Exhibit D
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AGREEMENT AND
PLAN OF MERGER
among
MADISON DEARBORN PARTNERS II, L.P.,
TUESDAY MORNING ACQUISITION CORP.
and
TUESDAY MORNING CORPORATION
dated as of September 12, 1997
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 12, 1997
(this "Agreement"), is made and entered into by and among Madison Dearborn
Partners II, L.P., a Delaware limited partnership ("Parent"), Tuesday Morning
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Tuesday Morning Corporation, a Delaware corporation (the
"Company").
WHEREAS, the general partner of Parent and the respective Boards of
Directors of Sub and the Company have approved the acquisition of the Company by
Parent, by means of the merger (the "Merger") of Sub with and into the Company,
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to those certain option agreements (the "Option
Agreements"), dated as of August 13, 1997, by and between Parent and each of
Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Stockholders"), Parent has
acquired an option (the "Option") to purchase 3,896,757 shares of common stock,
par value $0.01 per share, of the Company ("Shares" or "Company Common Stock")
held by the Stockholders (including 1,143,600 Shares issuable to the
Stockholders upon exercise of stock options), which Shares are currently being
held in escrow by NationsBank of Texas, N.A.;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law, as amended (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time. At the Effective Time, the separate corporate existence of
Sub shall cease, and the Company shall continue as the surviving corporation and
a direct wholly owned subsidiary of Parent (Sub and the Company are sometimes
hereinafter referred to as "Constituent Corporations" and, as the context
requires, the Company is sometimes hereinafter referred to as the "Surviving
Corporation"), and shall continue under the name "Tuesday Morning Corporation."
1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the merger (the "Closing") shall take place
at 10:00 a.m., Chicago time, on the first business day after satisfaction and/or
waiver of all of the conditions set forth in Article VI (the "Closing Date"), at
the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, unless another date, time or place is agreed to in writing by the parties
hereto.
1.3 Effective Time of the Merger. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware, as provided in the DGCL, on the Closing Date.
The Merger shall become effective upon such filing or at such time thereafter as
is provided in the Certificate of Merger (the "Effective Time").
1.4 Effects of the Merger.
(a) The Merger shall have the effects as set forth in the applicable
provisions of the DGCL.
(b) The directors of Sub and the officers of the Company immediately
prior to the Effective Time shall, from and after the Effective Time, be the
initial directors and officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company shall be amended
and restated in its entirety as set forth on Exhibit A hereto, and, from and
after the Effective Time, such amended and restated Certificate of Incorporation
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
(d) The Bylaws of the Company shall be amended and restated in their
entirety as set forth on Exhibit B hereto and, from and after the Effective
Time, such amended and restated Bylaws shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by applicable law, the
Certificate of Incorporation or the Bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Sub:
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(a) Capital Stock of Sub. Each share of the capital stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation or such other
equity securities of the Surviving Corporation as Parent shall specify.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock and all other shares of capital stock of the Company
that are owned by the Company and all shares of Company Common Stock and other
shares of capital stock of the Company owned by Parent or Sub shall be canceled
and retired and shall cease to exist and no consideration shall be delivered or
deliverable in exchange therefor.
2.2 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Sub, the Company or the holders of
any of the shares thereof:
(a) (i) Subject to the other provisions of this Section 2.2, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding shares owned, directly or indirectly (other than the
shares covered by the Option), by the Company or by Parent, Sub or any other
Subsidiary of Parent and Dissenting Shares (as defined in Section 2.6)) shall be
converted into the right to receive $25.00 per share, net to the seller in cash,
payable to the holder thereof, without any interest thereon (the "Merger
Consideration"), upon surrender and exchange of the Certificate (as defined in
Section 2.3) representing such share of Company Common Stock. As used in this
Agreement, the word "Subsidiary", with respect to any party, means any
corporation, partnership, joint venture or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other Subsidiary
of such party is a general partner; (ii) voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation, partnership, joint venture or other organization is held by such
party or by any one or more of its Subsidiaries, or by such party and any one or
more of its Subsidiaries; or (iii) at least 25% of the equity, other securities
or other interests is, directly or indirectly, owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and any one or more
of its Subsidiaries.
(ii) All such shares of Company Common Stock, when converted as
provided in Section 2.2(a)(i), no longer shall be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Certificate previously evidencing such Shares shall thereafter represent only
the right to receive the Merger Consideration. The holders of Certificates
previously evidencing Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to the Company Common Stock except
as otherwise provided herein or by law and, upon the surrender of Certificates
in accordance with the provisions of Section 2.3, shall only represent the right
to receive for their Shares, the Merger Consideration, without any interest
thereon.
2.3 Payment for Shares.
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(a) Paying Agent. Prior to the Effective Time, Sub shall appoint a
United States bank or trust company reasonably acceptable to the Company to act
as paying agent (the "Paying Agent") for the payment of the Merger
Consideration, and Sub shall deposit or shall cause to be deposited with the
Paying Agent in a separate fund established for the benefit of the holders of
shares of Company Common Stock, for payment in accordance with this Article II,
through the Paying Agent (the "Payment Fund"), immediately available funds in
amounts necessary to make the payments pursuant to Section 2.2(a)(i) and this
Section 2.3 to holders (other than the Company or Parent, Sub or any other
Subsidiary of Parent, or holders of Dissenting Shares). The Paying Agent shall,
pursuant to irrevocable instructions, pay the Merger Consideration out of the
Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as Parent
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both ▇▇▇▇▇'▇ Investors Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
holders of Company Common Stock entitled thereto as contemplated by this
Section. The Surviving Corporation shall cause the Payment Fund to be promptly
replenished to the extent of any losses incurred as a result of Permitted
Investments. All earnings on Permitted Investments shall be paid to the
Surviving Corporation. If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of shares of Company Common Stock
shall be entitled under this Section 2.3, the Surviving Corporation shall in any
event be liable for payment thereof. The Payment Fund shall not be used for any
purpose except as expressly provided in this Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall instruct the Paying Agent to
mail to each holder of record (other than the Company or Parent, Sub or any
other Subsidiary of Parent) of a Certificate or Certificates which, immediately
prior to the Effective Time, evidenced outstanding shares of Company Common
Stock (the "Certificates"), (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent, and shall be in such form and have such other provisions as the
Surviving Corporation reasonably may specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for payment therefor.
Upon surrender of a Certificate for cancellation to the Paying Agent together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in respect thereof cash in an amount
equal to the product of (x) the number of shares of Company Common Stock
represented by such Certificate and (y) the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. Absolutely no interest
shall be paid or accrued on the Merger Consideration payable upon the surrender
of any Certificate. If payment is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person
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requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or established to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.3(b), each Certificate (other than
Certificates representing Shares owned by the Company or Parent, Sub or any
other Subsidiary of Parent), shall represent for all purposes only the right to
receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the Payment
Fund which remains undistributed to the holders of Company Common Stock for 180
days after the Effective Time shall be delivered to the Surviving Corporation
upon demand, and any holders of Company Common Stock who have not theretofore
complied with this Article II and the instructions set forth in the letter of
transmittal mailed to such holder after the Effective Time shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration to
which they are entitled. All interest accrued in respect of the Payment Fund
shall inure to the benefit of and be paid to the Surviving Corporation.
(d) No Liability. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for any cash from the
Payment Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.4 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfer of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any certificates presented to the
Paying Agent or Parent for any reason shall be converted into the Merger
Consideration.
2.5 Stock Option Plans. At or about the Effective Time, the holders
of then outstanding options to purchase Shares under the Company's Restated
Incentive Stock Option Plan and Non-Qualified Stock Option Plan (the "Stock
Option Plans"), whether or not then exercisable (collectively, the "Employee
Options"), shall, in cancellation and settlement thereof, receive for each Share
subject to such Employee Option an amount (subject to any applicable withholding
tax) in cash equal to the difference between the Merger Consideration and the
per Share exercise price of such Employee Option to the extent such difference
is a positive number (such amount being hereinafter referred to as, the "Option
Consideration"). Upon receipt of the Option Consideration, the Employee Option
shall be canceled. The surrender of an Employee Option to the Company in
exchange for the Option Consideration shall be deemed a release of any and all
rights the holder had or may have had in respect of such Employee Option. Prior
to the Closing, the Company shall obtain all necessary consents or releases from
holders of Employee Options under the Stock Option Plans and take all such other
lawful action as may be necessary to give effect to the transactions
contemplated by this Section 2.5. The Stock Option Plans shall terminate as of
the Effective Time, and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any Subsidiary thereof shall be canceled as of
the Effective Time. Prior to the Closing, the Company shall take all action
necessary
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to (i) ensure that, following the Effective Time, no participant in the Stock
Option Plans or any other plans, programs or arrangements shall have any right
thereunder to acquire equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof and (ii) terminate all such plans,
programs and arrangements.
2.6 Dissenting Shares. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive the Merger
Consideration. Such stockholders instead shall be entitled to receive payment of
the appraised value of such shares of Company Common Stock held by them in
accordance with the provisions of such Section 262 of the DGCL, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Company Common Stock under such Section 262 of the DGCL shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration upon surrender in the manner provided in
Section 2.3, of the Certificate or Certificates that, immediately prior to the
Effective Time, evidenced such shares of Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified to do
business as a foreign corporation and in good standing to conduct business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not (i)
have a Material Adverse Effect (as defined below) with respect to the Company or
(ii) impair in any material respect the ability of the Company to consummate the
transactions contemplated by this Agreement. The Company has heretofore
delivered to Parent complete and correct copies of its and its Subsidiaries'
respective Certificates of Incorporation and Bylaws. All Subsidiaries of the
Company and their respective jurisdictions of incorporation or organization are
identified on Schedule 3.1(a). As used in this Agreement: a "Material Adverse
Effect" shall mean, with respect to any party, the result of one or more events,
changes or effects which, individually or in the aggregate, would have a
material adverse effect on the business, operations, results of operations,
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assets, condition (financial or otherwise) or prospects of such party and its
Subsidiaries, taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 Shares and 2,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). As of the
date hereof: (i) 12,346,974 Shares are issued and 11,917,681 Shares are
outstanding; (ii) no shares of Preferred Stock are issued and outstanding; and
(iii) 1,248,863 Shares are reserved for issuance pursuant to Employee Options
outstanding under the Stock Option Plans. Except for the issuance of Shares
pursuant to the exercise of outstanding Employee Options, there are no
employment, executive termination or similar agreements providing for the
issuance of Shares. No Shares are held by the Company, and no Shares are held by
any Subsidiary of the Company. No bonds, debentures, notes or other instruments
or evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which the Company stockholders may vote ("Company Voting Debt") are
issued or outstanding. All outstanding Shares are validly issued, fully paid and
nonassessable and are not subject to preemptive or other similar rights. Except
as set forth on Schedule 3.1(b), all outstanding shares of capital stock of the
Subsidiaries of the Company are owned by the Company or a direct or indirect
Subsidiary of the Company, free and clear of all liens, charges, encumbrances,
claims and options of any nature. Except as set forth in this Section 3.1(b),
there are outstanding: (i) no shares of capital stock, Company Voting Debt or
other voting securities of the Company; (ii) no securities of the Company or any
Subsidiary of the Company convertible into, or exchangeable or exercisable for,
shares of capital stock, Company Voting Debt or other voting securities of the
Company or any Subsidiary of the Company; and (iii) no options, warrants, calls,
rights (including preemptive rights), commitments or agreements to which the
Company or any Subsidiary of the Company is a party or by which it is bound, in
any case obligating the Company or any Subsidiary of the Company to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Except as set forth on Schedule 3.1(b), since June 30,
1997, the Company has not (i) granted any options, warrants or rights to
purchase shares of Company Common Stock or (ii) amended or repriced any Employee
Option or the Stock Option Plans. The Company has previously delivered to Parent
a complete and correct list of all outstanding options, warrants and rights to
purchase shares of Company Common Stock and the exercise prices relating
thereto. Except for the Option Agreements, there are not as of the date hereof
and there will not be at the Effective Time any stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting of any shares of the capital stock
of the Company which will limit in any way the solicitation of proxies by or on
behalf of the Company from, or the casting of votes by, the stockholders of the
Company with respect to the Merger. There are no restrictions on the Company to
vote the stock of any of its Subsidiaries.
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(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the approval of this
Agreement and the Merger by the holders of a majority of the outstanding Shares
("Company Stockholder Approval"), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the Company Stockholder
Approval. This Agreement has been duly executed and delivered by the Company
and, subject to the Company Stockholder Approval, constitutes a valid and
binding obligation of the Company enforceable in accordance with its terms and
conditions except that the enforcement hereof may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(ii) Except as set forth on Schedule 3.1(c)(ii), the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Company will not conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
(including pursuant to any put right) of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security interest or
other encumbrance on assets or property, or right of first refusal with respect
to any asset or property (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss, creation or right of first
refusal, a "Violation"), pursuant to, (A) any provision of the Certificate of
Incorporation or Bylaws of the Company or any of its Subsidiaries or (B) except
as to which requisite waivers or consents have been obtained and assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in paragraph (iii) of this Section 3.1(c) are duly and timely
obtained or made and the Company Stockholder Approval has been obtained, result
in any Violation of (1) any loan or credit agreement, note, mortgage, deed of
trust, indenture, lease, Benefit Plan (as defined in Section 3.1(i)), Company
Permit (as defined in Section 3.1(f)), or any other agreement, obligation,
instrument, concession, franchise, or license or (2) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or their respective properties or assets (collectively,
"Laws"). The Board of Directors of the Company has taken all actions necessary
under the DGCL, including approving the transactions contemplated by this
Agreement, to ensure that Section 203 of the DGCL does not, and will not, apply
to the transactions contemplated in this Agreement.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for: (A) the filing
of a pre-merger notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust improvements Act of 1976, as
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amended (the "HSR Act"), and the expiration or termination of the applicable
waiting period thereunder; (B) the filing with the United States Securities and
Exchange Commission (the "SEC") of (x) a proxy statement in definitive form
relating to a meeting of the holders of Company Common Stock to approve the
Merger (such proxy statement as amended or supplemented from time to time being
hereinafter referred to as the "Proxy Statement") and (y) such reports under and
such other compliance with the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby; (C) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (D) such filings and
approvals as may be required by any applicable state securities, "blue sky" or
takeover laws; and (E) such filings in connection with any state or local tax
which is attributable to the beneficial ownership of the Company's or its
Subsidiaries' real property, if any (collectively, the "Gains and Transfer
Taxes").
(d) SEC Documents. The Company has delivered to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since January 1, 1994 and
prior to the date of this Agreement (the "Company SEC Documents"), which are all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date. As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited state
ments, to normal, recurring adjustments, which will not be material, either
individually or in the aggregate) the consolidated financial position of the
Company and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of the
Company and its consolidated Subsidiaries for the periods presented therein.
(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, on the date it is first mailed to the holders of the Company
Common Stock or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event with respect to the Company or any of its
Subsidiaries, or with respect to other information supplied by the Company for
inclusion in the Proxy Statement, shall occur which is required to be described
in an amendment
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of, or a supplement to, the Proxy Statement, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. The Proxy
Statement, insofar as it relates to the Company or its Subsidiaries or other
information supplied by the Company for inclusion therein will comply as to
form, in all material respects, with the provisions of the Exchange Act or the
rules and regulations thereunder.
(f) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all material permits, licenses, variances, exemptions, orders, franchises
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"). The Company and its
Subsidiaries are in compliance in all material respects with the terms of the
Company Permits (a list of which is set forth on Schedule 3.1(f)). Except as
disclosed in Schedule 3.1(f), the Company and its Subsidiaries have complied in
all material respects with all applicable laws, ordinances and regulations of
all Governmental Entities. As of the date of this Agreement, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company, threatened.
(g) Litigation. Except as set forth on Schedule 3.1(g), there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary of the Company
("Company Litigation"), nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the Company
or any Subsidiary of the Company ("Company Order").
(h) Taxes. Except as set forth on Schedule 3.1(h) hereto:
(i) All Tax Returns required to be filed by or with respect to
the Company and each of its Subsidiaries have been duly and timely filed, and
all such Tax Returns are true, correct and complete in all material respects.
The Company and each of its Subsidiaries has duly and timely paid (or there has
been paid on its behalf) all Taxes that are due, or claimed or asserted by any
taxing authority to be due, from or with respect to it. With respect to any
period for which Taxes are not yet due with respect to the Company or any
Subsidiary, the Company and each of its Subsidiaries has made due and sufficient
current accruals for such Taxes in accordance with GAAP in the most recent
financial statements contained in the Company SEC Documents. The Company and
each of its Subsidiaries has made (or there has been made on its behalf) all
required estimated Tax payments sufficient to avoid any material underpayment
penalties. The Company and each of its Subsidiaries has withheld and paid all
Taxes required by all applicable laws to be withheld or paid in connection with
any amounts paid or owing to any employee, creditor, independent contractor or
other third party.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, material Taxes due
from or with respect to the Company or any of its Subsidiaries for any taxable
period. No audit or other proceeding by any court, governmental or
-10-
regulatory authority, or similar person is pending or, to the knowledge of the
Company, threatened in regard to any Taxes due from or with respect to the
Company or any of the Subsidiaries or any Tax Return filed by or with respect to
the Company or any of its Subsidiaries. No assessment of Taxes is proposed
against the Company or any of its Subsidiaries or any of their assets.
(iii) No election under Section 338 of the Code has been made or
filed by or with respect to the Company or any of its Subsidiaries. No consent
to the application of Section 341(f)(2) of the Code (or any predecessor
provision) has been made or filed by or with respect to the Company or any of
its Subsidiaries or any of their assets. None of the Company or any of its
Subsidiaries has agreed to make any adjustment pursuant to Section 481(a) of the
Code (or any predecessor provision) by reason of any change in any accounting
method, and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of the Company or any of its
Subsidiaries. None of the assets of the Company or any of its Subsidiaries is or
will be required to be treated as being owned by any person (other than the
Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986.
(iv) None of the Company or any of its Subsidiaries is a party
to, is bound by, or has any obligation under, any Tax sharing agreement, Tax
allocation agreement or similar contract.
(v) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company or any of its
Subsidiaries by reason of Section 280G of the Code.
(vi) Schedule 3.1(h) accurately sets forth (i) the amount of all
deferred intercompany gains for purposes of Treasury Regulation section 1.1502-
13 (including any predecessor regulation) with respect to the Company and its
Subsidiaries; and (ii) the amount of any excess loss account with respect to the
stock of each of the Subsidiaries for purposes of Treasury Regulation section
1.1502-19 (including any predecessor regulation).
(vii) The term "Code" shall mean the internal Revenue Code of
1986, as amended. The term "Taxes" shall mean all taxes, charges, fees, levies,
or other similar assessments or liabilities, including (a) income, gross
receipts, ad valorem, premium, excise, real property, personal property, sales,
use, transfer, withholding, employment, payroll, and franchise taxes imposed by
the United States of America, or by any state, local, or foreign government, or
any subdivision, agency, or other similar person of the United States or any
such government; and (b) any interest, fines, penalties, assessments, or
additions to taxes resulting from, attributable to, or incurred in connection
with any Tax or any contest, dispute, or refund thereof. The term "Tax Returns"
shall mean any report, return, or statement required to be supplied to a taxing
authority in connection with Taxes.
-11-
(i) Pension And Benefit Plans; ERISA.
(i) Schedule 3.1(i)(i) sets forth a complete and correct list
of:
(A) all "employee benefit plans", as defined in Sections
3(3) and 4(b)(4) of ERISA, under which Company or any of its
Subsidiaries has any obligation or liability, contingent or
otherwise ("Benefit Plans"); and
(B) all employment or consulting agreements, and all bonus
or other incentive compensation, deferred compensation, salary
continuation during any absence from active employment for
disability or other reasons, severance, sick days, stock award,
stock option, stock purchase, tuition assistance, club
membership, employee discount, employee loan, or vacation pay
agreements, policies or arrangements which the Company or any of
its Subsidiaries maintains or has any obligation or liability
(contingent or otherwise) and each of which has a cost to the
Company or any of its Sub sidiaries in excess of $10,000 for any
year (the "Employee Arrangements").
(ii) with respect to each Benefit Plan and Employee Arrangement,
a complete and correct copy of each of the following documents (if applicable)
has been delivered to Parent or its representatives: (i) the most recent plan
and related trust documents, and all amendments thereto; (ii) the most recent
summary plan description, and all related summaries of material modifications
thereto; (iii) the most recent Form 5500 (including schedules and attachments);
(iv) the most recent IRS determination letter; (v) the most recent actuarial
reports (including for purposes of Financial Accounting Standards Board report
no. 87, 106 and 112).
(iii) The Company and its Subsidiaries have not during the
preceding six years had any obligation or liability (contingent or otherwise)
with respect to a Benefit Plan which is described in Section 3(35), 3(37),
4(b)(4), 4063 or 4064 of ERISA.
(iv) The Benefit Plans and their related trusts intended to
qualify under Sections 401(a) and 501(a) of the Code, respectively, are
qualified under such sections. Any voluntary employee benefit association which
provides benefits to current or former employees of the Company and its
Subsidiaries, or their beneficiaries, is and has been qualified under Section
501(c)(9) of the Code.
(v) All contributions or other payments required to have been
made by the Company or any of its Subsidiaries to or under any Benefit Plan or
Employee Arrangement by applicable law or the terms of such Benefit Plan or
Employee Arrangement (or any agreement relating thereto) have been timely and
properly made.
(vi) The Benefit Plans and Employee Arrangements have been
maintained and administered in all material respects in accordance with their
terms and applicable laws.
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(vii) Except as disclosed in Schedule 3.1(i)(vii), there are no
pending or, to the best knowledge of the Company, threatened actions, claims or
proceedings against or relating to any Benefit Plan or Employee Arrangement
other than routine benefit claims by persons entitled to benefits thereunder.
(viii) Except as disclosed in Schedule 3.1(i)(viii), the Company
and its Subsidiaries do not maintain or have an obligation to contribute to
retiree life or retiree health plans which provide for continuing benefits or
coverage for current or former officers, directors or employees of the Company
or any of its Subsidiaries except (i) as may be required under Part 6 of Title I
of ERISA) and at the sole expense of the participant or the participant's
beneficiary or (ii) a medical expense reimbursement account plan pursuant to
Section 125 of the Code.
(ix) Except as disclosed in Schedule 3.1(i)(ix) none of the
assets of any Benefit Plan is directly invested in stock of the Company or any
of its affiliates, or property leased to or jointly owned by the Company or any
of its affiliates.
(x) Except as disclosed in Schedule 3.1(i)(x) or in
connection with equity compensation, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (A)
result in any payment becoming due to any employee (current, former or retired)
of the Company and its Subsidiaries, (B) increase any benefits under any Benefit
Plan or Employee Arrangement or (C) result in the acceleration of the time of
payment of, vesting of or other rights with respect to any such benefits.
(xi) The Company and its Subsidiaries have no liability
(contingent or otherwise) under Section 4069 of ERISA by reason of a transfer of
an underfunded pension plan.
(j) Absence of Certain Changes or Events. Since June 30, 1997, the
business of the Company and its Subsidiaries has been carried on only in the
ordinary and usual course and no event or events has or have occurred that
(either individually or in the aggregate) has had, or could have, a Material
Adverse Effect on the Company.
(k) No Undisclosed Liabilities. Except as specifically and
individually set forth on Schedule 3.1(k) or the other schedules hereto
(specific reference to which shall be made on Schedule 3.1(k)), there are no
liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, that are
material to the Company and its Subsidiaries considered as a whole other than:
(i) liabilities reflected on the Company's audited financial statements
(together with the related notes thereto) filed with the Company's Annual
Statement on Form 10-K for the year ended December 31, 1996 (as filed with the
SEC) or unaudited financial statements contained in the Company's Quarterly
Report on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997
(such audited and unaudited financial statements being referred to herein as the
"Company Financial Statements"); and (ii) liabilities under this Agreement.
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(l) Opinion of Financial Advisor. The Company has received the
opinion of SBC Warburg Dillon Read Inc., (the "Financial Advisor") dated
September 12, 1997, to the effect that, as of the date hereof, the Merger
Consideration to be received by the holders of Company Common Stock in the
Merger is fair from a financial point of view to such holders, a signed, true
and complete copy of which opinion shall be delivered to Parent, and such
opinion has not been withdrawn or modified. True and complete copies of all
agreements and understandings between the Company or any of its affiliates and
the Financial Advisor relating to the transactions contemplated by this
Agreement are attached hereto as Schedule 3.1(l).
(m) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary
(under applicable law or otherwise) to approve the Merger, this Agreement and
the transactions contemplated hereby.
(n) Labor Matters.
(i) Neither the Company nor any of its Subsidiaries is a
party to any labor or collective bargaining agreement, and no employees of the
Company or any of its Subsidiaries are represented by any labor organization.
Within the preceding three years, there have been no representation or
certification proceedings, or petitions seeking a representation proceeding,
pending or, to the knowledge of the Company, threatened to be brought or filed
with the National Labor Relations Board or any other labor relations tribunal or
authority. Within the preceding three years, to the knowledge of the Company,
there have been no organizing activities involving the Company or any of its
Subsidiaries with respect to any group of employees of the Company or any of its
Subsidiaries.
(ii) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or, to the knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries. There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge of the Company, threatened
by or on behalf of any employee or group of employees of the Company or any of
its Subsidiaries.
(iii) Except as set forth on Schedule 3.1(g), there are no
complaints, charges or claims against the Company or any of its Subsidiaries
pending or, to the knowledge of the Company, threatened to be brought or filed
with any governmental authority, arbitrator or court based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company or any of its Subsidiaries.
(iv) Each of the Company and its Subsidiaries is in material
compliance with all laws, regulations and orders relating to the employment of
labor, including all such laws, regulations and orders relating to wages, hours,
collective bargaining, discrimination, civil rights,
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safety and health, workers, compensation and the collection and payment of
withholding and/or social security taxes and any similar tax.
(v) Since January 1, 1996, there has been no "mass layoff" or
"plant closing" (as defined by the Worker Adjustment Retraining and Notification
Act of 1988, as amended ("WARN Act") with respect to the Company or any of its
Subsidiaries.
(o) Intangible Property. Except as set forth on Schedule 3.1(o)
attached hereto, each of the Company and its subsidiaries owns or has a right to
use each material trademark, trade name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand
name, computer program, database, industrial design and copyright owned, used or
useful in connection with the operation of its businesses, including any
registrations thereof and pending applications therefor, and each license or
other contract relating thereto (collectively, the "Company Intangible
Property"), free and clear of any and all liens, claims or encumbrances.
Schedule 3.1(o) hereto sets forth a complete list of the Company Intangible
Property. The use of the Company Intangible Property by the Company or its
Subsidiaries does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill, including
any intellectual property right, trademark, trade name, patent, service ▇▇▇▇,
brand ▇▇▇▇, brand name, computer program, database, industrial design, copyright
or any pending application therefor of any other person.
(p) Environmental Matters.
---------------------
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including fees,
disbursements and expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies and
the costs to clean up, remove, treat, or in any other way address any
Hazardous Materials) arising from or under any Environmental Law.
(B) "Environmental Law" means any applicable law regulating or
prohibiting Releases of Hazardous materials into any part of the
natural environment, or pertaining to the protection of natural
resources, the environment and public and employee health and safety
from Hazardous Materials including the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. (S)
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
(S) 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. (S) 6901 et seq.), the Clean Water Act (33 U.S.C. (S) 1251 et
seq.), the Clean Air Act (33 U.S.C. (S) 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. (S) 7401 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S) 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. (S) 651
et seq.) ("OSHA") and the regulations promulgated pursuant thereto,
and any such applicable state or local
-15-
statutes, including the Industrial Site Recovery Act ("IRSA"), and the
regulations promulgated pursuant thereto, as such laws have been and
may be amended or supplemented through the Closing Date;
(C) "Hazardous Material" means any substance, material or waste
which is regulated by any public or governmental authority in the
jurisdictions in which the applicable party or its Subsidiaries
conducts business, or the United States, including any material or
substance which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of Environmental Law and shall also
include petroleum, petroleum products, asbestos, polychlorinated
biphenyls and radioactive materials;
(D) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the environment, or into or out of any
property; and
(E) "Remedial Action" means all actions, including any
expenditures, required by a governmental entity or required under any
Environmental Law, or voluntarily undertaken to (I) clean up, remove,
treat, or in any other way ameliorate or address any Hazardous
Materials or other substance in the environment; (II) prevent the
Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not endanger or threaten to endanger the
public health or welfare or the environment; (III) perform pre-
remedial studies and investigations or post-remedial monitoring and
care pertaining or relating to a Release; or (IV) bring the applicable
party into compliance with any Environmental Law.
(ii) (A) The operations of the Company and its Subsidiaries have
been and, as of the Closing Date, will be, in compliance with all
Environmental Laws;
(B) The Company and its Subsidiaries have obtained and will, as
of the Closing Date, maintain all permits required under applicable
Environmental Laws for the continued operations of their respective
businesses, except such permits the lack of which would not materially
impair the ability of the Company and its Subsidiaries to continue
operations;
(C) The Company and its Subsidiaries are not subject to any
outstanding written orders from, or written agreements with, any
Governmental Entity or other person respecting (I) Environmental Laws,
(II) Remedial Action or (III) any Release or threatened Release of a
Hazardous Material;
-16-
(D) The Company and its Subsidiaries have not received any
written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which violation
or liability is outstanding;
(E) Neither the Company nor any of its Subsidiaries has any
contingent liability in connection with the Release of any Hazardous
Material into the environment (whether on-site or off-site) which
would be reasonably likely to result in the Company and its
Subsidiaries incurring Environmental Costs and Liabilities in excess
of $100,000;
(F) The operations of the Company or its Subsidiaries do not
involve the transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-
270 (in effect as of the date of this Agreement) or any state
equivalent;
(G) Except as set forth on Schedule 3.1(p) attached hereto, to
the knowledge of the Company, there is not now nor has there been in
the past, on or in any owned property of the Company or its
Subsidiaries any of the following: (I) any underground storage tanks
or surface impoundments, (II) any asbestos-containing materials in
friable form or (III) any polychlorinated biphenyls; and
(H) No judicial or administrative proceedings or governmental
investigations are pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries alleging the
violation of or seeking to impose liability pursuant to any
Environmental Law.
(q) Real Property.
-------------
(i) The Company has previously provided to Parent a list of all
of the real property owned in fee by the Company and its Subsidiaries. Each
of the Company and its Subsidiaries has good and marketable title to each
parcel of real property owned by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests, except (1) those
reflected or reserved against in the balance sheet of the Company dated as
of December 31, 1996, (2) taxes and general and special assessments not in
default and payable without penalty and interest, (3) statutory liens
arising or incurred in the ordinary course of business with respect to
which the underlying obligations are not delinquent and (4) liens which are
not substantial in character, amount or extent and which do not detract
from the value, or interfere with the present use, of the property subject
thereto or affected thereby.
(ii) The Company has previously provided to Parent a list setting
forth each lease, sublease or other agreement (collectively, the "Real
Property Leases") under which the Company or any of its Subsidiaries uses
or occupies or has the right to use or occupy, now or in the future, any
real property. Each Real Property Lease is valid, binding
-17-
and in full force and effect, all rent and other sums and charges payable
by the Company and its Subsidiaries as tenants thereunder are current, no
termination event or condition or uncured default of a material nature on
the part of the Company or any Subsidiary of the Company or, to the
Company's knowledge, the landlord, exists under any Real Property Lease.
Each of the Company and its Subsidiaries has a good and valid leasehold
interest in each parcel of real property leased by it free and clear of all
mortgages, pledges, liens, encumbrances and security interests, except (1)
those reflected or reserved against in the balance sheet of the Company
dated as of December 31, 1996, (2) taxes and general and special
assessments not in default and payable without penalty and interest, (3)
statutory liens arising or incurred in the ordinary course of business with
respect to which the underlying obligations are not delinquent and (4)
liens which are not substantial in character, amount or extent and which do
not detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
(r) Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has by the vote of those directors participating
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Company and has approved the same, and (ii) resolved to recommend that
the holders of the shares of Company Common Stock approve this Agreement and the
transactions contemplated herein, including the Merger.
(s) Material Contracts. The Company has delivered to Parent (i) true
and complete copies of all written contracts, agreements, commitments,
arrangements, leases (including with respect to personal property), policies and
other instruments to which it or any of its Subsidiaries is a party or by which
it or any such Subsidiary is bound which require payments to be made in excess
of $1,000,000 per year (other than purchase orders entered into in the ordinary
course of business, real estate leases or agreements listed in any of the other
disclosure schedules attached hereto) (collectively, "Material Contracts") and
(ii) a written description of each Material Contract that has not been reduced
to writing. Each of the Material Contracts is listed on Schedule 3.1(s). Neither
the Company nor any of its Subsidiaries is, or has received any notice or has
any knowledge that any other party is, in default in any material respect under
any such Material Contract; and there has not occurred any event or events that
with the lapse of time or the giving of notice or both would constitute such a
material default.
(t) Related Party Transactions. Except as set forth in the Company SEC
Documents, no director, officer, "affiliate" or "associate" (as such terms are
defined in Rule 12b-2 under the Exchange Act) of the Company or any of its
Subsidiaries (i) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to the Company or any of its
Subsidiaries; (ii) owns any direct or indirect interest of any kind in, or is a
director, officer, employee, partner, affiliate or associate of, or consultant
or lender to, or borrower from, or has the right to participate in the
management, operations or profits of, any person or entity which is (A) a
competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor
of the Company or any of its Subsidiaries, (B) engaged in a business related to
the business of the Company or any of its
-18-
Subsidiaries, or (C) participating in any transaction to which the Company or
any of its Subsidiaries is a party; or (iii) is otherwise a party to any
contract, arrangement or understanding with the Company or any of its
Subsidiaries.
(u) Indebtedness. Except as set forth on Schedule 3.1(u) hereto (or
otherwise disclosed in the Company Financial Statements), neither the Company
nor any of its Subsidiaries has any outstanding indebtedness for borrowed money
or representing the deferred purchase price of property or services or similar
liabilities or obligations, including any guarantee in respect thereof
("Indebtedness"), or is a party to any agreement, arrangement or understanding
providing for the creation, incurrence or assumption thereof.
(v) Liens. Except as set forth on Schedule 3.1(v) (or otherwise
disclosed in the Company Financial Statements), neither the Company nor any of
its Subsidiaries has granted, created, or suffered to exist with respect to any
of its assets, any mortgage, pledge, charge, hypothecation, collateral
assignment, lien, encumbrance or security agreement of any kind or nature
whatsoever, except for statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent and liens which are not substantial in character, amount or extent
and which do not detract from the value, or interfere with the present use, of
the property subject thereto or affected thereby.
(w) Suppliers. There has been no material deterioration in the
relations of the Company and its Subsidiaries with any of their material
suppliers since June 30, 1997.
(x) Disclosure. Neither this Section 3 nor any schedule, attachment,
written statement, document, certificate or other item supplied to Parent by or
on behalf of the Company with respect to the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits a material
fact necessary to make each statement contained herein or therein not
misleading.
3.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Parent is a limited partnership
and Sub is a corporation, and each is duly organized, validly existing and in
good standing under the laws of its state of organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified to do business as a
foreign partnership or corporation and in good standing to conduct business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify could not have
a Material Adverse Effect with respect to Parent.
-19-
(b) Authority; No Violations; Consents and Approvals.
------------------------------------------------
(i) Each of Parent and Sub has all requisite partnership or
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary partnership or corporate action on the part of
Parent and Sub. This Agreement has been duly executed and delivered by each of
Parent and Sub and assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes a valid and binding obligation of Parent
and Sub enforceable in accordance with its terms and conditions except that the
enforcement hereof may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by each of Parent and Sub
will not result in any Violation pursuant to any provision of the respective
Partnership Agreement or Certificate of Incorporation or Bylaws of Parent or Sub
(as applicable) or, except as to which requisite waivers or consents have been
obtained and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (iii) of this Section 3.2(b)
are duly and timely obtained or made, and the Company Stockholder Approval has
been obtained, result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation, instrument,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Sub or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, decla ration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by each of Parent
and Sub or the consummation by each of Parent or Sub of the transactions
contemplated hereby, except for: (A) filings under the HSR Act; (B) the filing
with the SEC of such reports under and such other compliance with the Exchange
Act and the rules and regulations thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware;
(D) such filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws; and (E) such filings in connection with
any Gains and Transfer Taxes.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion in the Proxy Statement will, at the date
it is first mailed to the Company's stockholders or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event with respect
to Parent or Sub, or with respect to information supplied by Parent or Sub for
inclusion in the Proxy Statement, shall occur which is
-20-
required to be described in an amendment of, or a supplement to, any of such
documents, such event shall be so described to the Company.
(d) Financing. Parent and Sub have delivered to the Company a true and
complete copy of the letters obtained by Parent and Sub from ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Co., Inc. to provide debt financing for the transactions contemplated hereby
(the "Financing Letters"). Parent and its Affiliates will provide $115,000,000
in equity financing for the transactions contemplated hereby.
(e) Due Diligence. Parent and Sub acknowledge that they and their
representatives have conducted an independent due diligence investigation of the
Company and its Subsidiaries prior to the execution of this Agreement and will
continue to do so. At the time of the execution of this Agreement, the officers
of Parent are not aware of facts which would currently entitle Parent and Sub to
decline to effect the Merger pursuant to Section 6.2(a). Parent and Sub agree to
confirm to the Company in writing at the time the Proxy Statement is mailed to
the Company's stockholders that such officers are not aware of any such facts.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to the
Company and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, or to the extent that Parent shall otherwise consent in
writing):
(a) Ordinary Course. Each of the Company and its Subsidiaries shall
carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having material business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it
permit any of its Subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock; (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire, any shares of its
capital stock, except as required by the terms of its securities outstanding on
the date hereof.
(c) Issuance of Securities. The Company shall not, nor shall it permit
any of its Subsidiaries to, (i) grant any options, warrants or rights, to
purchase shares of Company Common Stock, (ii) amend the terms of or reprice any
option or amend the terms of the Stock Option Plans,
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or (iii) issue, deliver or sell, or authorize or propose to issue, deliver or
sell, any shares of its capital stock of any class or series, any Company Voting
Debt or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Company Voting Debt or convertible securities, other
than the issuance of Shares upon the exercise of Employee Options that are
outstanding on the date hereof.
(d) Governing Documents. The Company shall not amend or propose to
amend its Certificate of Incorporation or Bylaws, except as contemplated hereby.
(e) No Solicitation. From and after the date hereof until the
termination of this Agreement, neither the Company or any of its Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates (including any investment banker, advisor attorney or
accountant retained by any of the above) (such officers, directors, employees,
representatives, agents, affiliates, investment bankers, attorneys and
accountants being referred to herein, collectively, as "Representatives"), will,
directly or indirectly, (i) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or could
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
(ii) provide any information to any other person or entity concerning the
Company (other than information which the Company provides to other persons in
the ordinary course of its business, so long as the Company has no reason to
believe that such information will be used to make or evaluate an Acquisition
Proposal, or as required by law) or (iii) enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal; and neither the Company nor any of its Subsidiaries will
authorize or permit any of its Representatives to take any such action, and the
Company shall notify Parent orally (within one business day) and in writing (as
promptly as practicable) of all of the relevant details relating to, and all
material aspects of, all inquiries and proposals which it or any of its
Subsidiaries or any of their respective Representatives may receive relating to
any of such matters, including the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact, and, if such inquiry or
proposal is in writing, the Company shall deliver to Parent a copy of such
inquiry or proposal as promptly as practicable; provided, however, that nothing
contained in this Section 4.1(e) shall prohibit the Board of Directors of the
Company from responding to any unsolicited written, bona fide Acquisition
Proposal if, and only to the extent that, (A) the Board of Directors of the
Company, after consultation with and based upon the advice of its Financial
Advisor, determines in good faith that such Acquisition Proposal is reasonably
capable of being completed on the terms proposed and would, if consummated,
result in a transaction more favorable to the Company's stockholders than the
transaction contemplated herein, (B) the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal counsel
(who may be the Company's regularly engaged independent legal counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law, (C) prior to taking such action, the Company (x) provides
reasonable prior notice to Parent to the effect that it is taking such action
and (y) receives from such person or entity an executed confidentiality
agreement in reasonably customary form, and (D) the
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Company shall promptly and continuously advise Parent as to all of the relevant
details relating to, and all material aspects, of any such discussions or
negotiations.
For purposes of this Agreement, "Acquisition Proposal" shall mean any
of the following (other than the transactions among the Company, Parent and Sub
contemplated hereunder) involving the Company or any of its Subsidiaries: (i)
any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of all or substantially all of
the assets of the Company and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for all or substantially all of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(f) No Acquisitions. The Company shall not, nor shall it permit any
of its Subsidiaries to, merge or consolidate with, or acquire any equity
interest in, any corporation, partnership, association or other business
organization, or enter into an agreement with respect thereto. The Company shall
not acquire or agree to acquire any assets of any corporation, partnership,
association or other business organization or division thereof, except for the
purchase of inventory and supplies in the ordinary course of business.
(g) No Dispositions. Other than sales of inventory in the ordinary
course of business consistent with past practice, the Company shall not, nor
shall it permit any of its Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its assets (including
any capital stock or other ownership interest of any Subsidiary of the Company).
(h) Governmental Filings. The Company shall promptly provide Parent
(or its counsel) with copies of all filings made by the Company with the SEC or
any other state or federal Governmental Entity in connection with this Agreement
and the transactions contemplated hereby.
(i) No Dissolution, Etc. The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of the Company or any of its Subsidiaries.
(j) Other Actions. The Company will not nor will it permit any of its
Subsidiaries to take or agree or commit to take any action that is reasonably
likely to result in any of the Company's representations or warranties hereunder
being untrue in any material respect or in any of the Company's covenants
hereunder or any of the conditions to the Merger not being satisfied in all
material respects.
(k) Certain Employee Matters. The Company and its Subsidiaries shall
not (without the prior written consent of Parent): (i) grant any increases in
the compensation of any of
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its directors, officers or key employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or contemplated to
be paid prior to the Effective Time by any of the existing Benefit Plans or
Employee Arrangements as in effect on the date hereof to any such director,
officer or key employee, whether past or present; (iii) enter into any new, or
materially amend any existing, employment or severance or termination agreement
with any such director, officer or key employee; or (iv) except as may be
required to comply with applicable law, become obligated under any new Benefit
Plan or Employee Arrangement, which was not in existence on the date hereof, or
amend any such plan or arrangement in existence on the date hereof if such
amendment would have the effect of materially enhancing any benefits thereunder.
(l) Indebtedness; Agreements.
(i) The Company shall not, nor shall the Company permit any
of its Subsidiaries to, assume or incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of
its Subsidiaries or guarantee any debt securities of others (other than
borrowings under the Company's existing revolving credit facility in the
ordinary course of business consistent with past practice) or enter into
any operating or capital lease (other than entering into operating leases
in connection with leasing additional retail space in the ordinary course
of business consistent with past practice) or create any mortgages, liens,
security interests or other encumbrances on the property of the Company or
any of its Subsidiaries, or enter into any "keep well" or other agreement
or arrangement to maintain the financial condition of another person.
(ii) The Company shall not, nor shall the Company permit any
of its Subsidiaries to, enter into, modify, rescind, terminate, waive,
release or otherwise amend in any material respect any of the terms or-
provisions of any Material Contract.
(m) Accounting. The Company shall not take any action, other than in
the ordinary course of business, consistent with past practice or as required by
the SEC or by law, with respect to accounting policies, procedures and
practices.
(n) Capital Expenditures. The Company and its Subsidiaries shall not
incur any capital expenditures in excess of $100,000, except for capital
expenditures contemplated by the Company's budget previously supplied to Parent.
(o) Requisite Consents. The Company and its Subsidiaries shall use
all commercially reasonable efforts to (i) obtain consents from third parties to
the consummation of the Merger and the transactions contemplated thereby and
hereby, which consents are material to the business of the Company (the
"Requisite Consents") and (ii) ensure that such Requisite Consents are in full
force and effect as of the Closing Date.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Company Stockholders Meeting.
(a) As soon as practicable following the date hereof, the Company and
Parent shall prepare the Proxy Statement. The Company will, as soon as
practicable following the date hereof, file the Proxy Statement with the SEC.
The Company will use all commercially reasonable efforts to respond to all SEC
comments with respect to the Proxy Statement and to cause the Proxy Statement to
be mailed to the Company's stockholders at the earliest practicable date.
(b) The Company will, as soon as practicable following the date
hereof, duly call, give notice of, convene and hold a meeting of the Company's
stockholders for the purpose of approving this Agreement and the transactions
contemplated hereby. At such stockholders meeting, Parent shall cause all of the
shares of Company Common Stock then owned by Parent and Sub to be voted in favor
of the Merger.
(c) Sub shall promptly submit this Agreement and the transactions
contemplated hereby for approval and adoption by Parent, as its sole
stockholder, by written consent.
5.2 Access to Information. Upon reasonable notice, each of the
Company or Parent, as the case may be, shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other party (including, in the case of Parent and
Sub, potential financing sources and their employees, accountants, counsel and
other representatives), access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other party, (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to SEC requirements and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. The Confidentiality Agreement previously
entered into between Parent and the Company (the "Confidentiality Agreement")
shall apply with respect to information furnished thereunder or hereunder and
any other activities contemplated thereby.
5.3 Settlements. Neither the Company nor any of its Subsidiaries
shall effect any settlements of any legal proceedings arising out of or related
to the execution, delivery or performance of this Agreement or the consummation
of any of the transactions contemplated hereby without the prior written consent
of Parent.
5.4 Fees and Expenses.
(a) Except as otherwise provided in this Section 5.4 and except with
respect to claims for damages incurred as a result of the breach of this
Agreement, all costs and expenses
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incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense.
(b) The Company agrees to pay Parent a fee in immediately available
funds equal to $9,750,000 upon:
(i) the termination of this Agreement under Section 7.1(d) in
the event that any of the following events shall occur (each, a "Trigger
Event"):
(1) the Board of Directors of the Company shall have (A)
withdrawn or modified, in a manner adverse to Parent or Sub, its
recommendation of the Agreement or the Merger or (B) failed to confirm
its recommendation of the Agreement or the Merger within two business
days after a written request by Parent to do so after the occurrence
of an Acquisition Proposal;
(2) the Board of Directors of the Company shall have
approved, endorsed or recommended to the stockholders of the Company
an Acquisition Proposal;
(3) the Company shall have entered into an agreement (other
than a confidentiality agreement as contemplated by Section 4.1(e))
with respect to an Acquisition Proposal;
(4) any Person or group (other than Parent, Sub or any of
their Affiliates) shall have acquired Company Common Stock after the
date of this Agreement which, when added to Company Common Stock
already owned by such Person or group, constitutes a majority of the
outstanding Company Common Stock or a tender or exchange offer for
Company Common Stock shall have been commenced and such offer
ultimately results, including after the termination of this Agreement,
in a Person or group owning a majority of the outstanding Company
Common Stock; or
(5) (A) an Acquisition Proposal is made and (B) the Company
fails to call and hold a stockholders meeting to approve the Agreement
and the Merger as promptly as is reasonably practicable having regard
to the expected timing of the financing of the Merger and, in any
event, on or prior to the 175th calendar day after the date hereof
(such time period shall be extended by an amount of time equal, in the
reasonable judgment of the Company, to any delays beyond the
reasonable control of the Company in obtaining any required regulatory
approvals in connection with the transactions contemplated hereby); or
(ii) the termination of this Agreement under Section 7.1(b)
following a material and willful breach by the Company of any covenant or
agreement set forth in this
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Agreement, which breach could reasonably be expected to aid or encourage an
Acquisition Proposal and shall not have been cured within ten business days
following receipt by the Company of notice of such breach.
(c) Upon any termination of this Agreement (other than a termination
by the Company under Section 7.1(b)(i) hereof), the Company shall pay to Parent
(not later than one business day after receipt of reasonable documentation
therefor and in no event prior to January 2, 1998) such amounts as may be
necessary to reimburse Parent and Sub for their reasonable out-of-pocket fees
and expenses incurred or paid by or on behalf of Parent or Sub to third parties
in connection with the Merger or the consummation of any of the transactions
contemplated by this Agreement, including all costs and reasonable fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants, provided that (x) reimbursement for such fees and expenses shall be
limited to $1,000,000 and (y) reimbursement under this sentence shall not cover
fees incurred or paid by or on behalf of Parent or Sub under the Financing
Letters. In addition, in the event the payment becomes due under Section 5.4(b),
the Company shall pay to Parent (not later than one business day after receipt
of reasonable documentation therefor) all fees and expenses incurred or paid by
or on behalf of Parent or Sub under the Financing Letters, provided that
reimbursement for fees and expenses under this sentence shall be limited to
$1,000,000. The Company shall in any event pay the amount requested (subject to
the limits in the preceding two sentences) within one business day of receipt of
reasonable documentation from Parent. The amounts payable to Parent and Sub
under this Section 5.4(c) shall be in addition to (and not an offset against)
the amount (if any) payable to Parent under Section 5.4(b).
(d) Any amounts due under this Section 5.4 that are not paid when due
shall bear interest at the rate of 12% per annum from the date due through and
including the date paid.
5.5 Brokers or Finders. (a) The Company represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finders fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except the Financial Advisor
and ▇▇▇▇▇▇▇▇ Capital Group, Inc., whose fees and expenses will be paid by the
Company in accordance with the Company's agreements with such firms (copies of
which have been delivered by the Company to Parent prior to the date of this
Agreement).
(b) Parent represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's or finders fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
5.6 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, the
Surviving Corporation shall, indemnify, defend and hold harmless each person who
is now, or has been at any
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time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of the Company or any of its Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
attorneys' fees and expenses), liabilities or judgments or amounts that are paid
in settlement with the approval of the indemnifying party (which approval shall
not be unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of the Company or any of its Subsidiaries whether pertaining
to any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the full
extent a corporation is permitted under the DGCL to indemnify its own directors
or officers as the case may be (and the Company and the Surviving Corporation,
as the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent permitted
by law). Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), the Company shall defend
the Indemnified Parties in such matter with counsel of the Company's choosing
and the Indemnified Parties will use all reasonable efforts to assist in the
vigorous defense of any such matter. In no event will the Company or the
Surviving Corporation be liable for any settlement effected without its prior
written consent which consent shall not unreasonably be withheld. Any
Indemnified Party wishing to claim indemnification under this Section 5.6, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify the Company (or after the Effective Time, the Surviving
Corporation) (but the failure so to notify shall not relieve a party from any
liability which it may have under this Section 5.6 except to the extent such
failure prejudices such party), and shall deliver to the Company (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 145(e) of the DGCL. The Company and Sub agree that the foregoing rights
to indemnification, including provisions relating to advances of expenses
incurred in defense of any action or suit, existing in favor of the Indemnified
Parties with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time; provided, however, that all
rights to indemnification in respect of any Indemnified Liabilities asserted or
made within such period shall continue until the disposition of such Indemnified
Liabilities.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries (provided that Parent may substitute therefor policies of at least
the same coverage and containing terms and conditions which are not materially
less advantageous to the Indemnified Parties) with respect to matters arising
before the Effective Time, provided that Parent shall not be required to pay an
annual premium for such insurance in excess of 200% of the last annual premium
paid by the Company prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount. The last annual premium paid by the
Company was $105,000.
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(c) The provisions of this Section 5.6 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his heirs and
his personal representatives and shall be binding on all successors and assigns
of Sub, the Company and the Surviving Corporation.
5.7 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable, under
applicable laws and regulations or otherwise, to consummate and make effective
the transactions contemplated by this Agreement, subject to the Company
Stockholder Approval, including cooperating fully with the other party,
including by provision of information and making of all necessary filings in
connection with, among other things, approvals under the HSR Act. In case at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of either of the Constituent Corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Without limiting the generality of the foregoing, the Company agrees to
cooperate with Parent's and Sub's efforts to secure the financing contemplated
by the Financing Letters, such cooperation to include providing such information
to Parent's and Sub's financing sources as Parent or Sub may reasonably request
and making available management and such other employees of the Company as
Parent and Sub may reasonably request to participate in any marketing and sales
efforts relating to sales of securities in connection with the Financing
Letters.
5.8 Conduct of Business of Sub. During the period of time from the
date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
5.9 Publicity. The parties will consult with each other and will
mutually agree upon any press release or public announcement pertaining to the
Merger and shall not issue any such press release or make any such public
announcement prior to such consultation and agreement, except as may be required
by applicable law, in which case the party proposing to issue such press release
or make such public announcement shall use reasonable efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcement.
5.10 Withholding Rights. Sub and the Surviving Corporation, as
applicable, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as Sub or the Surviving Corporation, as applicable, is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Sub or the Surviving Corporation, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by Sub or the Surviving Corporation, as
applicable.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding Shares entitled to vote thereon.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and no restrictive order or other requirements shall have been
placed on the Company, Parent, Sub or the Surviving Corporation in connection
therewith.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect; provided, however,
that prior to invoking this condition, each party shall use all commercially
reasonable efforts to have any such decree, ruling, injunction or order vacated.
(d) Statutes. No statute, rule, order, decree or regulation shall
have been enacted or promulgated by any government or governmental agency or
authority which prohibits the consummation of the Merger.
6.2 Conditions of Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Parent and Sub:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement
and except in those instances where the aggregate amounts represented by all
breaches (other than breaches for which the Company has obtained the consent of
Parent and Sub) of such representations and warranties are not likely to result
in a Material Adverse Effect on the Company; and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
by the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the
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Company by the chief executive officer and by the chief financial officer of the
Company to such effect.
(c) Financing. Parent and Sub shall have received the debt financing
for the transactions contemplated hereby on terms substantially as outlined in
the Financing Letters.
(d) Employment Matters. ▇▇▇▇▇ ▇. ▇▇▇▇ shall have entered into a two-
year consulting agreement with the Surviving Corporation on terms consistent
with the letter dated September 12, 1997 from Parent to him. ▇▇▇▇▇ ▇. ▇▇▇▇▇
shall have entered into a three-year employment agreement with the Surviving
Corporation on terms consistent with the letter dated September 12, 1997 from
Parent to him and shall have made the investment in Sub as contemplated therein.
(e) No Litigation. There shall be no action, suit or proceeding
pending against Parent, Sub or the Company seeking to restrain or enjoin the
Merger, or seeking a material amount of damages in connection with the Merger,
which action, suit or proceeding has, in the opinion of legal counsel to Parent,
a reasonable possibility of success.
(f) Consents. The Company and the Subsidiaries shall have obtained
all of Requisite Consents.
(g) Dissenting Shares. No more than five percent (5.0%) of the shares
of Company Common Stock outstanding immediately prior to the Effective Time
shall be Dissenting Shares.
6.3 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer and by the
chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by the
Chief Executive officer and by the Chief Financial Officer of Parent to such
effect.
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or by Parent:
(a) by mutual written consent of the Company and Parent, or by mutual
action of their respective Boards of Directors;
(b) by either the Company or Parent (i) so long as such party is not
then in material breach of its obligations hereunder, if there has been a breach
of any representation, warranty, covenant or agreement on the part of the other
set forth in this Agreement which breach has not been cured within five business
days following receipt by the breaching party of notice of such breach, or (ii)
if any permanent injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have become final and
non-appealable;
(c) by either the Company or Parent, so long as such party is not
then in material breach of its obligations hereunder, if the Merger shall not
have been consummated on or before the 180th calendar day following the date
hereof; provided, that the right to terminate this Agreement under this Section
7.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date; or
(d) by Parent in the event that a Trigger Event has occurred under
Section 5.4(b) prior to the Closing.
7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or shareholders except (i) with respect to (A)
this Section 7.2, (B) the second sentence of Section 5.2 and (C) Section 5.4,
and (ii) to the extent that such termination results from the material breach by
a party hereto of any of its representations or warranties, or of any of its
covenants or agreements, in each case, as set forth in this Agreement.
7.3 Amendment. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of Parent, Sub and
the Company at any time prior to the Effective Date with respect to any of the
terms contained herein; provided, however, that, after this Agreement is
approved by the Company's stockholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be delivered to the
holders of Shares.
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7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by mutual action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. 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. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Article II and Section 5.6 hereof.
The Confidentiality Agreement shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreement shall apply to
all information and material delivered by any party hereunder.
8.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
Madison Dearborn Partners II, L.P.
Three First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Tuesday Morning Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. 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. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (together with the Confidentiality Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and
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understandings, both written and oral, among the parties with respect to the
subject matter hereof and, except as provided in Section 5.6, is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
8.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that (a) Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to (i)
any newly-formed direct wholly-owned Subsidiary of Parent or Sub or (ii) any
institutional lender who provides funds to Parent, Sub or the Surviving
Corporation for the consummation of the transactions contemplated hereby and (b)
Parent may assign, in its sole discretion, any or all of its rights, interests
and obligations hereunder to Madison Dearborn Capital Partners II, L.P or any
subsidiary of the type contemplated in clause (a)(i) above. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
PARENT:
MADISON DEARBORN PARTNERS II, L.P.
By: MADISON DEARBORN PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
SUB:
TUESDAY MORNING ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
Title: Vice President
-----------------------------------------
COMPANY:
-------
TUESDAY MORNING CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
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