1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 8, 2000
BY AND AMONG
SCI ACQUISITION INC.
AND
SWISS CHALET, INC.
2
AGREEMENT AND PLAN OF MERGER, dated as of May 8, 2000, by and between
SCI Acquisition Inc. ("Purchaser"), a corporation organized under the laws of
the Commonwealth of Puerto Rico (the "Commonwealth"), and Swiss Chalet, Inc.
(the "Company"), a corporation organized under the laws of the Commonwealth.
WITNESSETH:
WHEREAS the respective Boards of Directors of Purchaser and the Company
have determined that it is in the best interests of Purchaser and the Company
and their respective stockholders to combine their respective businesses through
the merger (the "Merger") of Purchaser with and into the Company, on the terms
and conditions set forth in this Agreement; and
WHEREAS, as a result of the Merger, all the outstanding shares of
Common Stock, no par value, of the Company ("Company Common Stock") will be
converted into the right to receive (i) an aggregate amount of $17,700,000, or
$12.63237227 per share in cash on account of the Merger, (ii) the Extraordinary
Distribution, as defined below, and (iii) any Contingency Escrow Consideration,
as defined in Section 1.6(e), subject to the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, promises and obligations contained herein, the parties hereto agree
as follows:
1
3
ARTICLE I
THE MERGER
1.1. The Merger.
(a) At the Effective Time (as defined in Section 1.1(b)),
Purchaser shall merge with and into the Company, and the separate existence of
Purchaser shall cease. The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the separate corporate existence of the Company, with all its rights, privileges
and franchises, shall continue unaffected by the Merger. The Merger shall be
pursuant to and have the effects specified in the Puerto Rico General
Corporation Law of 1995 (the "Corporation Law"). The Charter and Bylaws of the
Company, as amended at the Effective Time (as defined in Section 1.1(b)) to
reflect the authorized capital of Purchaser, shall be the Charter and the Bylaws
of the Surviving Corporation until further amended as provided therein. The
directors and officers of Purchaser at the Effective Time shall be the directors
and officers of the Surviving Corporation until their successors are elected and
qualified.
(b) On a date selected by Purchaser, which shall be no later
than the 30th day following the satisfaction or waiver of the conditions set
forth in Article 6, the parties hereto shall cause this Agreement or a
certificate of merger to be properly filed in the office of the Secretary of
State of the Commonwealth in accordance with the Corporation Law. The Merger
shall become effective at the time (the "Effective Time") this Agreement or a
certificate of merger is properly filed in accordance with the
2
4
Corporation Law. The date on which the Effective Time shall
occur is herein referred to as the "Effective Date").
(c) Purchaser shall have the right, subject to Section 7.4, to
require the amendment of this Agreement to provide that Purchaser, and not the
Company, shall be the Surviving Corporation in the Merger, and the Company
agrees to execute such amendment in the event of any such request by Purchaser.
In the event any such amendment is executed after the stockholders of the
Company shall have approved the Merger, no additional stockholder approval shall
be required for such amendment.
1.2. Effect of the Merger on Outstanding Shares of Company Common
Stock. Subject to the terms and conditions of this Agreement, to effectuate, and
automatically by virtue of, the Merger:
(a) (i) At the Effective Time, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares held as treasury stock of the Company) ("Outstanding Shares") shall
become and be converted into the right to receive (i) $12.63237227 in cash (the
"Consideration") (which amount is based on an aggregate amount of Consideration
equal to $17,700,000 and 1,401,162 shares outstanding) on account of the Merger,
(ii) the Extraordinary Distribution (calculated on a per share basis), and (iii)
any Contingency Escrow Consideration (calculated on a per share basis);
(ii) Notwithstanding any other provision hereof,
if the Company effects a stock dividend, extraordinary dividend
or distribution (other than as contemplated by Section 1.4),
3
5
reclassification, recapitalization, split-up, combination, exchange of shares or
similar transaction after the date hereof and before the Effective Time, the
Consideration shall be appropriately adjusted.
(iii) At the Effective Time, each share of Company
Common Stock that, immediately prior to the Effective Time, is held as treasury
stock of the Company shall by virtue of the Merger be cancelled and retired and
shall cease to exist, and no exchange or payment shall be made thereof.
(b) Not later than the 30th day prior to the anticipated
Effective Date or such other date as the parties may agree in writing (the
"Mailing Date"), Purchaser shall mail a letter of transmittal, substantially in
the form of Exhibit 1.2, to each person that was a holder of record of Company
Common Stock immediately prior to the Mailing Date. The letter of transmittal
shall be used by holders of Company Common Stock to surrender the certificates
representing shares of Company Common Stock prior to the Effective Time ("Old
Certificates") in exchange for the Consideration, and must be accompanied by
such Old Certificates.
1.3. Effect of Merger of Outstanding Shares of Capital Stock of
Purchaser. At and after the Effective Date, each share of Purchaser's common
stock issued and outstanding immediately prior to the Effective Date shall
remain an issued and outstanding share of common stock of the Surviving
Corporation and shall not be affected by the Merger.
1.4. Extraordinary Distribution.
4
6
(a) Immediately prior to the Effective Time, and subject to
the terms of this Section 1.4 and compliance with all laws, regulations and
regulatory policies, the Company may declare and pay an extraordinary cash
distribution (the "Extraordinary Distribution") in an amount equal to its
available cash after deducting the amount necessary
(i) to fund a cash reserve (the "Cash Reserve") of
(A) $400,000, in the event that Purchaser is provided with evidence of the
satisfaction of the claim for property taxes on property number
040-050-191-35-901, or (B) $575,000, in the event that Purchaser is not provided
with such evidence, which Cash Reserve the Company will maintain at such level
until after the consummation of the Merger and which will remain the property of
the Surviving Corporation after the consummation of the Merger,
(ii) to fund the Contingency Escrow contemplated
by Section 1.6,
(iii) to fund an additional cash reserve in an
amount certified by the Company to be sufficient to pay any declared but unpaid
dividends, including dividends payable to stockholders with unknown addresses,
which reserve will remain the property of the Surviving Corporation after the
consummation of the Merger,
(iv) to fund an additional cash reserve (the
"Liability Reserve"), which will remain the property of the Surviving
Corporation after the Effective Time, to pay any long-term liability of the
Company existing at the Effective Time (A) which is of the type required to be
included in a balance sheet in accordance with U.S. generally accepted
accounting principles,
5
7
(B) which was not reflected on the April 30, 1999 balance sheet of the Company,
(C) which will remain outstanding at the Effective Time, (D) for which an asset
of equal value that was not reflected on such April 30, 1999 balance sheet will
not exist on the Closing Date Balance Sheet (as defined below), and (E) which,
in the case of a liability in an amount in excess of $100,000 that is not
voluntarily incurred by the Company, the Company consents at the Effective Time
to include for purposes of calculating the Liability Reserve,
(v) to fund any payment due or to become due to
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Mr. B. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and any other
officer of the Company referred to in Schedule 3.14(b) under their agreements
with the Company (including the non-qualified deferred compensation plan
referred to in Schedule 3.14(b)), and
(vi) to fund the payment of accrued unpaid taxes
payable with respect to the fiscal year ending April 30, 2000 and the period
from May 1, 2000 to the Effective Date, it being agreed that no provision or
deposit will be made hereunder, or in the Contingency Escrow or the Liability
Reserve, with respect to income or property tax contingencies identified on or
prior to the date hereof by Purchaser's due diligence investigation.
(b) The amount, if any, of the Liability Reserve shall be
determined on the basis of a balance sheet and supporting documentation prepared
by the Company as of the Effective Date (the "Closing Date Balance Sheet"),
which shall take into consideration the latest financial information available
to the Company. Ten days prior to the Effective Date, the Company shall
6
8
provide to the Purchaser a projected Closing Date Balance Sheet and supporting
documentation.
(c) In the event that the Company does not consent at the
Effective Time to take into consideration a liability described in clause
(a)(iv)(E) above for purposes of calculating the Liability Reserve, the
Purchaser may terminate this Agreement pursuant to Section 7.1(i).
(d) The amount of the Extraordinary Distribution shall be
delivered at the Effective Time by the Company to the Exchange Agent mentioned
in Section 1.5 and distributed to shareholders together with the Consideration.
(e) The amount of the reserves described in clauses (i)
through (vi) of Section 1.4(a) shall not exceed the Company's available cash
(including cash equivalents and securities) on the Effective Date.
1.5. Appointment of Exchange Agent. Purchaser and the Company shall
appoint an exchange agent (the "Exchange Agent") to effect the exchange of Old
Certificates for the Consideration and shall enter into an escrow agreement with
the Exchange Agent that incorporates the terms hereof. Any fees and expenses of
the Exchange Agent payable prior to the Effective Time will be paid 85% by
Purchaser and 15% by the Company. On the Effective Date, Purchaser shall
transfer to the Exchange Agent an amount equal to the aggregate amount of the
Consideration minus the amount of the Deposit described in Section 1.9 in
immediately available funds. The Exchange Agent shall be a bank mutually agreed
by the Company and Purchaser with offices in Puerto Rico and the United States.
7
9
1.6. Establishment of Contingency Escrow.
(a) Prior to the declaration and payment of the Extraordinary
Distribution, (i) the Company and Purchaser shall establish by mutual agreement
an escrow account (the "Contingency Escrow") with the same entity acting as
Exchange Agent and shall enter into an escrow agreement (the "Contingency Escrow
Agreement") with such entity incorporating the relevant terms hereof, and (ii)
the Company shall transfer to such escrow account an amount agreed to between
the Company and Purchaser.
(b) The Company shall withdraw funds from the Contingency
Escrow from time to time at any time prior to the 18- month anniversary of the
Effective Date, to pay material contingent liabilities identified in writing by
Purchaser and the Company on or prior to the Effective Date, which material
contingent liabilities are not reflected on the audited balance sheet of the
Company as of April 30, 1999, and not reserved for in the Liability Reserve, and
which relate to events occurring or conditions existing prior to the Effective
Date. These material contingent liabilities shall include any material
contingent liabilities arising from or constituting a breach of any of the
representations made by the Company herein, and any other material contingent
liability identified in writing by Purchaser as a result of its labor, employee
benefit, financial and environmental due diligence investigation of the Company
after the date hereof and agreed to by the Company (it being understood that,
for purposes of this Section 1.6, contingent liabilities involving less than
$5,000 individually or less than $100,000 in the aggregate shall not be
considered material).
8
10
(c) The parties agree to negotiate in good faith the amount of
the Contingency Escrow. In the event that the Purchaser and the Company cannot
agree as to the amount of the Contingency Escrow, the Purchaser shall have the
option of terminating this Agreement pursuant to Section 7.1(i) or agreeing to
the amount proposed by the Company.
(d) Any proceeding relating to any claim reserved for in the
Contingency Escrow shall be administered, and monies therein may be withdrawn by
the Company, as provided in the Contingency Escrow Agreement.
(e) Any funds remaining in the Contingency Escrow on the
18-month anniversary of the Effective Date and not applied to pay contingencies
as provided in clauses (b) and (d) above, including any interest earned on such
funds, shall be considered additional Consideration ("Contingency Escrow
Consideration") and shall be distributed pro rata to the persons who were the
holders of record of Company Common Stock immediately prior to the Effective
Date, provided such persons have surrendered their Old Certificates. Any funds
in the Contingency Escrow, including any interest earned on such funds, relating
to Old Certificates that have not been surrendered shall be transferred to the
Surviving Corporation in accordance with Section 1.7(d).
1.7. Additional Exchange Procedures.
(a) At and after the Effective Time, each Old Certificate, and
each share of Company Common Stock represented thereby, shall represent for all
purposes only the right to receive Consideration as provided herein, and nothing
else.
9
11
(b) If any Consideration is to be issued to a person other
than the registered holder of the shares of Company Common Stock formerly
represented by the Old Certificate or Certificates surrendered with respect
thereto, it shall be a condition to such issuance that the Old Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result of such issuance
to a person other than the registered holder of such shares of Company Common
Stock or shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not payable.
(c) At and after the Effective Time, there shall be no further
registration or transfers of shares of Company Common Stock, and the stock
ledgers of the Company shall be closed. After the Effective Time, Old
Certificates presented to the Surviving Corporation for transfer shall be
cancelled and exchanged for the Consideration provided for, and in accordance
with the procedures set forth, in this Article 1.
(d) On the six-month anniversary of the Effective Date, the
Exchange Agent shall transfer to the Company the balance of the funds held by it
corresponding to former holders of Company Common Stock who have not delivered
Old Certificates to the Exchange Agent in accordance with this Article 1 prior
to that time. The Surviving Corporation shall continue to exchange Old
Certificates in accordance with this Article 1 until the second anniversary of
the Effective Date, at which time, to the extent permitted by law, such funds
may be retained by the Company free and clear of the claims of such former
holders.
10
12
(e) None of the Company, the Surviving Corporation, Purchaser
and the Exchange Agent, or any of their respective current or former directors,
shall be liable to any former holder of Company Common Stock for any securities
delivered or any cash paid to a public official pursuant to applicable escheat
or abandoned property laws or for any securities or cash retained by any of them
as permitted by any such law or by this Agreement. The Surviving Corporation
shall indemnify any current or former director of the Company for any expenses
incurred as a result of any claim by a former Company stockholder arising from
Section 1.7(d).
(f) Except as set forth in Section 1.6 with respect to
interest on the Contingency Escrow, no interest will be paid or accrued on the
Consideration.
(g) In the event that any Old Certificate shall have been
lost, stolen or destroyed, the Exchange Agent shall pay in respect of such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, the Consideration as may be provided pursuant to this
Agreement; provided, however, that each of Purchaser and the Surviving
Corporation may, in its discretion and as a condition precedent to the payment
thereof, require the owner of such lost, stolen or destroyed certificate to
deliver a bond in such sum as it may direct as indemnity against any claim that
may be made against Purchaser, the Company, the Exchange Agent or any other
party with respect to the certificate alleged to have been lost, stolen or
destroyed.
11
13
(h) The amount payable to a shareholder in exchange for his
Old Certificates shall be rounded down to the nearest dollar.
1.8. Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, if holders of shares of Company Common Stock are entitled to
demand appraisal for their shares under the Corporation Law, the following shall
apply:
(i) Any shares of Company Common Stock held by a holder who
has demanded appraisal of his shares and as of the Effective Date has neither
effectively withdrawn nor lost his right to such appraisal (the "Dissenting
Shares") shall not be converted in the manner set forth in Section 1.2, but the
holder thereof shall only be entitled to such rights as are granted by the
Corporation Law.
(ii) If after the Effective Date any holder of Dissenting
Shares shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to appraisal, then such Dissenting Shares shall be
converted into Consideration.
1.9. Deposit. Simultaneously with the execution of this Agreement,
Purchaser has deposited $250,000 (the "Deposit") in immediately available funds
with an escrow agent in accordance with the Escrow Agreement included as Exhibit
1.9. If the Merger is consummated, the Deposit shall be transferred to the
Exchange Agent and shall be used as part of the Consideration. If the Merger is
not consummated and this Agreement is terminated in accordance with its
provisions because Purchaser is unable to obtain the financing required, because
Purchaser breaches any of its covenants or representations herein, or because
Purchaser
12
14
refuses to consummate the Merger after all conditions precedent to its
obligations have been satisfied, Purchaser shall forfeit the Deposit and the
Company may keep the Deposit. Otherwise, the Deposit shall be returned to
Purchaser upon the termination of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
2.1. Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth (the "Commonwealth"), and it has the requisite corporate power to
carry on its business as now conducted.
2.2. Authority Relative to this Agreement; Non- Contravention.
Purchaser has the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery and performance of
this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by its Board of
Directors, and no other corporate proceedings on its part are necessary to
authorize this Agreement and such transactions. This Agreement has been duly
executed and delivered by Purchaser and constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms. Purchaser is
not subject to, or obligated under, any
13
15
provision of (a) its Charter or Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit or (d) subject to obtaining
the approvals referred to in the next sentence, any law, regulation, order,
judgment or decree, which would be breached or violated, or in respect of which
a right of termination or acceleration or any encumbrance on any of its assets
would be created, by its execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby. Other than
the filing of this Agreement in accordance with the Corporation Law, compliance
with and filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
if applicable, and the consent of the Government of Puerto Rico to the change of
control of the Company in connection with the Company's tax exemption concession
(the "Requisite Approvals"), no authorization, consent or approval of, or filing
with, any public body, court or authority is necessary on its part for the
consummation by Purchaser of the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
3.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Corporation Law and
it has the requisite corporate power and authority to carry on its business as
now conducted. The copies of the Charter and Bylaws of the Company which have
been made available to Purchaser on or prior to the date of this
14
16
Agreement are correct and complete and reflect all amendments made thereto
through such date. The Company is licensed or qualified to do business in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be so licensed or qualified.
3.2. Authority Relative to this Agreement; Non- Contravention. The
Company has the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and, subject to obtaining
shareholder approval, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company (the "Company's Board")
and, except for approval of this Agreement and the Merger by the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock, no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement and such transactions. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
is not subject to, or obligated under, any provision of (a) its Charter or
Bylaws, (b) any agreement, arrangement or understanding, (c) any license,
franchise or permit or (d) to the best of its knowledge any law, regulation,
order, judgment or decree, which would be breached or violated, or in respect of
which a right of termination or acceleration or any encumbrance on any assets of
the Company would be created, by the execution, delivery or performance of this
Agreement, or the consummation of the transactions contemplated hereby. Other
than in connection with obtaining the Requisite Approvals and the
15
17
filing of a proxy or information statement and Rule 13e-3 Transaction Statement
(if applicable) with the Securities and Exchange Commission (the "SEC"), to the
best of its knowledge no authorization, consent or approval of, or filing with,
any public body, court or authority, or any other person, is necessary on the
part of the Company for the consummation by the Company of the transactions
contemplated by this Agreement.
3.3. Capitalization.
(a) The authorized, issued and outstanding capital stock of
the Company as of the date hereof is as follows: 4,000,000 authorized shares of
Company Common Stock, of which 1,401,162 are outstanding. The issued and
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and have not been issued in violation of
any preemptive or similar rights. There are no options, warrants, conversion
privileges, preemptive rights or other rights, agreements, arrangements or
commitments ("Rights") obligating the Company to issue, sell, purchase or redeem
any shares of its capital stock or securities or obligations of any kind
convertible into or exchangeable for any shares of its capital stock, nor are
there any stock appreciation, phantom or similar rights outstanding based upon
the book or market value or any other attribute of any of the capital stock of
the Company, or the earnings or other attributes of the Company.
(b) No bonds, debentures, notes or other indebtedness of the
Company having the right to vote on or approve any of the transactions
contemplated hereby ("Voting Debt") are issued or outstanding.
16
18
3.4. [Reserved]
3.5. Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.5, all the material obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
and regardless of when asserted), including Taxes (as defined in Section 3.9)
(collectively, "Liabilities"), required to be reflected or reserved against in
the Company's audited balance sheet as of April 30, 1999 (the "1999 Balance
Sheet"), or in the notes thereto, in accordance with generally accepted
accounting principles have been so reflected. The Company has no other material
Liabilities, except: (a) Liabilities (other than for borrowed money) which have
arisen in the ordinary course of business after the date of the 1999 Balance
Sheet (which Liabilities will be reflected on the Closing Date Balance Sheet),
and (b) as otherwise set forth on Schedule 3.5.
3.6. Absence of Certain Developments. Except as set forth on Schedule
3.6, the Company has not agreed, promised or committed to take any action that,
if taken or agreed, promised or committed to after the date hereof, would
violate or conflict with Section 4.1 hereof.
3.7. Properties.
(a) The Company owns good, marketable and insurable title to
all the real property and all the personal property, fixtures, furniture and
equipment reflected on the 1999 Balance Sheet or acquired since the date
thereof, free and clear of any liens, pledges, security, interests, encumbrances
or charges of any kind, except for (i) liens for current taxes and special
17
19
assessments not yet due and payable, (ii) those identified on Schedule 3.7(a),
(iii) property disposed of since the date of the 1999 Balance Sheet in the
ordinary course of business, and (iv) utility easements. The real property owned
by the Company includes a 184-room hotel in an approximately 2.6 acre site
located at De Diego Avenue and Loiza Street in San ▇▇▇▇, Puerto Rico, and
comprised of several adjacent parcels that include the hotel, its supporting
facilities, several retail establishments (including Tradicione Francaise and
Metropol), a theater building, and two parking lots. The Company appears as the
record owner of all such real property in the Registry of Property of Puerto
Rico.
(b) Except as set forth in Schedule 3.7(b), all the buildings,
fixtures, furniture and equipment necessary for the conduct of the business of
the Company are usable in the ordinary course of business. The Company owns all
buildings, fixtures, furniture, personal property, land improvements and
equipment necessary for the conduct of its business as it is presently being
conducted.
3.8. Environmental Matters. Except as set forth in Schedule 3.8:
(a) To the best of the Company's knowledge, each of the
Company, the Participation Facilities and the Loan/Fiduciary Properties (each as
hereinafter defined) are, and have been, in material compliance with all
applicable Environmental Laws (as hereinafter defined), which compliance
includes, but is not limited to, the possession of all permits and
authorizations required under applicable Environmental Law, and compliance with
the terms and conditions thereof.
18
20
(b) To the best of the Company's knowledge, no transfer of
permits or other governmental authorizations under Environmental Laws, and no
additional permits or other governmental authorizations under Environmental
Laws, will be required to permit the Company to conduct its business in full
compliance with all applicable Environmental Laws after the Effective Time.
(c) There is no suit, claim, action, proceeding, investigation
or notice pending or to the best of the Company's knowledge threatened (or past
or present actions, activities, circumstances, conditions, events or incidents
that to the best of the Company's knowledge could reasonably form the basis of
any such suit, claim, action, proceeding, investigation or notice), before any
governmental entity or other forum in which the Company, any Participation
Facility or any Loan/Fiduciary Property (or person or entity whose liability for
any such suit, claim, action, proceeding, investigation or notice the Company,
Participation Facility or Loan/Fiduciary Property has or may have retained or
assumed either contractually or by operation of law), has been or, with respect
to threatened suits, claims, actions, proceedings, investigations or notices,
may be, named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the Release (as hereinafter defined) or threatened Release into the
environment of any Hazardous Material (as hereinafter defined) whether or not
occurring at or on a site owned, leased or operated by the Company, any
Participation Facility or any Loan/Fiduciary Property.
19
21
(d) To the best of the Company's knowledge, during the period
of: (i) the Company's ownership or operation of any of its current properties,
(ii) the Company's participation, if any, in the management of any Participation
Facility, or (iii) the Company's holding of a security or other interest in a
Loan/Fiduciary Property, there has been no Release of or contamination by any
Hazardous Material in, on, under or affecting any such property, Participation
Facility or Loan/Fiduciary Property. To the best of the Company's knowledge,
prior to the period of (x) the Company's ownership or operation of any of its
respective currently or formerly owned or leased properties, (y) the Company's
participation in the management of any Participation Facility, or (z) the
Company's holding of a security or other interest in a Loan/Fiduciary Property,
there was no Release of or contamination by any Hazardous Material in, on, under
or affecting any such property, Participation Facility or Loan/Fiduciary
Property.
(e) To the best of the Company's knowledge, no part of any
property currently owned or leased by the Company, any Participation Facility or
any Loan/Fiduciary Property has been or is scheduled for investigation or
monitoring pursuant to any Environmental Law.
(f) The following definitions apply for purposes of this
Section 3.8: (i) "Environmental Laws" means all federal, Puerto Rico, state,
local and foreign laws and regulations relating to pollution or protection of
human health or the environment presently in effect or hereinafter adopted,
including without limitation, laws relating to Releases or threatened Releases
of Hazardous Materials into the indoor or outdoor environment (including,
without limitation, ambient air, surface
20
22
water, ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials, and all laws relating to endangered
or threatened species of fish, wildlife and plants and the management or use of
natural resources; (ii) "Loan/Fiduciary Property" means any property owned or
controlled by the Company or in which the Company holds a security or other
interest, and, where required by the context, said term means the owner or
operator of such property; (iii) "Participation Facility" means any facility in
which the Company participates in the management and, where required by the
context, said term means the owner or operator of such property; (iv) "Hazardous
Material" means materials which are: (A) listed, classified or regulated
pursuant to any Environmental Law, (B) petroleum, any petroleum products or
by-products, friable asbestos, airborne asbestos, asbestos containing material,
polychlorinated biphenyls ("PCBs"), radioactive materials or radon gas, or (C)
any other material or substance the presence of which is prohibited, limited or
regulated by any governmental entity or Environmental Law; and (v) "Release"
means any release, spill, emission, discharge, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment (including, without limitation, ambient air, surface
water, groundwater and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Materials through or in, the air,
soil, surface water, groundwater or property.
21
23
3.9. Tax Matters. Except as set forth in Schedule 3.9, the Company has
filed or will file all Tax (as hereinafter defined) returns (including
information returns) or reports required to be filed (taking into account
permissible extensions) by it on or prior to the Effective Date, and has paid or
will pay, prior to the Effective Date, all Taxes relating to the time periods
covered by such returns and reports which are or will become due and payable
prior to the Effective Date. The accrued taxes payable accounts for Taxes and
provision for deferred income taxes, specifically identified as such, on the
1999 Balance Sheet or any balance sheet of the Company delivered to Purchaser
after the date hereof (including the Closing Date Balance Sheet) are or will be,
to the best of the Company's knowledge, sufficient for the payment of all unpaid
Taxes of the Company accrued for or applicable to all periods ended on or prior
to the date of such balance sheet or which may subsequently be determined to be
owing with respect to any such period. Except as disclosed on Schedule 3.9, the
Company has not waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to an assessment or deficiency for
Taxes. The Company has paid or will pay in a timely manner and as required by
law all Taxes due and payable by it or which it is obligated to withhold from
amounts owing to any employee or third party. All Taxes which will be due and
payable, whether now or hereafter, for any period ending on, prior to or
including the Effective Date shall have been paid by or on behalf of the
Company. No Tax returns of the Company have been audited by any governmental
authority other than as disclosed on Schedule 3.9; and, except as set forth on
Schedule 3.9, there are no unresolved questions, claims or disputes asserted and
notified to the Company by any relevant taxing authority concerning the
liability for Taxes of the Company. The Company has not reached an agreement
under Section
22
24
6006 of the Puerto Rico Code for any taxable years not yet closed for statute of
limitations purposes. No demand or claim has been made, or, to the best of the
Company's knowledge, could be made, against the Company with respect to any
Taxes arising out of membership or participation in any consolidated,
affiliated, combined or unitary group of which the Company was at any time a
member. For purposes of this Agreement, the term "Tax" shall mean any
Commonwealth, U.S. federal, state, local or foreign income, gross receipts,
municipal license, deposit, license, payroll, employment, excise, municipal
excise, severance, stamp, occupation, premium, property or windfall profits tax,
environmental tax, customs duty, capital stock, franchise, employees' income
withholding, dividends withholding, foreign or domestic withholding (including
withholding on payments for services rendered), social security, unemployment,
disability, workers' compensation, employment-related insurance, real property,
personal property, sales, use, room occupancy, transfer, value added,
alternative or add-on minimum or other tax, assessment or governmental charge of
any kind whatsoever, including any interest, penalties or additions to, or
additional amounts in respect of, the foregoing.
3.10. Contracts and Commitments.
(a) Except as set forth on Schedule 3.10 and Schedule 3.14,
the Company (i) is not a party to any written or oral agreement or understanding
to repurchase assets previously sold (or to indemnify or otherwise compensate
the purchaser in respect of such assets), (ii) is not a party to any (A)
contract or group of related contracts with the same person for the purchase or
sale of products or services, under which the undelivered balance of such
products and services has a purchase price in excess of
23
25
$10,000 for any individual contract or $20,000 for any group of related
contracts in the aggregate, (B) other contract which would be a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K promulgated by
the SEC, or (C) other agreement which was not entered into in the ordinary
course of business and which is not disclosed on Schedules 3.7(a) or 3.7(b), and
(iii) does not have any commitments for capital expenditures in excess of
$10,000.
(b) Except as disclosed on Schedule 3.10, (i) the Company has
performed all obligations required to be performed by it prior to the date
hereof in connection with the contracts or commitments set forth on Schedule
3.10, and the Company is not in receipt of any claim of default under any
contract or commitment set forth on Schedule 3.10 and (ii) the Company does not
have any present expectation or intention of not fully performing any obligation
pursuant to any contract or commitment set forth on Schedule 3.10.
3.11. Litigation. Except as set forth on Schedule 3.11, there are no
actions, suits, proceedings, orders or investigations pending or, to the best
knowledge of the Company, threatened against the Company, at law or in equity,
or before or by any Commonwealth, federal, state or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
3.12. No Brokers or Finders. Except as disclosed on Schedule 3.12 (as
to both identity and amount), there are no claims for brokerage commissions,
finders' fees, investment advisory fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any
24
26
arrangement, understanding, commitment or agreement made by or on
behalf of the Company.
3.13. Employees; Labor Matters. (a) Except as disclosed on Schedule
3.13(a), there is no (i) collective bargaining agreement or other labor
agreement to which the Company is a party or by which it is bound; (ii) written
or oral retainer, consulting, employment, severance, or incentive plan or
contract to which the Company is a party or by which it is bound; or (iii) plan
or agreement under which "fringe benefits" (including, but not limited to,
incentive performance bonus, vacation plans or programs, sick leave plans or
programs and related benefits, but not including those plans disclosed on
Schedule 3.14(a)) are afforded any of such employees of the Company. The Company
is not and, to the best of the Company's knowledge no other person who is a
party to any such agreement, plan or contract is in default with respect to any
material term or condition thereof, nor has any event occurred which through the
passage of time or the giving of notice, or both, would constitute a default
thereunder or would cause the acceleration of any obligation of any party
thereto.
(b) To the best of the Company's knowledge, except as
disclosed on Schedule 3.13(b), the Company has complied in all material respects
with all applicable laws, rules and regulations relating to the employment of
labor, including those related to wages, salary withholdings, meal periods, sick
leave, sexual harassment, vacations, maternity, disabilities (including the
Americans with Disabilities Act) employee health and safety (including OSHA),
Christmas bonus, working hours and benefits for employees and former employees,
equal opportunity, collective bargaining, non-discrimination and the payment and
withholding of
25
27
social security and other taxes (including social security taxes imposed upon
any of the Benefit Plans (as defined below)) and other sums as required by
appropriate governmental authorities, and has withheld and paid to the
appropriate governmental authorities or is holding for payment not yet due to
such authorities, all amounts required to be withheld from such employees and
former employees of the Company and is not liable to any person or entity
(including any governmental entity) for any arrears of wages, commissions and
benefits for employees, taxes, penalties or other sums for failure to comply
with any of the foregoing. There is no: (i) unfair labor practice complaint
against the Company pending before the National Labor Relations Board or any
state or local agency; (ii) pending labor strike or other labor trouble
affecting the Company; (iii) labor grievance pending against the Company; (iv)
pending representation question respecting the employees of the Company; or (v)
pending arbitration proceedings arising out of or under any collective
bargaining agreement to which the Company is a party.
(c) The Company maintains an insurance policy in full force
and effect with the Puerto Rico State Insurance Fund; and the Company has paid
all premiums on said policy and has no outstanding debts with respect thereto.
Except as disclosed on Schedule 3.13(c), no work-related accidents have been
reported to the State Insurance Fund nor has any work-related accident occurred
for which the Company is or may be classified as an uninsured employer.
(d) The Company maintains an insurance policy under the Puerto
Rico Short-Term Disability Act (SINOT), which is in full force and effect.
26
28
(e) Except as disclosed on Schedule 3.13(e), there are no
material controversies pending or to the best of the Company's knowledge
threatened before any federal or local court or government agency, including the
Equal Employment Opportunity Commission or any similar agency of the
Commonwealth of Puerto Rico, the National Labor Relations Board, the United
States Department of Labor and the Antidiscrimination Unit, the Negotiation and
Conciliation Board, or any other unit of the Puerto Rico Department of Labor,
between the Company and any of its past or present employees or relating to the
Company.
(f) Except as set forth on Schedule 3.13(f), the Company is
not a party to any employment contract or arrangement with respect to any of its
employees (including, without limitation, so-called "golden parachute" or
severance agreements), nor has the Company in any other manner limited its right
to terminate the employment relationship with its employees except as provided
by Act 80 of May 30, 1976.
(g) The Company has not been notified by any federal or Puerto
Rico agency of any labor or employee-related investigation involving the
Company, nor, to the best of the Company's knowledge, does any condition exist,
which would constitute a violation of any applicable federal or local labor law
or regulation.
3.14. Employee Benefit Plans.
(a) All benefit plans, contracts or arrangements covering
current employees or former employees of the Company (the "Employees"),
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of the Employee
27
29
Retirement Income Security Act of 1974, as amended ("ERISA"), and plans of
deferred compensation (the "Benefit Plans"), are listed in Schedule 3.14(a).
True and complete copies of all Benefit Plans, including, but not limited to,
any trust instruments and insurance contracts forming a part of any Benefit
Plans, and all amendments thereto or a description in the case of any Benefit
Plan not reduced to writing have been provided or made available to Purchaser,
with the exception of the documents related to the multiemployer pension plan
maintained by the Teamsters Union (the "Teamsters Pension Plan") to which the
Company contributes in accordance with the terms of its collective bargaining
agreement.
(b) Except as disclosed on Schedule 3.14(b), all employee
benefit plans, and the operation and administration of the same, covering
Employees (the "Plans"), are in substantial compliance with ERISA, to the extent
subject to ERISA, and all applicable laws and regulations, except that no
representation is made with respect to the Teamsters Pension Plan. None of the
Plans is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA ("Pension Plan") or is intended to be qualified under Section 165(a) of
the Puerto Rico Income Tax Act of 1954 or Section 1165(a) of the Puerto Rico
Internal Revenue Code of 1994, both statutes as amended (both statutes,
collectively, the "Puerto Rico Tax Code") or the United States Internal Revenue
Code of 1986, as amended, and therefore the trust which forms part of the same,
if any, is not a tax exempt trust, except that no representation is made with
respect to the Teamsters Pension Plan. There is no material pending or, to the
best of the Company's knowledge, threatened litigation relating to the Plans
(other than the Teamsters Pension Plan) or any administrator or fiduciary
related to the Plans. The Company has not been advised of any material pending
or threatened litigation
28
30
relating to the Teamsters Pension Plan or any administrator or fiduciary related
to the Teamsters Pension Plan. Except as disclosed on Schedule 3.14, the Company
has not engaged in a transaction with respect to any Plan (other than the
Teamsters Pension Plan), or to the best of the Company's knowledge the Teamsters
Pension Plan, that, assuming the taxable period of such transaction expired as
of the date hereof, could subject the Company to a tax or penalty imposed
pursuant to the Puerto Rico Tax Code or Section 502(i) of ERISA in an amount
which would be material or could result in the revocation of the tax exemption
of any Pension Plan's trust under the Puerto Rico Tax Code.
(c) The Company does not have and has never had any
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA. No
entity could be considered a single employer with the Company under Section 4001
of ERISA. The Company has not incurred any withdrawal liability with respect to
a multiemployer plan under Subtitle E of Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA, for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Pension Plan (other than the Teamsters Pension Plan), or to the best of
the Company's knowledge for the Teamsters Pension Plan, within the 12-month
period ending on the date hereof.
(d) Except as disclosed on Schedule 3.14(d) all contributions
required to be made under the terms of any Benefit Plan (other than the
Teamsters Pension Plan) have been timely made. All contributions required to be
made to the Teamsters Pension Plan pursuant to the Company's collective
bargaining agreement have been made.
29
31
(e) The Company does not have any obligations for retiree
health and life benefits under any Benefit Plan, except as set forth on Schedule
3.14. Except as disclosed in Schedule 3.14, the Company may amend or terminate
any such Benefit Plan at any time without incurring any liability thereunder.
(f) Except as disclosed in Schedule 3.14, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will, whether under a Plan or any other arrangement or
agreement, be a factor in causing payments to be made by the Surviving
Corporation, Purchaser or the Company that are not deductible (in whole or in
part) under the Puerto Rico Tax Code or (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of the Company under any
Plan or otherwise from the Company, (ii) increase any benefits otherwise payable
under any Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit, except that no representation is made with respect
to the Teamsters Pension Plan.
3.15. Insurance. Schedule 3.15 hereto lists each insurance policy
maintained by the Company (or its lessees) with respect to its properties and
assets. The Company hereby covenants that it has delivered or shall deliver or
make available to Purchaser complete and accurate copies of each of such
insurance policies within ten business days of the date hereof. Each such policy
is in full force and effect and the Company has paid all premiums due thereon.
3.16. Interest of Certain Persons. Except as set forth on
Schedule 3.16, there are no loans from the Company to any officer
30
32
or director of the Company or any of their affiliates and no officer or director
of the Company has any material interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of the Company.
3.17. Compliance with Laws; Permits. To the best of its knowledge,
except as set forth in Schedule 3.17, the Company has complied in all material
respect with all applicable laws and regulations of the Commonwealth, foreign,
federal, state and local governments and all agencies thereof which affect or
relate to the business and operations or any owned or leased properties of the
Company or to which the Company may be subject; and no claims have been filed by
any such governments or agencies against the Company alleging such a material
violation of any such law or regulation which have not been resolved to the
satisfaction of such governments or agencies. To the best of its knowledge, the
Company holds all of the permits, licenses, certificates and other
authorizations of the Commonwealth, foreign, federal, state and local
governmental agencies required for the conduct of its business. Except as
disclosed in Schedule 3.17, the Company is not subject to any cease and desist
order, written agreement or memorandum of understanding with, or is a party to
any commitment letter or similar undertaking to, or is subject to any order or
directive body, or is a recipient of any supervisory letter from, or has adopted
any board resolution at the request of, any Commonwealth or federal governmental
authorities, nor has the Company been advised by any governmental authority that
it is contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, commitment letter, board resolution or similar
undertaking.
31
33
3.18. Proxy Statement. At the time the Proxy Statement is mailed to the
stockholders of the Company and at all times subsequent to such mailing up to
and including the Effective Time, such Proxy Statement (including any
supplements thereto), will (a) comply as to form in all material respects with
applicable provisions of the 1933 Act and the 1934 Act and (b) not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they are made, not misleading.
3.19. Noncompete Provisions. The Company is not subject to, or
obligated under, any agreement, arrangement or understanding that restricts its
ability to engage in any and all activities permissible for corporations under
applicable laws and regulations ("Permissible Activities"). No agreement,
arrangement or understanding would limit or restrict the ability of the
Surviving Corporation or its subsidiaries to engage in any and all Permissible
Activities upon consummation of the transactions contemplated hereby.
3.20. Equity Ownership. Except as disclosed on Schedule 3.20, the
Company does not own any stock, partnership interest, joint venture interest or
any other equity or similar security issued by any other corporation,
organization or entity.
3.21. Financial Statements and Reports.
(a) The Company has timely filed all reports and statements,
and any amendments required to be made with respect thereto, that it was
required to file with Commonwealth Authorities, the SEC or any other applicable
federal or state
32
34
regulatory authorities, and, as of their respective dates (and, in the case of
reports or statements filed prior to the date hereof, without giving effect to
any amendments or modifications filed after the date hereof), each such report
or statement, including the financial statements and exhibits thereto, complied
(or will comply, in the case of reports or statements filed after the date
hereof) in all material respects, to the best of its knowledge, with all
applicable statutes, rules and regulations. Such reports, statements and
amendments are referred to herein as the "Company's Reports".
(b) As of their respective dates (and without giving effect to
any amendments or modifications filed after the date hereof), each of the
Company's Reports, including the financial statements, notes, exhibits and
schedules thereto, filed, used or circulated prior to the date hereof complied
(and each of the Company Reports filed, used or circulated after the date
hereof, will comply) in all material respects with the applicable laws and did
not (or in the case of the Company Reports filed, used or circulated after the
date hereof, will not) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.
(c) The 1999 Balance Sheet, including the related notes and
schedules, fairly presents its financial position as of the date of such balance
sheet and each of the statements of income, cash flows and stockholders' equity
for the period then ended (collectively, the "1999 Financial Statements"),
including any related notes and schedules, fairly presents its results of
operations, retained earnings and cash flows, as the case may be,
33
35
at the dates and for the periods set forth therein in accordance with U.S.
generally accepted accounting principles.
(d) Since April 30, 1999, there has been no change, event,
occurrence or development in the business directly or indirectly conducted by it
that has had or would reasonably be expected to have a material adverse effect
on the Company.
3.23. Tax Exemption Concession. The Company has a tax exemption
concession from the Department of Treasury of the Commonwealth of Puerto Rico
issued pursuant to the Tourism Incentives Act of 1983 that provides for the
following tax exemptions:
(a) Income Taxes: 90%, for ten years, of which five have been
used. The Company has the option to elect the ten specific years to be covered
under the income tax concession. Pursuant to this tax exemption concession, the
Company is required to invest at least 20% of its net income in certain
qualified activities that include marketing and promotion, training programs and
improvement of the property, among others.
(b) Property Taxes: 80%, until December 31, 2002.
(c) Municipal License Tax: 100%, from July 1, 1993 to June 30,
2003.
To the best of its knowledge, the Company is in compliance with all of
the terms of its tax concession and of the Tourism Incentives Act.
34
36
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1. Conduct of Business of the Company. From the date of this
Agreement to the Effective Date, unless Purchaser shall otherwise agree in
writing or as otherwise expressly permitted by other provisions of this
Agreement, including this Section 4.1:
(a) The business of the Company will be conducted only in, and
the Company shall not take any action except in, the ordinary course, on an
arms-length basis and in accordance, in all material respects, with all
applicable laws, rules and regulation and past practices;
(b) The Company will not, directly or indirectly, (i) amend or
propose to amend its Charter or Bylaws; (ii) issue or sell any of its equity
securities, Voting Debt, securities convertible into or exchangeable for its
equity securities, warrants, options or other rights to acquire its equity
securities, or any bonds or other securities; (iii) redeem, purchase, acquire or
offer to acquire, directly or indirectly, any shares of capital stock of the
Company or other securities of the Company; (iv) split, combine or reclassify
any outstanding shares of capital stock of the Company, or declare, set aside or
pay any dividend or other distribution payable in cash, property or otherwise
with respect to shares of capital stock of the Company, except the Extraordinary
Distribution permitted by Section 1.4 and its regular semi-annual dividend in
June 2000 in an amount consistent with past practices; (v) borrow any amount or
incur or become subject to any other material liability, except liabilities
(other than borrowings) incurred in the ordinary course of business consistent
with past practices; (vi) sell, assign, transfer, mortgage, pledge or subject to
or permit
35
37
to be subject to any lien or other encumbrance any of its assets, except liens
and encumbrances for current property taxes not yet due and payable; (vii)
cancel any material debt or claims or waive any rights of material value, except
as set forth in Schedule 4.1(b); (viii) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or
material assets; (ix) other than as set forth on Schedule 3.10, make any capital
expenditures or commitments therefor in an aggregate amount for all such capital
expenditures in excess of $10,000 or enter into any lease; (x) modify its policy
relating to the payment of accounts payable or the collection of accounts
receivable, it being agreed that the Company will pay its accounts payable as
they become due; or (xi) enter into or propose to enter into, or modify or
propose to modify, any material agreement, or any agreement, arrangement or
understanding with respect to any of the matters set forth in this Section
4.1(b);
(c) Except as set forth in Schedule 4.1(c), the Company will
not, directly or indirectly, enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, wage, salary or
compensation increases, or severance or termination pay to, or promote, any
director, officer, employee, group of employees or consultant or hire any
employee, except as contemplated by the Company's existing collective bargaining
agreement, and except that the wages and salaries of non-union employees may be
adjusted on a basis consistent with prior practices;
(d) The Company will not adopt or amend any bonus, profit
sharing, stock option, pension, retirement, deferred
36
38
compensation or other employee benefit plan, trust, fund, contract or
arrangement for the benefit or welfare of any employees;
(e) The Company will use reasonable efforts to cause its
current insurance policies not to be cancelled or terminated or any of the
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage substantially
equal to the coverage under the cancelled, terminated or lapsed policies are in
full force and effect;
(f) The Company will not enter into any settlement or similar
agreement with respect to, or take any other significant action with respect to
the conduct of, any action, suit, proceeding, order or investigation without
prior consultation with Purchaser;
(g) The Company will use all reasonable efforts to preserve
intact in all material respects its business organization as a whole and the
goodwill of the Company and to keep available the services of its officers and
employees as a group and preserve intact material agreements, and the Company
will confer on a regular and frequent basis with representatives of Purchaser,
as reasonably requested by Purchaser, to report on operational matters and the
general status of ongoing operations;
(h) With respect to properties leased by the Company, the
Company will not renew, exercise an option to extend, cancel or surrender any
lease of real property or allow any such lease to lapse, without prior
consultation with Purchaser; and
37
39
(i) The Company will not agree or commit to do any of the
foregoing.
The term "prior consultation" means, with respect to any action, advance notice
of such proposed action and a reasonable opportunity to discuss with Purchaser
such action in good faith prior to taking such action.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1. Filing and Approvals. Each party will use all reasonable efforts
and will cooperate with the other party in the preparation and filing, as soon
as practicable, of all applications, proxy statements or other documents
required to obtain regulatory approvals and consents from any applicable
regulatory authorities and provide copies of such applications, filings and
related correspondence to the other party. Prior to filing each application,
proxy statement or other document with the applicable regulatory authority, each
party will provide the other party with an opportunity to review and comment on
such application, proxy statement or other document. Each party will use all
reasonable efforts and cooperate with the other party in taking any other
actions necessary to obtain such regulatory or other approvals and consents,
including participating in any required hearings or proceedings.
5.2. Financial Statements. The Company shall furnish Purchaser with the
Company's balance sheets as of the end of each calendar month ending after the
date hereof and the related statements of income, not later than the 15th day
after the end
38
40
of each such calendar month, and shall furnish Purchaser with the Company's
audited financial statements as of and for the year ended April 30, 2000, not
later than June 30, 2000. Such financial statements shall be prepared on a basis
consistent with the 1999 Financial Statements and on a consistent basis during
the periods involved and shall fairly present the financial condition of the
Company as of the dates thereof and the results of operations of the Company for
the periods then ended in accordance with U.S. Generally Accepted Accounting
Principles (except as specifically noted in such financial statements).
5.3. Expenses. All costs and expenses incurred in connection with this
Agreement and the transaction contemplated hereby shall be paid by the party
incurring such costs and expenses; provided, however, that in the event that
this Agreement is terminated pursuant to clause (b), (d), (e) or (h) of Section
7.1, the Company shall reimburse to Purchaser all of Purchaser's reasonable
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby. The provisions of this Section shall survive
the termination of this Agreement.
5.4. No Negotiations. The Company will not, directly or indirectly,
solicit the submission of any proposal, offer, tender offer or exchange offer
from any person or entity relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, the Company or
other similar transaction or business combination involving the Company (any of
the foregoing, an "Acquisition Proposal"). The Company shall promptly notify
Purchaser if any Acquisition Proposal, or any inquiry from or contact with any
person with respect thereto,
39
41
is made, and shall keep Purchaser informed on a timely basis as to the status of
such Acquisition Proposal, inquiry or contact, including the identity of the
person or persons making the Acquisition Proposal, inquiry or contact, and the
material terms thereof. As of the date hereof, the Company has not received and
is not considering any outstanding Acquisition Proposal.
5.5. Notification of Certain Matters. Each party shall give prompt
notice to the other party of (a) the occurrence or failure to occur of any event
or the discovery of any information, which occurrence, failure, discovery or
information would result in or would reasonably be expected to result in any
representation or warranty on its part contained in this Agreement to be untrue
or inaccurate when made, at the Effective Date or at any time prior to the
Effective Date and (b) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
5.6. Access to Information; Confidentiality.
(a) The Company shall permit Purchaser full access on
reasonable notice and at reasonable hours to its properties and shall disclose
and make available (together with the right to copy), to Purchaser and to the
internal auditors, employees, attorneys, accountants and other representatives
of Purchaser all books, papers and records relating to the assets, stock,
properties, operations, obligations and liabilities of the Company, including,
without limitation, all books of account (including, without limitation, the
general ledger), tax records, minute books of directors' and stockholders'
meetings, organizational documents, bylaws, contracts and agreements,
40
42
filings with any regulatory authority, accountants' work papers, litigation
files (including, without limitation, legal research memoranda), documents
relating to assets and title thereto (including, without limitation, abstracts,
title insurance policies, surveys, environmental reports, opinions of title and
other information relating to its real and personal property), plans affecting
employees, securities transfer records and stockholder lists, and any books,
papers and records relating to other assets, business activities or prospects in
which Purchaser may have a reasonable interest, including, without limitation,
its interest in planning for transition with respect to the business of the
Company; provided, however, that the foregoing rights granted to Purchaser
shall, whether or not and regardless of the extent to which such rights may be
exercised, in no way affect the nature or scope of the representations,
warranties and covenants of the Company set forth herein.
(b) All information furnished by the Company pursuant hereto
shall be treated as the sole property of the Company until the Effective Date,
and, if the Effective Date shall not occur, Purchaser shall, at the option of
the Company, return to the Company, or destroy, all documents or other materials
(including copies thereof) containing, reflecting or referring to such
information. In addition, Purchaser shall keep confidential all such information
and shall not directly or indirectly use such information for any competitive or
other commercial purpose. In the event that this Agreement shall terminate,
neither party shall disclose, except as required by law or pursuant to the
request of an administrative agency or other regulatory body, the basis or
reason for such termination, without the consent of the other party. The
obligation to keep such information confidential shall not apply to (i) any
information which (A) was
41
43
already in Purchaser's possession prior to the disclosure thereof to Purchaser
by the Company, (B) was then generally known to the public, (C) became known to
the public through no fault of Purchaser or its representatives or (D) was
disclosed to Purchaser by a third party not bound by an obligation of
confidentiality or (ii) disclosures required by law or governmental or
regulatory authority.
5.7. Filing of Tax Returns and Adjustments.
(a) The Company will file (or cause to be filed) at its own
expense, on or prior to the due date, all Tax returns for all Tax periods ending
on or before the Effective Date where the due date for such returns or reports
(taking into account valid extensions of the respective due dates) falls on or
before the Effective Date; provided, however, that the Company shall not file
any such Tax returns, or other returns, elections or information statements with
respect to any liabilities for Taxes (other than federal, state or local sales,
use, withholding or employment tax returns or statements), or consent to any
adjustment or otherwise compromise or settle any matters with respect to Taxes,
without prior consultation with Purchaser; provided, further, that the Company
shall not make any election or take any other discretionary position with
respect to Taxes, in a manner inconsistent with past practices, without the
prior written approval of Purchaser. The Company will provide Purchaser with a
copy of appropriate work papers, schedules, drafts and final copies of each
federal and state income Tax return or election of the Company (including
returns of all Plans) at least seven days before filing such return or election
and shall reasonably cooperate with any request by Purchaser in connection
therewith.
42
44
(b) Purchaser, in its sole and absolute discretion, and at its
sole cost and expense, will file (or cause to be filed) all Tax returns of the
Company due after the Effective Date. After the Effective Date, the Surviving
Corporation, in its sole and absolute discretion and at its sole cost and
expense, and to the extent permitted by law, shall have the right to amend,
modify or otherwise change all Tax returns of the Company for all Tax periods.
5.8. Proxy Statement.
(a) For the purposes of holding the meeting of the
stockholders of the Company to approve this Agreement and the Merger (the
"Meeting"), the parties hereto will cooperate in the preparation of an
appropriate information or proxy statement satisfying all applicable
requirements of the 1934 Act, applicable Commonwealth and state securities laws
and the rules and regulations thereunder (such information or proxy statement,
together with any and all amendments or supplements thereto being herein
referred to as the "Proxy Statement").
(b) Purchaser will furnish the Company with such information
concerning Purchaser as is necessary in order to cause the Proxy Statement,
insofar as it relates to Purchaser, to be prepared in accordance with Section
5.8(a). Purchaser agrees promptly to advise the Company if at any time prior to
the Meeting any information provided by Purchaser in the Proxy Statement becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy or omission.
43
45
(c) The Company will promptly prepare and file the Proxy
Statement with the SEC and applicable Commonwealth and state securities
agencies. Purchaser shall have the right to review and comment on the Proxy
Statement. The Company will advise Purchaser promptly of any supplements or
amendments to the Proxy Statement, and shall furnish Purchaser with copies of
all such documents.
(d) The Company will deliver to Purchaser letters relating to
the Proxy Statement from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., PSC, the Company's
independent auditors, one dated a date within two business days before the date
on which the Proxy Statement shall be mailed to the Company's shareholders and
the other dated a date within two business days before the Effective Date, each
addressed to Purchaser, in form and substance reasonably satisfactory to
Purchaser and customary in scope and substance for letters delivered by
independent public accountants in connection with similar proxy statements.
5.9. Directors. Immediately prior to the Effective Time, the existing
directors of the Company shall submit their written resignations, effective
immediately after the Effective Time, at which time the directors of the
Purchaser will become the directors of the Surviving Corporation.
5.10. Reports. The Company will provide to Purchaser copies of all
Forms 10-K, 10-Q, and 8-K filed with the SEC by it, between the date hereof and
the Effective Date, within two days after the date such reports are so filed.
5.11. Stockholder Approval. The Company will call the
Meeting as promptly as practicable after the date hereof. The
44
46
Board of Directors of the Company will recommend approval of this Agreement and
the Merger, and use its best efforts (including, without limitation, soliciting
proxies for such approvals) to obtain such shareholder approval, unless it
determines that recommending such approval or using its best efforts to obtain
such shareholder approval would result in a breach of its fiduciary duties
established under the laws of the Commonwealth.
5.12. Efforts to Consummate. Subject to the terms of this Agreement,
each of Purchaser and the Company agrees to use reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby.
5.13. Non-Qualified Deferred Compensation Plan. The Surviving
Corporation will not take any action that would affect the rights of the
beneficiaries under the non-qualified deferred compensation plan referred to in
Schedule 3.14(b) hereto under "Pension Plans".
ARTICLE 6
CONDITIONS
6.1. Conditions to Obligations of Each Party. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Effective Date of the
following conditions:
45
47
(a) Regulatory Approvals. Regulatory approvals for the
consummation of the transactions contemplated hereby shall have been obtained
from each governmental authority from which approval is required, and all
statutory and regulatory waiting periods shall have expired (it being understood
by the parties that the only regulatory approvals that the parties believe may
be applicable is expiration of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ waiting period). None of
such approvals shall contain any condition or restriction that would so
materially and adversely impact the economic or business benefits to Purchaser
of the transactions contemplated by this Agreement that, had such condition or
requirement been known, Purchaser would not, in its reasonable judgment, have
entered into this Agreement.
(b) No Injunction. No injunction or other order entered by a
Commonwealth or federal court of competent jurisdiction shall have been issued
and remain in effet which would prohibit the consummation of the transactions
contemplated hereby.
(c) No Positive Change of Law. There shall have been no law,
statute, rule or regulation, domestic or foreign, enacted or promulgated which
would prohibit the consummation of the transactions contemplated hereby.
(d) Stockholder Approval. This Agreement and the Merger shall
have been approved by the affirmative vote of the holders of a majority of the
outstanding shares of the Company Common Stock (50% plus one share), being the
portion of the Company capital stock required for such approval under the
provision of the Company's Charter and Bylaws and the laws of the Commonwealth.
46
48
(e) Financing. Purchaser shall have obtained all the financing
required by it to consummate the Merger.
6.2. Additional Conditions to Obligation of the Company. The obligation
of the Company to consummate the transactions contemplated hereby in accordance
with the terms of this Agreement is also subject to the following conditions:
(a) Representations and Compliance. The representations and
warranties of Purchaser set forth in Article 2 shall have been true and correct
as of the date hereof, and shall be true and correct as of the Effective Date as
if made at and as of the Effective Date; and the Purchaser shall in all material
respects have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it hereunder at or prior to the
Effective Time.
(b) Officers' Certificate. Purchaser shall have furnished to
the Company a certificate of the President of the Purchaser, dated as of the
Effective Date, to the effect set forth in Section 6.2(a).
(c) Solvency Certificate. Purchaser shall have furnished to
the Company a certificate from an officer of Purchaser to the effect that, at
the Effective Time, after giving effect to the consummation of the Merger, the
Surviving Corporation will be "solvent" for purposes of fraudulent conveyance
analysis under the U.S. Bankruptcy Code.
6.3. Additional Conditions to Obligation of Purchaser. The
obligation of Purchaser to consummate the transactions
47
49
contemplated hereby in accordance with the terms of this Agreement are also
subject to the following conditions:
(a) Representations and Compliance. The representations and
warranties of the Company set forth in Article 3 of this Agreement shall have
been true and correct as of the date hereof, and such representations and
warranties shall be true and correct as of the date hereof, and such
representations and warranties shall be true and correct as of the Effective
Date as if made at and as of the Effective Date; and the Company shall in all
material respects have performed each obligation and agreement and complied with
each covenant to be performed and complied with by it hereunder at or prior to
the Effective Date.
(b) Officers' Certificate. The Company shall have furnished to
Purchaser a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company, dated as of the Effective Date, to the effect set forth
in Section 6.3(a).
(c) Secretary's Certificates. The Company shall have furnished
to Purchaser (i) copies of the text of the resolutions by which the corporate
action on the part of the Company necessary to approve this Agreement and the
transactions contemplated hereby were taken, (ii) certificates, dated as of the
Effective Date, executed on behalf of the Company by its corporate secretary or
one of its assistant corporate secretaries, certifying to Purchaser that such
copies are true, correct and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded and (iii)
an incumbency certificate, dated as of the Effective Date, executed on behalf of
the Company by its
48
50
corporate secretary or one of its assistant corporate secretaries, certifying
the signature and office of each officer executing this Agreement or any other
agreement, certificate or other instrument executed pursuant hereto.
(d) Opinion of Counsel to the Company. Purchaser shall have
received an opinion letter, dated as of the Effective Date, addressed to
Purchaser from ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company, in customary form and
subject to customary qualifications, to the effect that:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth.
(ii) The Company has the requisite corporate and
other power and authority (including all licenses, permits and authorizations)
to own and operate its properties and to carry on its business as now conducted.
The Company is licensed or qualified to do business in Puerto Rico which, given
the nature of its business and its ownership of property, is the only
jurisdiction where the Company is required to be licensed or qualified.
(iii) The execution and delivery of this Agreement by
the Company and the consummation of the transactions contemplated hereby and
thereby will not constitute a breach, default or violation under the respective
Charter or Bylaws of the Company or, to such counsel's knowledge, (A) any
material agreement, arrangement or understanding to which the Company is a
party, (B) any material license, franchise or permit or (C) any law, regulation,
order, judgment or decree.
49
51
(iv) The authorized capital of the Company consists
of 4,000,000 shares of the Company Common Stock, 1,401,162 of which are
outstanding; all of the issued and outstanding shares of the capital stock of
the Company are duly authorized.
(v) The Company has the corporate power to consummate
the transactions on its part contemplated by this Agreement. The Company has
duly taken all requisite corporate action to authorize this Agreement and this
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable in accordance with
its terms, subject as to the enforcement of remedies to applicable bankruptcy,
insolvency, moratorium and other laws affecting the rights of creditors
generally and to judicial limitations on the enforcement of the remedy of
specific performance.
(e) Best Western Contract. Purchaser shall have received a
written acknowledgement from Best Western consenting to the Merger, confirming
that the agreement with Best Western shall remain in full force and effect after
the Merger, and confirming that no defaults exist under such agreement.
(f) Tax Exemption. Purchaser shall have received the consent
of the Government of Puerto Rico to the change of control of the Company
pursuant to the terms of its tax exemption concession.
(g) Environmental Matters. Purchaser shall have received an
environmental study of the property of the Company (which shall be paid by
Purchaser) that shall not have revealed
50
52
any material liability (i) not reflected in the Company's 1999 Balance Sheet or
otherwise disclosed (including as to the amount thereof) in Schedule 3.8, and
(ii) not reserved against to the satisfaction of Purchaser in the Contingency
Escrow or remedied to the satisfaction of Purchaser prior to the Effective Date.
(h) No Material Adverse Change. There shall not have occurred
any material adverse change in the condition, financial or otherwise, business,
assets or prospects of the Company since April 30, 1999, and Purchaser shall not
have become aware of any condition or event not disclosed to Purchaser
(including in the Schedules hereto) prior to the date hereof or otherwise known
to Purchaser on the date hereof that could reasonably be expected to have a
material adverse effect on the condition, financial or otherwise, business,
assets or prospects of the Company.
(i) Director Resignation Letters. The existing directors of
the Company shall have submitted their written resignations as contemplated by
Section 5.9.
(j) Audited Financial Statements. The Company shall have
delivered to Purchaser its audited financial statements as of and for the year
ended April 30, 2000, together with the report of its auditors relating to such
financial statements.
(k) Opinion as to Tax Withholding of Consideration and
Extraordinary Distribution. The Purchaser shall have received an opinion of
▇'▇▇▇▇▇ & ▇▇▇▇▇▇ to the effect that the withholding tax treatment of the
Consideration and the Extraordinary Distribution proposed by the Company is the
appropriate one under applicable law. ▇'▇▇▇▇▇ & ▇▇▇▇▇▇ may require rulings from
the appropriate government agencies in connection with such opinion.
51
53
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to the
Effective Date:
(a) by mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company, if this Agreement and
the Merger are not duly approved by the stockholders of the Company at the
meeting of stockholders (or any adjournment thereof) duly called and held for
such purpose, or such approval is subsequently revoked;
(c) by either Purchaser or the Company, if the Effective Date
is not on or before the six-month anniversary of the date hereof (unless the
failure to consummate the Merger by such date shall be due to the action or
failure to act of the party seeking to terminate this Agreement in breach of
such party's obligations under this Agreement);
(d) by Purchaser, (i) if the Company participates in
negotiations with, provides nonpublic information to, or enters into any
agreement with another party regarding an Acquisition Proposal, or (ii) if the
Company's Board fails to recommend to shareholders of the Company approval (or
withdraws its recommendation of approval) of the Merger, or (iii) if there shall
have occurred any breach of either Section 5.4 or Section 5.11;
52
54
(e) by Purchaser, if there shall have occurred any breach of
any representation, warranty, covenant or agreement of the Company contained
herein that would result in the failure to satisfy the closing condition set
forth in Section 6.3(a) and such breach cannot be or has not been cured within
30 days after the giving of a written notice to the Company of such breach;
(f) by the Company, if there shall have occurred any breach of
any representation, warranty, covenant or agreement of Purchaser contained
herein that would result in the failure to satisfy the closing condition set
forth in Section 6.2(a) and such breach cannot be or has not been cured within
30 days after the giving of a written notice to Purchaser of such breach;
(g) by the Company or by the Purchaser if Purchaser shall not
have obtained all the financing required by it to consummate the Merger on or
before the six-month anniversary of the date hereof;
(h) by Purchaser if the closing condition set forth in Section
6.3(h) shall have become incapable of being satisfied;
(i) by Purchaser under the circumstances set forth in Section
1.4(c) or 1.6(c); or
(j) by Purchaser if the holders of 20% or more of the shares
of Common Stock of the Company shall have exercised appraisal rights.
Any party desiring to terminate this Agreement shall give written
notice of such termination and the reasons therefor to the other party.
53
55
7.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 7.1, such termination shall be without liability or
obligation of any party to the other party to this Agreement, except (a) as
provided in Sections 1.9, 5.3, 7.3 and 8.6 and (b) that termination shall not
relieve any party from liability for any breach of this Agreement.
7.3. Termination Fee. The Company hereby agrees to pay to Purchaser,
and Purchaser shall be entitled to payment of, a fee of $250,000 if Purchaser
terminates this Agreement pursuant to Section 7.1(b) or 7.1(d).
7.4. Amendment. This Agreement may be amended, but only by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Purchaser shall (A) be
entitled to revise the structure of the Merger and related transactions,
including by requiring that Purchaser be the Surviving Corporation in the
Merger; provided that each of the transactions comprising such revised structure
shall (i) not subject any of the stockholders of the Company to adverse tax
consequences or reduce the amount of Consideration to be received by any such
stockholders and (ii) not result in any material delay of the consummation of
the transactions contemplated hereby. This Agreement and any related documents
shall be appropriately amended in order to reflect any such revised structure.
7.5. Waiver. At any time prior to the Effective Date, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto
54
56
or (b) waive compliance with any of the agreements of the other party or with
any conditions to its own obligations, in each case only to the extent such
obligations, agreements and conditions are intended for its benefit. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party,
but such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE 8
GENERAL PROVISIONS
8.1. Public Statements. Neither the Company nor Purchaser shall make
any public announcement or statement with respect to the Merger, this Agreement
or any related transactions without the approval of the other party; provided,
however, that either Purchaser or the Company may, upon reasonable notice to the
other party, make any public announcement or statement that it believes is
required by law. To the extent practicable, each of Purchaser and the Company
will consult with the other with respect to any such public announcement or
statement.
8.2. Notices. All notices and other communications hereunder shall be
in writing and shall be sufficiently given if made by hand delivery, by
telecopier, by overnight delivery service, or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by it by
like notice):
55
57
If to Purchaser:
SCI Acquisition Inc.
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Piquer
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇'▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Swiss Chalet, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered; on the fifth
business day after being deposited in the mail, postage prepaid, if delivered by
mail; when receipt
56
58
acknowledged, if telecopied; and the next day after being delivered to an
overnight delivery service.
8.3. Interpretation. When a reference is made in this Agreement to
"previously disclosed", it means disclosed in writing to the other party hereto,
which writing refers to the relevant Section of this Agreement. 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. References to
Sections and Articles refer to Sections and Articles of this Agreement unless
otherwise stated. Words such as "herein", "hereinafter", "hereof", "hereto",
"hereby" and "hereunder", and words of like import, unless the context requires
otherwise, refer to this Agreement (including the Exhibits and Schedules
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.
8.4. Severable. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
8.5. Miscellaneous. This Agreement (a) is not intended to, and shall
not, confer upon any person other than each party hereto any rights or remedies
hereunder; (b) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the Commonwealth applicable
to agreements
57
59
made and wholly to be performed in the Commonwealth; and (c) shall not be
assigned by operation of law or otherwise (and any purported assignment shall be
null and void). This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
8.6. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of the parties set forth herein shall
survive the consummation of the Merger for a period of 18 months after the
Effective Date. In addition, if this Agreement is terminated pursuant to Section
7.1, the covenants contained in Sections 5.3 and 5.6(b) shall survive such
termination.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
Agreement to be executed on the date first written above by their respective
officers.
SCI ACQUISITION INC.
By:
-----------------------------
Name:
Title:
SWISS CHALET, INC.
By:
-----------------------------
Name:
Title:
58
