6.2 herein, the Company
Recommendation, together with a copy of the opinion referred to in Section
4.15(b), shall be included in the Company Proxy Statement.
(d) The Company represents and warrants that the Company
Proxy Statement and the Schedule 13E-3 will, in the case of the Schedule 13E-
3 as of the date thereof, the date of any amendment thereto, and as of the
time of the Company Shareholder Meeting, and, in the case of the Company
Proxy Statement, as of the time the Company Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the Company's Shareholders
and as of the time of the Company Shareholder Meeting, not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. The Company Proxy Statement and the Schedule 13E-3 will comply
as to form in all material respects with the provisions of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any statements made or incorporated by reference in
the Company Proxy Statement or the Schedule 13E-3 based on information
supplied by Parent or the Acquiror for inclusion or incorporation by
reference therein.
(e) Parent and the Acquiror represent and warrant that the
information supplied or to be supplied by Parent and the Acquiror in writing
for inclusion or incorporation by reference in the Company Proxy Statement or
the Schedule 13E-3 will, in the case of the Schedule 13E-3 as of the date
thereof, the date of any amendment thereto, and as of the time of the Company
Shareholder Meeting, and, in the case of the Company Proxy Statement, as of
the time the Company Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the Company's Shareholders, and as of the time of
the Company Shareholder Meeting, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Parent and the Acquiror make no representation or warranty with
respect to any statements made or incorporated by reference in the Company
Proxy Statement or Schedule 13E-3 based on information supplied by Company
for inclusion or incorporation by reference therein.
8.3. Public Announcements. So long as this Agreement is in
effect, the parties shall consult with each other before issuing any press
release or making any public statement with respect to this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby and
shall not issue any such press release or make any such public statement
without the prior consent of the other party, which shall not be unreasonably
withheld or delayed, except as may be required by applicable Law or any
listing agreement with any national securities exchange. Notwithstanding
anything in this Agreement to the contrary, the Company shall, as promptly as
practicable after the execution hereof, file or furnish to the SEC a current
report on Form 8-K which attaches as exhibits this Agreement and copies of
all executed financing commitment letters received by Parent and Acquiror and
delivered to the Company in connection with this Agreement.
8.4. Access to Information; Notification of Certain Matters.
(a) From the date hereof until the Effective Time and
subject to applicable Law, the Company shall (i) give to Parent, Acquiror and
their Representatives reasonable access during normal business hours to its
offices, properties, books and records; (ii) furnish or make available to
Parent, Acquiror and their Representatives any financial and operating data
and other information as those Persons may reasonably request; and (iii)
instruct its Representatives to cooperate with the reasonable requests of
Parent and Acquiror in their investigation. Any investigation pursuant to
this Section shall be conducted in a manner which will not interfere
unreasonably with the conduct of the business of the Company and its
Subsidiaries and shall be in accordance with any other existing agreements or
obligations binding on the Company or any of its Subsidiaries. Unless
otherwise required by Law, each of Parent and Acquiror will hold, and will
cause its respective Representatives to hold any nonpublic information
obtained in any investigation in confidence in accordance with and agrees to
be bound by, the terms of that certain confidentiality agreement, dated as of
February 10, 2004, as amended (the "Confidentiality Agreement"), between the
Company and LGP. No investigations pursuant to this Section 8.4(a) shall
affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
(b) The Company shall give prompt notice to Parent and
Acquiror, and Parent and Acquiror shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would reasonably be expected to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect; (ii) any failure of the
Company, Parent or Acquiror, as the case may be, to materially comply with or
satisfy, or the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would reasonably be expected to cause the failure by
such party to materially comply with or satisfy, any covenant, condition or
agreement to be complied with or satisfied by it hereunder; (iii) any notice
or other communication from any Third Party alleging that the consent of such
Third Party is or may be required in connection with the transactions
contemplated by this Agreement or any Ancillary Agreement; (iv) any actions,
suits, claims, investigations or proceedings commenced or, to the best of
such party's knowledge, threatened against, or affecting such party which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to this Agreement or which relate to the consummation of
the transactions contemplated hereby or by the Ancillary Agreements; and (v)
the occurrence of any event, development or circumstance which has had or
would be reasonably expected to result in a Company Material Adverse Effect
or Acquiror Material Adverse Effect; provided, however, that the delivery of
any notice pursuant to this Section 8.4(b) shall not limit or otherwise
affect the remedies available hereunder to the party giving or receiving such
notice.
(c) Parent, the Acquiror and their agents, shall have the
right, from time to time, prior to the Closing Date or earlier termination of
this Agreement, during normal business hours and after reasonable notice has
been provided, to enter upon the real property owned or leased by the Company
or any Company Subsidiary (collectively, the "Premises") for the purpose of
conducting visual inspections of the Premises, taking of measurements, making
of surveys and generally for the reasonable performance of a standard "Phase
I" investigation relating to the Premises, all at Acquiror's sole cost and
expense; provided, however, that Parent or the Acquiror shall (i) restore any
damage to the Premises or any adjacent property caused by such actions within
a reasonable time period after such entry; (ii) not unreasonably interfere
with the conduct of the business of the Company or any Company Subsidiary and
(iii) not conduct any soil borings, or groundwater testing or any other
"Phase II" testing without the prior written consent of the Company. Any
entry by Parent or the Acquiror onto the Premises shall be subject to, and
conducted in accordance with, any other existing agreements or obligations
binding on the Company or any Company Subsidiary and all applicable
Environmental Laws. Parent and the Acquiror shall keep the Premises free and
clear of any mechanic's or materialmen's liens arising out of any entry onto
or inspection of the Premises. Parent and the Acquiror shall not disturb the
Premises beyond what is reasonably necessary to conduct its investigations.
8.5. Further Assurances. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use their
respective best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement. At and after the
Effective Time, the officers and directors of the Surviving Corporation will
be authorized to execute and deliver, in the name and on behalf of the
Company or Acquiror, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of the Company or Acquiror, any
other actions and things to vest, perfect or confirm of record or otherwise
in the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger. The Company shall use reasonable efforts to cooperate with
and assist Acquiror in obtaining the Financing.
8.6. Disposition of Litigation. The Company will consult with
Parent and the Acquiror with respect to any action by any Third Party to
restrain or prohibit or otherwise oppose the Merger or the other transactions
contemplated by this Agreement or the Ancillary Agreements and, subject to
Section 6.2, will use reasonable best efforts to resist any such effort to
restrain or prohibit or otherwise oppose the Merger or the other transactions
contemplated by this Agreement or the Ancillary Agreements. Acquiror may
participate in (but not control) the defense of any shareholder litigation
against the Company and its directors relating to the transactions
contemplated by this Agreement at Acquiror's sole cost and expense (subject
to Section 10.2). In addition, subject to Section 6.2, the Company will not
voluntarily cooperate with any Third Party which has sought or may hereafter
seek to restrain or prohibit or otherwise oppose the Merger or the other
transactions contemplated by this Agreement and the Ancillary Agreements,
other than extending professional courtesies to such Third Party, and will
cooperate with Acquiror to resist any such effort to restrain or prohibit or
otherwise oppose the Merger or the other transactions contemplated by this
Agreement and the Ancillary Agreements.
8.7. Confidentiality Agreement. The parties acknowledge that the
Company and LGP entered into the Confidentiality Agreement, which shall be
deemed to be incorporated herein as if it were set forth in its entirety, and
which Confidentiality Agreement shall continue in full force and effect in
accordance with its terms until the earlier of (a) the Effective Time or (b)
the expiration of the Confidentiality Agreement according to its terms;
provided that, to the extent any provision of this Agreement or the Ancillary
Agreements permits Parent or Acquiror to take any action otherwise prohibited
under the Confidentiality Agreement, the terms of this Agreement or such
Ancillary Agreement shall prevail.
ARTICLE IX
CONDITIONS TO MERGER
9.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Acquiror to consummate the Merger are
subject to the satisfaction or waiver of the following conditions:
(a) the Company Shareholder Approval shall have been
obtained;
(b) any applicable waiting period or required approval under
the HSR Act, or any other similar applicable Law required prior to the
completion of the Merger, in connection with the Merger or the other
transactions contemplated by this Agreement or the Ancillary Agreements,
shall have expired or been earlier terminated or received; and
(c) no Governmental Entity of competent authority or
jurisdiction shall have issued any Law or taken any other action then in
effect, which restrains, enjoins or otherwise prohibits or makes illegal the
consummation of the Merger; provided, however, that the parties hereto shall
use their respective reasonable best efforts to have any such Law or other
legal restraint vacated.
9.2. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver of the following further conditions:
(a) (i) Parent and Acquiror shall have performed in all
material respects all of their obligations hereunder required to be performed
by them at or prior to the Effective Time, (ii) (A) the representations and
warranties of Parent and Acquiror contained in this Agreement that are
qualified by reference to materiality or an Acquiror Material Adverse Effect
shall be true and correct when made and at and as of the Effective Time, as
if made at and as of such time (provided that representations made as of a
specific date shall be required to be true and correct as of such date only),
(B) the representations and warranties of the Parent and Acquiror set forth
in Section 5.1, Section 5.2, Section 5.6 and Section 5.7 that are not
qualified by Acquiror Material Adverse Effect shall have been true and
correct in all respects when made and at and as of the Effective Time, as if
made as of such time (provided that representations made as of a specific
date shall be required to be true and correct as of such date only), and (C)
all other representations and warranties of Parent and Acquiror shall be true
and correct when made and at and as of the Effective Time as if made at and
as of such time (provided that representations made as of a specific date
shall be required to be true and correct as of such date only), except where
the failure of such representations and warranties to be so true and correct,
individually or in the aggregate, does not have, and is not reasonably likely
to have, an Acquiror Material Adverse Effect and (iii) the Company shall have
received a certificate signed by the Chief Executive Officer or President of
each of Parent and Acquiror to the foregoing effect;
(b) Parent shall have obtained or made all consents,
approvals, actions, orders, authorizations, registrations, declarations,
announcements and filings identified on Section 9.2(b) of the Company
Disclosure Schedule; provided, however, that this condition shall be deemed
satisfied if the failure of this condition is due to willful breach by the
Company of any of its material covenants in this Agreement; and
(c) since the date of this Agreement, there shall not have
occurred any change, event, occurrence, development or circumstance which,
individually or in the aggregate, constitutes or could reasonably be expected
to result in, an Acquiror Material Adverse Effect.
9.3. Conditions to the Obligations of Acquiror. The obligations
of Parent and Acquiror to consummate the Merger are subject to the
satisfaction or waiver of the following further conditions:
(a) (i) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at
or prior to the Effective Time, (ii) (A) the representations and warranties
of the Company contained in this Agreement that are qualified by reference to
materiality or a Company Material Adverse Effect shall be true and correct
when made and at and as of the Effective Time, as if made at and as of such
time (provided that representations made as of a specific date shall be
required to be true and correct as of such date only), (B) the
representations and warranties of the Company set forth in Section 4.1(a),
Section 4.2, Section 4.5, Section 4.6(b) and Section 4.15 that are not
qualified by Company Material Adverse Effect shall have been true and correct
in all respects (except, with respect to Section 4.5, for de minimus
deviations) when made and at and as of the Effective Time, as if made at and
as of such time (provided that representations made as of a specific date
shall be required to be true and correct as of such date only), and (C) all
other representations and warranties of the Company shall have been true and
correct when made and at and as of the Effective Time, as if made at and as
of such time (provided that representations made as of a specific date shall
be required to be true and correct as of such date only), except where the
failure of such representations and warranties to be so true and correct,
individually or in the aggregate, does not have, and is not reasonably likely
to have, a Company Material Adverse Effect and (iii) Parent shall have
received a certificate signed by the Chief Executive Officer of the Company
to the foregoing effect;
(b) there shall not be pending (i) any action or proceeding
by any Governmental Entity or (ii) any action or proceeding by any other
Person, in any case referred to in clauses (i) and (ii), before any court or
Governmental Entity that has a reasonable probability of success seeking (x)
to make illegal or to restrain or prohibit the consummation of the Merger or
the other transactions contemplated hereby or by the Ancillary Agreements or
seeking to obtain material damages, (y) to restrain or prohibit Parent's
(including its Affiliates) ownership or operation of all or any material
portion of the business or assets of the Company (including the Surviving
Corporation after the Effective Time) or any of its Subsidiaries, or to
compel Parent or any of its Affiliates (including the Surviving Corporation
after the Effective Time) to dispose of or hold separate all or any material
portion of the business or assets of the Company (including the Surviving
Corporation after the Effective Time) or its Subsidiaries, or (z) to impose
or confirm material limitations on the ability of Parent or any of its
Affiliates (including the Surviving Corporation after the Effective Time) to
effectively control the business or operations of the Company (including the
Surviving Corporation after the Effective Time) or any of its Subsidiaries or
effectively to exercise full rights of ownership of the Company Shares;
(c) since the date of this Agreement, there shall not have
occurred any change, event, occurrence, development or circumstance which,
individually or in the aggregate, constitutes or could reasonably be expected
to result in, a Company Material Adverse Effect;
(d) the Employment Agreement between the Acquiror and ▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall be in full force and effect, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be
ready, willing and able, absent a Default by Parent or Acquiror of the
Employment Agreement, to perform and provide his services in accordance with
the terms and conditions of his Employment Agreement;
(e) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have entered into and delivered to
Parent the agreements contemplated by, and performed all actions required by
him to consummate the transactions contemplated by, the Option Exchange and
Contribution Agreement;
(f) the financings and related transactions contemplated by
the Bank Commitment Letter (or in any Substitute Financing, if applicable),
including the repayment of the Company's and its Subsidiaries' indebtedness
as contemplated therein, and the release of any related liens shall have been
consummated on terms reasonably acceptable to Acquiror; provided, however,
that the terms of the Bank Commitment Letter and the terms of the Notes
Tender Offer are hereby deemed to be acceptable to Acquiror; and
(g) (i) immediately prior to the Effective Time, a principal
amount of Senior Subordinated Notes shall have been validly tendered and not
withdrawn pursuant to the Notes Tender Offer such that the Minimum Notes
Condition shall have been satisfied and (ii) the Company, Hollywood
Management Company and the trustee under the Senior Subordinated Notes
Indenture shall have executed and delivered the Supplemental Indenture and
(iii) the Company shall accept for payment the Senior Subordinated Notes
tendered pursuant to the Notes Tender Offer as of the Effective Time.
ARTICLE X
TERMINATION
10.1. Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by written notice,
whether before or after the Company Shareholder Approval shall have been
obtained (provided that, in the case of a termination by the Company under
this Section 10.1, such termination shall also have been approved by the
Special Committee):
(a) by mutual written agreement of Parent and the Company,
in each case duly authorized by their respective Boards of Directors;
(b) by either Parent or the Company, if
(i) the Merger shall not have been consummated by
October 15, 2004 (the "End Date"); provided, however, that
the right to terminate this Agreement under this Section
10.1(b)(i) shall not be available to any party whose breach
of any provision of this Agreement has resulted in the
failure of the Merger to occur on or before the End Date;
(ii) there shall be any Law that makes consummation
of the Merger illegal or otherwise prohibited or any
ruling, judgment, injunction, order or decree of any
Governmental Entity having competent jurisdiction enjoining
the Company or Acquiror from consummating the Merger is
entered and the ruling, judgment, injunction, order or
decree shall have become final and nonappealable and, prior
to that termination, the parties shall have used reasonable
best efforts to resist, resolve or lift, as applicable, the
Law, ruling, judgment, injunction, order or decree;
provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(b)(ii) shall not be
available to any party whose breach of any provision of
this Agreement results in the imposition of such ruling,
judgment, injunction, order or decree or the failure of
such ruling, judgment, injunction, order or decree to be
resisted, resolved or lifted, as applicable; or
(iii) at the Company Shareholder Meeting or any
adjournment thereof at which this Agreement has been voted
upon, the Company Shareholder Approval shall not have been
obtained;
(c) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of Parent or
Acquiror set forth in this Agreement shall have occurred which would cause
any of the conditions set forth in Section 9.2(a) not to be satisfied, and
such condition shall either be incapable of being satisfied by the End Date
or is not cured within ten (10) Business Days after notice from the Company;
provided, however, that the Company shall not also then be in material breach
of this Agreement;
(d) by Parent, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement shall have occurred which would cause any of the
conditions set forth in Section 9.3(a) not to be satisfied, and such
condition is either incapable of being satisfied by the End Date or is not
cured within ten (10) Business Days after notice from the Parent; provided,
however, that Parent or Acquiror shall not also then be in material breach of
this Agreement;
(e) by Parent, if:
(i) the Company shall have breached any of its
obligations under Section 6.2 (other than immaterial and
inadvertent breaches of Section 6.2(b)) or Section 8.2
(other than breaches which are cured within five (5)
Business Days after notice from Parent) of this Agreement,
(ii) the Board of Directors of the Company shall (A)
withdraw, modify, condition or qualify the Company
Recommendation in a manner adverse to Parent or Acquiror,
(B) approve or recommend to the Company Shareholders an
Acquisition Proposal (other than by Parent, Acquiror or
their Affiliates), (C) approve or recommend that the
Company Shareholders tender their Company Shares in any
tender or exchange offer that is an Acquisition Proposal
(other than by Parent, Acquiror or their Affiliates), or
(D) approve a resolution or agree to do any of the
foregoing;
(iii) any Person or group (other than Parent,
Acquiror or their Affiliates) acquires Beneficial Ownership
of a majority of the outstanding Company Shares; or
(iv) any other Third Party Acquisition shall have
occurred; or
(f) by the Company, if (i) the Company concurrently enters
into a definitive agreement for a Superior Proposal in accordance with, and
has otherwise complied with, all provisions of Section 6.2 hereof and (ii)
concurrently with such termination, the Company shall have paid Parent the
Termination Fee and the Parent Expense Reimbursement Amount in accordance
with Section 10.2.
The party desiring to terminate this Agreement pursuant to
Sections 10.1(b) through (f) shall give written notice of such termination to
the other party in accordance with Section 11.1 of this Agreement; provided
that no termination by the Company shall be effective unless and until the
Company shall have paid any Termination Fee and/or Parent Expense
Reimbursement Amount required to be then paid by it pursuant to Section 10.2
of this Agreement.
10.2. Effect of Termination.
(a) In the event of termination of this Agreement by either
the Company or Acquiror as provided in Section 10.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of the Company or Acquiror or their respective Subsidiaries, officers or
directors except (i) with respect to Section 8.3, Section 8.7, this Section
10.2 and Article XI and (ii) with respect to any liabilities for damages
incurred or suffered by a party as a result of the willful and material
breach by the other party of any of its representations, warranties,
covenants or other agreements set forth in this Agreement or any Ancillary
Agreement.
(b) The Company agrees that if this Agreement is terminated
prior to the Effective Time as a consequence of a failure or non-waiver of
any condition contained in Section 9.3(a) or Section 9.3(c) or pursuant to
Section 10.1(b)(iii), Section 10.1(d), Section 10.1(e) or Section 10.1(f),
then the Company shall pay Acquiror an amount equal to the Parent Expense
Reimbursement Amount. Payment of the Parent Expense Reimbursement Amount
pursuant to this Section 10.2(b) shall be made not later than five (5)
Business Days after Parent has delivered to the Company a notice of demand
for payment and a documented itemization setting forth in reasonable detail
all expenses for which it seeks payment (which itemization may be
supplemented and updated from time to time until the thirtieth (30th) day
after Parent delivers notice of demand for payment).
(c) In addition to any payment required by Section 10.2(b)
and notwithstanding any other provision of this Agreement, the Company and
Parent agree that:
(i) if this Agreement is terminated pursuant to
Section 10.1(e)(i), Section 10.1(e)(ii), Section
10.1(e)(iii) or Section 10.1(f) then the Company shall
immediately pay to Parent the Termination Fee;
(ii) if this Agreement is terminated pursuant to
Section 10.1(b)(iii) or Section 10.1(d) then, in the event
that, prior to such termination, (A) any Third Party
Acquisition occurs or (B) any Third Party shall have
publicly made, proposed, communicated or disclosed an
intention to make a bona fide Acquisition Proposal (or such
Acquisition Proposal becomes publicly known) which, in the
event of a termination pursuant to Section 10.1(d), could
reasonably be expected to lead to a Superior Proposal, the
Company shall immediately pay to Parent the Termination
Fee;
(iii) if (A) this Agreement is terminated pursuant to
Section 10.1(b)(iii) or Section 10.1(d) and (B) no
Termination Fee has been paid by the Company to Parent and
(C) within twelve (12) months following such termination,
(1) the Company enters into a definitive agreement with
respect to an Acquisition Proposal or (2) any Third Party
Acquisition occurs, then the Company shall immediately pay
to Parent the Termination Fee upon the first to occur of
the events described in clause (C)(1) and (C)(2) of this
sentence; and
(iv) if (A) this Agreement is terminated pursuant to
Section 10.1(b)(i) (provided that at the time of such
termination pursuant to Section 10.1(b)(i), the conditions
precedent in Section 9.1(b), Section 9.3(f) and Section
9.3(g) shall have been satisfied and the reason for the
Closing not having previously occurred shall not be the
failure to satisfy the conditions precedent set forth in
Section 9.2 through no fault of the Company) and (B) prior
to such termination, (1) any Third Party Acquisition occurs
or (2) any Third Party shall have publicly made, proposed,
communicated or disclosed an intention to make a bona fide
Acquisition Proposal, or such Acquisition Proposal becomes
publicly known and (C) no Termination Fee has been paid by
the Company to Parent and (D) within twelve (12) months
following such termination, (1) the Company enters into a
definitive agreement with respect to an Acquisition
Proposal or (2) any Third Party Acquisition occurs, then
the Company shall immediately pay to Parent the Termination
Fee upon the first to occur of the events described in
clause (D)(1) and (D)(2) of this sentence. Solely for
purposes of Sections 10.2(c)(ii), (iii) and (iv) hereof,
all references to 15% in the definition of the term
"Acquisition Proposal" shall be deemed to be 20%.
(d) Notwithstanding anything in this Section 10.2 to the
contrary, the Company shall not be required to pay any Termination Fee and/or
Parent Expense Reimbursement Amount to Parent in the event this Agreement is
terminated by Parent as a result of the condition in Section 9.3(d) or
Section 9.3(e) becoming incapable of being satisfied due to the death or
"Disability" (as that term is defined in the Employment Agreement) of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
10.3. Fees and Expenses. Except as otherwise specifically
provided herein, all fees and expenses incurred in connection herewith and
the transactions contemplated hereby shall be paid by the party incurring
such fees and expenses, whether or not the Merger is consummated.
ARTICLE XI
MISCELLANEOUS
11.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given,
if to Parent or Acquiror, to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: 310-954-0404
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
if to the Company, to:
Hollywood Entertainment Corporation
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
and
Stoel Rives LLP
Standard Insurance Center
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or such other address or facsimile number as a party may hereafter specify
for the purpose by notice to the other parties hereto. Each notice, request
or other communication shall be effective only (a) if given by facsimile,
when the facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (b) if
given by overnight courier or personal delivery when delivered at the address
specified in this Section.
11.2. Survival. None of the representations, warranties,
covenants or agreements in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time; provided,
however, that this Section 11.2 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time, including, but not limited to, those covenants in Articles 2, 3, 7 and
11 which contemplate performance after the Effective Time.
11.3. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time, if, and only if, the amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Parent and
Acquiror, or in the case of a waiver, by the party against whom the waiver is
to be effective. No amendment or waiver shall be binding on the Company
unless approved by the Special Committee.
(b) At any time prior to the Effective Time, Parent and the
Company may with respect to the other party (a) extend the time for the
performance of any of the obligations or other acts of such other party and
(b) waive any inaccuracies in the representations and warranties of such
other party contained herein or in any document delivered pursuant hereto.
No such extension or waiver shall be deemed or construed as a continuing
extension or waiver on any occasion other than the one on which such
extension or waiver was granted or as an extension or waiver with respect to
any provision of this Agreement not expressly identified in such extension or
waiver on the same or any other occasion. No failure or delay by any party
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by Law.
11.4. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that all or any
of the rights or obligations of Acquiror may be assigned to any direct or
indirect wholly-owned Subsidiary of Acquiror (which assignment shall not
relieve Acquiror of its obligations hereunder); provided, further, that other
than with respect to the foregoing proviso, no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto. Any purported assignment in
violation hereof shall be null and void.
11.5. Counterparts; Effectiveness; Third Party Beneficiaries.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all
of the other parties hereto. Except as set forth in Sections 3.3, 3.4 or
7.1, no provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
11.6. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal Laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware, except to the extent that the Merger is mandatorily governed by the
laws of the State of Oregon.
11.7. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby
shall be brought exclusively in the Court of Chancery of the State of
Delaware, County of New Castle or, if such court does not have jurisdiction
over the subject matter of such proceeding or if such jurisdiction is not
available, the United States District Court for the District of Delaware, and
each of the parties hereby consents to the exclusive jurisdiction of those
courts (and of the appropriate appellate courts therefrom) in any suit,
action or proceeding and irrevocably waives, to the fullest extent permitted
by Law, any objection which it may now or hereafter have to the laying of the
venue of any suit, action or proceeding in any of those courts or that any
suit, action or proceeding which is brought in any of those courts has been
brought in an inconvenient forum. Process in any suit, action or proceeding
may be served on any party anywhere in the world, whether within or without
the jurisdiction of any of the named courts. Without limiting the foregoing,
each party agrees that service of process on it by notice as provided in
Section 11.1 shall be deemed effective service of process.
11.8. Entire Agreement. This Agreement (together with the
exhibits and schedules hereto), the Ancillary Agreements and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both oral and written, between the parties with respect
to the subject matter hereof.
11.9. Authorship. The parties agree that the terms and language
of this Agreement were the result of negotiations between the parties and, as
a result, there shall be no presumption that any ambiguities in this
Agreement shall be resolved against any party. Any controversy over
construction of this Agreement shall be decided without regard to events of
authorship or negotiation.
11.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
11.11. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
11.12. Headings; Construction. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement (a) words
denoting the singular include the plural and vice versa, (b) "it" or "its" or
words denoting any gender include all genders, (c) the word "including" shall
mean "including without limitation," whether or not expressed, (d) any
reference herein to a Section, Article, Paragraph, Clause or Schedule refers
to a Section, Article, Paragraph or Clause of or a Schedule to this
Agreement, unless otherwise stated, and (e) when calculating the period of
time within or following which any act is to be done or steps taken, the date
which is the reference day in calculating such period shall be excluded and
if the last day of such period is not a Business Day, then the period shall
end on the next day which is a Business Day.
[Signature Page Follows]
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
HOLLYWOOD ENTERTAINMENT CORPORATION, an
Oregon corporation
/s/ F. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By: F. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: President and Chief Operating
Officer
COSAR CORPORATION, an Oregon corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice Predient
CARSO HOLDINGS CORPORATION, a Delaware
corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President