SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of May 5, 1997, among ▇▇▇▇▇▇▇
Sports Inc., a Delaware corporation ("Parent"), Cheer Acquisition Corp., a
Tennessee corporation and a wholly owned subsidiary of Parent (the "Purchaser"),
and the shareholders of Varsity Spirit Corporation, a Tennessee corporation (the
"Company"), set forth on the signature page hereto (collectively referred to
herein as the "Shareholders" and each, a "Shareholder").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company have entered into an Agreement
and Plan of Merger (as such Agreement may hereafter be amended from time to
time, the "Merger Agreement"), pursuant to which Purchaser will be merged with
and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, the Purchaser shall commence
a cash tender offer (the "Offer") to purchase at a price of $18.90 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Shareholders agree, and the
Shareholders have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" as within the meaning of Section 13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean at any time the common
stock, $.01 par value, of the Company.
(c) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
(d) Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, each of the Shareholders hereby agrees to validly tender
(or cause the record owner of such shares to validly tender), and not to
withdraw, pursuant to and in accordance with the terms of the Offer, not later
than the fifth business day after commencement of the Offer pursuant to Section
1.1 of the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Shareholder's name under
the caption "Tender Shares" on Schedule I hereto, all of which are Beneficially
Owned by such Shareholder. Each Shareholder hereby acknowledges and agrees that
Parent's and the Purchaser's obligation to accept for payment and pay for the
Shares in the Offer, including the Shares Beneficially Owned by such
Shareholder, is subject to the terms and conditions of the Offer. The total
number of shares of Company Common Stock set forth opposite such Shareholder's
name on Schedule I under the caption "Total Shares", and together with any
shares acquired by such Shareholder in any capacity after the date hereof and
prior to the termination of this Agreement whether upon the exercise of options
or by means of purchase, divi-
2
dend, distribution, gift or otherwise, are referred to herein as the "Shares".
(b) The transfer by the Shareholders of the Shares to
Purchaser in the Offer shall pass to and unconditionally vest in the Purchaser
good and valid title to the Tender Shares, free and clear of all Encumbrances.
(c) The Shareholders hereby permit Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
shareholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) their identity and ownership of
the Company Common Stock and the nature of their commitments, arrangements and
understandings under this Agreement.
3. Additional Agreements.
(a) Voting Agreement. During the Term, (as defined in Section
8 herein) each Shareholder shall, at any meeting of the holders of Company
Common Stock, however called, or in connection with any written consent of the
holders of Company Common Stock, vote (or cause to be voted) the Shares (if any)
then held of record or Beneficially Owned by such Shareholder, (i) in favor of
the Merger, the execution and delivery by the Company of the Merger Agreement
and the approval of the terms thereof and each of the other actions contemplated
by the Merger Agreement and this Agreement and any actions required in
furtherance thereof and hereof; and (ii) against any Acquisition Proposal (as
defined in the Merger Agreement) and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or which would result in
any of the conditions set forth in Annex A to the Merger Agreement or set forth
in Article VI of the Merger Agreement not being fulfilled. The parties hereto
agree and acknowledge that nothing in this Section 3 or any other part of this
Agreement shall be construed as requiring any Shareholder who also is a director
of the Company to propose, endorse, approve or recommend the Merger Agreement or
any transaction contemplated thereby in such Shareholder's capacity as a
director of the Company.
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(b) No Inconsistent Arrangements. Each of the Shareholders
hereby covenants and agrees that, except as contemplated by this Agreement and
the Merger Agreement, during the Term it shall not (i) tender, or consent to any
tender of, any or all of such Shareholder's Shares, pursuant to any Acquisition
Proposal (as defined in the Merger Agreement), (ii) transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of such Shareholder's Shares, Company
Options or any interest therein, (iii) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of such
Shares, Company Options or any interest therein, (iv) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares or
Company Options, (v) deposit such Shares or Company Options into a voting trust
or enter into a voting agreement or arrangement with respect to such Shares or
Company Options, or (vi) take any other action that would in any way restrict,
limit or interfere with the performance of its obligations hereunder or the
transactions contemplated hereby or by the Merger Agreement. Without limiting
the foregoing sentence, each of the Shareholders hereby covenants and agrees to
be bound by the provisions of Section 5.4(a) of the Merger Agreement to the same
extent as the Company.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Each Shareholder hereby irrevocably grants to, and
appoints, Parent and ▇▇▇▇▇ ▇▇▇▇▇ (as Chief Executive Officer) and ▇▇▇▇ ▇▇▇▇▇▇▇
(as General Counsel), or either of them, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such
office of Parent, and each of them individually, such Shareholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Shareholder, to vote such Shareholder's Shares, or grant a
consent or approval in respect of the Shares in favor of the various
transactions contemplated by the Merger Agreement (the "Transactions") and
against any Acquisition Proposal.
(ii) Each Shareholder represents that any proxies
heretofore given in respect of such Shareholder's
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Shares are not irrevocable, and that any such proxies are hereby revoked.
(iii) Each Shareholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon such Shareholder's
execution and delivery of this Agreement. Each Shareholder hereby affirms that
the irrevocable proxy set forth in this Section 3(c) is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of such Shareholder under this
Agreement. Each Shareholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Each
Shareholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Article ▇▇-▇▇-▇▇▇ of the Tennessee Business Corporations Act.
(d) Company Options. Each of the Shareholders that holds
Company Options to acquire shares of Company Common Stock, as identified on the
signature pages hereof, shall, if requested by the Company, consent to the
cancellation or substitution of such Shareholder's Company Options in accordance
with the terms of the Merger Agreement and shall execute all appropriate
documentation in connection with such cancellation or substitution.
(e) Reasonable Efforts. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult with the other and
provide any necessary information and material with respect to all filings made
by such party with any Governmental Entity in connection with this Agreement and
the Merger Agreement and the transactions contemplated hereby and thereby.
5
(f) Waiver of Rights to Dissent. Each Shareholder hereby
waives any rights of appraisal or rights to dissent from the Merger that such
Shareholder may have.
4. Representations and Warranties of the Shareholders.
Each Shareholder hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Shareholder is the record and
Beneficial Owner of the Shares, as set forth on Schedule I. On the date hereof,
the Existing Shares constitute all of the Shares owned of record or Beneficially
Owned by such Shareholder. Such Shareholder has sole voting power and sole power
to issue instructions with respect to the matters set forth in Sections 2, and 3
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Existing Shares with
no limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) Power; Binding Agreement. Such Shareholder has the legal
capacity, power and authority to enter into and perform all of such
Shareholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Shareholder will not violate any other
agreement to which such Shareholder is a party including, without limitation,
any voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by such Shareholder and constitutes a valid and binding agreement of
such Shareholder, enforceable against such Shareholder in accordance with its
terms. There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which such Shareholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation by
such Shareholder of the transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and
the Exchange Act, (i) no filing with, and no permit, authorization, consent
or approval of, any Governmental Entity for the execution of this Agreement
by such Shareholder and the consummation by such Share-
6
holder of the transactions contemplated hereby and (ii) none of the execution
and delivery of this Agreement by such Shareholder, the consummation by such
Shareholder of the transactions contemplated hereby or compliance by such
Shareholder with any of the provisions hereof shall (A) conflict with or result
in any breach of any organizational documents applicable to the Shareholder, (B)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Shareholder is a
party or by which such Shareholder or any of its properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Shareholder or any of its
properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement,
the Shares and the certificates representing such Shares are now, and at all
times during the term hereof will be, held by such Shareholder, or by a nominee
or custodian for the benefit of such Shareholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such Encumbrances or
proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Shareholder.
(f) Reliance by Parent. Each Shareholder understands and
acknowledges that Parent is entering into, and causing Purchaser to enter into,
the Merger Agreement in reliance upon such Shareholder's execution and delivery
of this Agreement.
5. Representations and Warranties of Parent and the
Purchaser. Each of Parent and the Purchaser
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hereby represents and warrants to the Shareholders as follows:
(a) Power; Binding Agreement. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms.
(b) No Conflicts. Except for filings under the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby and (ii) none
of the execution and delivery of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby or compliance by each of Parent and the
Purchaser with any of the provisions hereof shall (A) conflict with or result in
any breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
either of Parent or the Purchaser is a party or by which either of Parent or the
Purchaser or any of their properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
6. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such
8
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
7. Stop Transfer. The Shareholders shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
8. Termination. The covenants and agreements contained herein
with respect to the Shares shall terminate upon the earlier of the consummation
of the Merger and four months following the termination of the Merger Agreement
in accordance with its terms (the period during which this Agreement is in
effect being referred to herein as the "Term").
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations
hereunder shall attach to the Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise, including, without limitation, a Shareholder's
heirs, guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the
9
prior written consent of the other parties, provided that Parent may assign, in
its sole discretion, its rights and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent, but no such assignment shall relieve
Parent of its obligations hereunder if such assignee does not perform such
obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to a Shareholder: to such Shareholder's address set
forth on Schedule I hereto
If to Parent or
the Purchaser: ▇▇▇▇▇▇▇ Sports Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
copy to: Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
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(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Tennessee, without
giving effect to the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Courts of the State of New York and the United
States District Court for the Southern District of New York in any action, suit
or proceeding arising in connection with this Agreement, and agrees that any
such action, suit or proceeding shall be brought only in such court (and waives
any objection based on forum non conveniens or any other objection to venue
therein). Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(m) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Shareholders
have caused this Agreement to be duly executed as of the day and year first
above written.
▇▇▇▇▇▇▇ SPORTS INC.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
CHEER ACQUISITION CORP.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Schedule I
Number of Shares and Company
Name and Address of Shareholder Options Beneficially Owned
-----------------------------
Total Tender Company
Shares Shares Options
------ ------ -------
▇▇▇▇ ▇. ▇▇▇▇▇▇ 648,500 648,500
9330 Sears Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 460,000 460,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 650,958 553,455 91,325
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 123,450 76,575 46,875
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇