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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BETWEEN
CONFETTI ACQUISITION, INC.
AND
AMSCAN HOLDINGS, INC.
DATED AS OF AUGUST 10, 1997
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TABLE OF CONTENTS
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ARTICLE 1
THE MERGER
SECTION 1.1 The Merger............................................................ A-1
SECTION 1.2 Closing............................................................... A-2
SECTION 1.3 Effective Time........................................................ A-2
SECTION 1.4 Effects of the Merger................................................. A-2
SECTION 1.5 Certificate of Incorporation; By-Laws................................. A-2
SECTION 1.6 Directors and Officers................................................ A-2
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock............................................... A-2
SECTION 2.2 Dissenting Share...................................................... A-3
SECTION 2.3 Mixed Consideration Elections......................................... A-3
SECTION 2.4 Treatment of Options.................................................. A-4
SECTION 2.5 Surrender of Shares; Transfer Books................................... A-5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Qualification; Subsidiaries.......................... A-7
SECTION 3.2 Certificates of Incorporation and By-Laws............................. A-7
SECTION 3.3 Capitalization........................................................ A-7
SECTION 3.4 Authority Relative to This Agreement.................................. A-8
SECTION 3.5 No Conflict; Required Filings and Consents............................ A-9
SECTION 3.6 Compliance............................................................ A-10
SECTION 3.7 SEC Filings; Financial Statements..................................... A-10
SECTION 3.8 Absence of Certain Changes or Events.................................. A-10
SECTION 3.9 Absence of Litigation................................................. A-10
SECTION 3.10 Properties............................................................ A-11
SECTION 3.11 Employee Benefit Plans................................................ A-12
SECTION 3.12 Tax Matters........................................................... A-13
SECTION 3.13 Environmental Laws.................................................... A-14
SECTION 3.14 Intellectual Property................................................. A-15
SECTION 3.15 Labor Matters......................................................... A-15
SECTION 3.16 Business Relationships; No Restrictive Agreements..................... A-16
SECTION 3.17 Form S-4; Proxy Statement............................................. A-16
SECTION 3.18 Brokers............................................................... A-16
SECTION 3.19 Opinion of Company Financial Advisor.................................. A-16
SECTION 3.20 Board Recommendation.................................................. A-16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NEWCO
SECTION 4.1 Corporate Organization................................................ A-17
SECTION 4.2 Authority Relative to This Agreement.................................. ▇-▇▇
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SECTION 4.3.. No Conflict; Required Filings and Consents............................ A-17
SECTION 4.4 Form S-4; Proxy Statement............................................. A-18
SECTION 4.5 Brokers............................................................... A-18
SECTION 4.6 Financing............................................................. A-18
SECTION 4.7 Newco Not an Interested Stockholder................................... A-18
SECTION 4.8 Solvency of the Company Following the Merger.......................... A-18
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business Pending the Merger................................ A-18
ARTICLE 6
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting.................................................. A-20
SECTION 6.2 Form S-4 and Proxy Statement.......................................... A-20
SECTION 6.3 Access to Information; Confidentiality................................ A-21
SECTION 6.4 No Solicitation....................................................... A-22
SECTION 6.5 ESOP.................................................................. A-22
SECTION 6.6 Directors' and Officers' Indemnification and Insurance................ A-22
SECTION 6.7 Notification of Certain Matters....................................... A-23
SECTION 6.8 Further Action; Best Efforts.......................................... A-23
SECTION 6.9 Public Announcements.................................................. A-25
SECTION 6.10 Disposition of Litigation............................................. A-25
SECTION 6.11 Affiliates............................................................ A-25
SECTION 6.12 Stop Transfer Order................................................... A-25
SECTION 6.13 Transfer Taxes........................................................ A-25
SECTION 6.14 Employee Plans and Benefits........................................... A-25
ARTICLE 7
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger........... A-26
SECTION 7.2 Conditions to Obligation of Newco..................................... A-26
SECTION 7.3 Conditions to Obligation of the Company............................... ▇-▇▇
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ AND WAIVER
SECTION 8.1 Termination........................................................... A-28
SECTION 8.2 Effect of Termination................................................. A-28
SECTION 8.3 Fees and Expenses..................................................... A-28
SECTION 8.4 Amendment............................................................. A-29
SECTION 8.5 Waiver................................................................ A-29
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements............ A-29
SECTION 9.2 Notices............................................................... A-29
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SECTION 9.3 Certain Definitions................................................... A-30
SECTION 9.4 Severability.......................................................... A-31
SECTION 9.5 Entire Agreement; Assignment.......................................... A-31
SECTION 9.6 Parties in Interest................................................... A-31
SECTION 9.7 Governing Law......................................................... A-31
SECTION 9.8 Headings.............................................................. A-31
SECTION 9.9 Counterparts.......................................................... A-31
Annex A -- Form of Affiliate Letter
Exhibit A -- Certificate of Incorporation of Amscan Holdings, Inc.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 10, 1997 (the
"Agreement"), between Confetti Acquisition, Inc., a Delaware corporation
("Newco"), and Amscan Holdings, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company and Newco have
determined that the merger of Newco with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement, based
on the availability of the Cash Election Price to any stockholder who so elects,
would be fair to and in the best interests of their respective stockholders, and
such Boards of Directors have approved the Merger, pursuant to which each share
of common stock, par value $.10 per share (the "Company Common Stock"), issued
and outstanding immediately prior to the Effective Time (as defined in Section
1.3) (other than (a) shares of Company Common Stock owned, directly or
indirectly, by the Company or any Subsidiary (as defined in Section 9.3) of the
Company or by Newco or any Subsidiary of Newco and (b) Dissenting Shares (as
defined in Section 2.2)), will be converted into either (A) at the election of
the holder thereof and subject to the terms hereof, the right to retain one-one
hundred fifty thousandth (1/150,000) of each share of their Company Common Stock
and the right to receive $9.33 per share in cash or (B) the right to receive
$16.50 per share in cash;
WHEREAS, the Merger and this Agreement require the affirmative vote by the
holders of a majority of the shares of the Company Common Stock outstanding and
entitled to vote for the adoption and approval thereof (the "Company Stockholder
Approval");
WHEREAS, Newco is a newly formed corporation organized at the direction of
GS Capital Partners II, L.P.;
WHEREAS, as a condition to Newco's willingness to enter into this Agreement
and consummate the transactions contemplated hereby, Newco has required that the
"Stockholder" (as defined in the Voting Agreement (as defined below)) agree,
among other things, to vote all shares of Company Common Stock beneficially
owned by the Stockholder and certain related persons (as defined in Section 9.3)
in accordance with the Voting Agreement and comply with the other provisions of
the Voting Agreement, and to make a Mixed Consideration Election (as defined
herein) with respect to all shares of Company Common Stock owned by the
Stockholder; and in order to induce Newco to enter into this Agreement, the
Stockholder will execute and deliver the Voting Agreement, dated as of the date
hereof, among Newco, the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ (the "Voting Agreement");
WHEREAS, in connection with this Agreement, Newco and certain employees of
the Company entered into certain agreements as of the date hereof relating to
their employment with the Company following the Effective Time and relating to
their ownership of the capital stock of Newco (collectively, the "Employment
Arrangements");
WHEREAS, certain terms used herein are defined in Section 9.3;
WHEREAS, Newco 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 Merger; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"), at the Effective Time
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(as defined in Section 1.3), Newco shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Newco shall cease
and the Company shall survive the Merger.
SECTION 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article 7, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on the second business day after satisfaction or waiver of the
conditions set forth in Article 7 (the "Closing Date"), at the offices of
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.3 Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article 7, the parties hereto shall
cause the Merger to be consummated by filing this Agreement or a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as required by and executed in accordance with the
relevant provisions of the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and Newco
shall vest in the Company following the Merger, and all debts, liabilities and
duties of the Company and Newco shall become the debts, liabilities and duties
of the Company following the Merger.
SECTION 1.5 Certificate of Incorporation; By-Laws. (a) At the Effective
Time and without any further action on the part of the Company or Newco or their
respective stockholders, the certificate of incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be amended and restated so
as to read in its entirety in the form set forth as Exhibit A hereto and, as so
amended, until thereafter further amended as provided therein and under the
DGCL, it shall be the certificate of incorporation of the Company following the
Merger.
(b) At the Effective Time and without any further action on the part of the
Company or Newco or their respective stockholders, the by-laws of Newco as in
effect immediately prior to the Effective Time shall be the by-laws of the
Company following the Merger and thereafter may be amended or repealed in
accordance with their terms and the certificate of incorporation of the Company
following the Merger and as provided under the DGCL.
SECTION 1.6 Directors and Officers. The directors of Newco immediately
prior to the Effective Time shall be the initial directors of the Company
following the Merger, each to hold office in accordance with the certificate of
incorporation and by-laws of the Company following the Merger, and the officers
of the Company immediately prior to the Effective Time shall be the initial
officers of the Company following the Merger, in each case until their
respective successors are duly elected or appointed (as the case may be) and
qualified.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Newco or any
holder of any shares of Company Common Stock or any shares of capital stock of
Newco:
(a) Common Stock of Newco. Each share of common stock, par value $.10
per share, of Newco ("Newco Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into a number of
fully paid and nonassessable shares of the common stock, par value $.10 per
share, of the Company following the Merger equal to the quotient of (i) 900
divided by (ii) the number of shares of Newco Common Stock outstanding
immediately prior to the Effective Time.
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(b) Cancellation of Treasury Stock and Newco-Owned Company Common
Stock. Each share of Company Common Stock that, immediately prior to the
Effective Time, is owned by the Company or by any Subsidiary of the
Company, and each share of Company Common Stock that, immediately prior to
the Effective Time, is owned by Newco or any Subsidiary of Newco shall
automatically be cancelled and retired and shall cease to exist, and no
cash, Company Common Stock or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
herein, each issued and outstanding share of Company Common Stock (other
than any such shares to be cancelled pursuant to Section 2.1(b) and any
Dissenting Shares (as defined in Section 2.2)) shall be converted into the
following (the "Merger Consideration"):
(i) for each such share of Company Common Stock with respect to
which an election to retain Company Common Stock has been effectively
made and not revoked or lost, pursuant to Section 2.3 ("Electing
Shares"), the right to retain one-one hundred fifty thousandth
(1/150,000) of a fully paid and nonassessable share of Company Common
Stock and the right to receive in cash from the Company following the
Merger an amount equal to $9.33 (such Company Common Stock and cash,
together, being the "Mixed Consideration"); or
(ii) for each such share of Company Common Stock, other than
Electing Shares, the right to receive in cash from the Company following
the Merger an amount equal to $16.50 (the "Cash Election Price").
(d) Cancellation and Retirement of Company Common Stock. As of the
Effective Time, all shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than those shares issued
pursuant to Section 2.1(a) (the "New Shares") and those shares retained
pursuant to Section 2.1(c)(i) after giving effect to Section 2.5(e) (the
"Retained Shares")) shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock (other
than New Shares and Retained Shares) shall, to the extent such certificate
represents such shares, cease to have any rights with respect thereto,
except the right to receive cash, including cash in lieu of fractional
shares of Company Common Stock, to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.5.
SECTION 2.2 Dissenting Shares. (a) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and which are held by
stockholders who have not voted in favor of or consented to the Merger and who
shall have delivered a written demand for appraisal of such shares in the time
and manner provided in Section 262 of the DGCL and shall not have failed to
perfect or shall not have effectively withdrawn or lost their rights to
appraisal and payment under the DGCL (the "Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration, but shall be
entitled to receive the consideration as shall be determined pursuant to Section
262 of the DGCL; provided, however, that, if any such holder shall have failed
to perfect or shall have effectively withdrawn or lost his, her or its right to
appraisal and payment under the DGCL, such holder's shares of Company Common
Stock shall thereupon be deemed to have been converted, at the Effective Time,
into the right to receive the Merger Consideration set forth in Section
2.1(c)(ii) of this Agreement, without any interest thereon.
(b) The Company shall give Newco (i) prompt notice of any demands for
appraisal pursuant to Section 262 received by the Company, withdrawals of such
demands and any other instruments served pursuant to the DGCL and received by
the Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Newco, make any payment with respect to
any such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.3 Mixed Consideration Elections. (a) Each person who, on or
prior to the Election Date referred to in (c) below, is a record holder of
shares of Company Common Stock will be entitled, with respect
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to all or any portion of his shares, to make an unconditional election (a "Mixed
Election") on or prior to such Election Date to retain and receive, as
applicable, Mixed Consideration, on the basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement (as defined in Section
3.17), Newco shall appoint a bank or trust company to act as exchange agent (the
"Exchange Agent") for the payment of the Merger Consideration.
(c) Newco shall prepare and mail a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election"), with
the Proxy Statement to the record holders of Company Common Stock as of the
record date for the Stockholders Meeting (as defined in Section 6.1), which Form
of Election shall be used by each record holder of shares of Company Common
Stock who wishes to elect to retain and receive, as applicable, Mixed
Consideration for any or all shares of Company Common Stock held by such holder.
The Company will use its best efforts to make the Form of Election and the Proxy
Statement available to all persons who become holders of Company Common Stock
during the period between such record date and the Election Date referred to
below. Any such holder's election to retain and receive, as applicable, Mixed
Consideration shall have been properly made only if the Exchange Agent shall
have received at its designated office, by 5:00 p.m., New York City time, on the
business day (the "Election Date") next preceding the date of the Stockholders
Meeting, a Form of Election properly completed and signed and accompanied by
certificates for the shares of Company Common Stock to which such Form of
Election relates, duly endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company (or by an appropriate guarantee of delivery
of such certificates as set forth in such Form of Election from a firm which is
a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States, provided such
certificates are in fact delivered to the Exchange Agent within three NASDAQ
trading days after the date of execution of such guarantee of delivery).
(d) Any Form of Election may be revoked by the stockholder after submitting
it to the Exchange Agent only by written notice received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Election Date (which shall be the
record date for determination of stockholders entitled to make the Mixed
Election), unless Newco and such stockholder agree otherwise. In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Newco and the Company that the Merger has been abandoned.
If a Form of Election is revoked, the certificate or certificates (or guarantees
of delivery, as appropriate) for the shares of Company Common Stock to which
such Form of Election relates shall be promptly returned to the stockholder
submitting the same to the Exchange Agent.
(e) The good faith determination of the Exchange Agent as to whether or not
elections to retain and receive, as applicable, Mixed Consideration have been
properly made or revoked pursuant to this Section 2.3 with respect to shares of
Company Common Stock, and as to when elections and revocations were received by
it, shall be binding. If the Exchange Agent determines that any election to
retain and receive, as applicable, Mixed Consideration was not properly made
with respect to shares of Company Common Stock, such shares shall be treated by
the Exchange Agent as shares which were not Electing Shares at the Effective
Time, and such shares shall be exchanged in the Merger for cash pursuant to
Section 2.1(c)(ii). The Exchange Agent may, with the mutual agreement of Newco
and the Company, make such rules as are consistent with this Section 2.3 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
SECTION 2.4 Treatment of Options. (a) Except as otherwise agreed by Newco
and any such holder of an Option (as defined below) prior to the Effective Time,
including pursuant to the Employment Arrangements, immediately prior to the
Effective Time, each outstanding stock option held by any current or former
employee or director (an "Option") granted under the 1996 Stock Option Plan for
Key Employees (the "Stock Plan"), whether or not then exercisable, shall be
cancelled by the Company, and except as otherwise agreed by the Company, Newco
and the holder, the holder thereof shall be entitled to receive at the Effective
Time or as soon as practicable thereafter from the Company in consideration for
such cancellation an amount in cash equal to the product of (a) the number of
shares of Company Common Stock previously subject to such Option and (b) the
excess, if any, of the Cash Election Price over the per share exercise price
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of the shares of Company Common Stock previously subject to such Option, reduced
by the amount of any withholding or other taxes required by law to be withheld
(the "Option Cash-Out Amount").
(b) The Company shall use its reasonable best efforts to take all such
action as is necessary prior to the Effective Time to terminate the Stock Plan
so that on and after the Effective Time no current or former employee or
director shall have any Option to purchase shares of Company Common Stock or any
other equity interest in the Company under the Stock Plan and to provide that
from and after the Effective Time, to the extent any Option has not been
cancelled as contemplated by Section 2.4(a), upon exercise of any such Option,
the holder thereof shall be entitled to receive only the Option Cash-Out Amount.
The Company shall use its reasonable best efforts to obtain any consents
necessary to release the Company from any liability in respect of any Option.
SECTION 2.5 Surrender of Shares; Transfer Books. (a) Exchange
Agent. Following the Effective Time, the Company shall deposit with the
Exchange Agent, for the benefit of the holders of shares of Company Common
Stock, as and when needed, the cash portion of the Merger Consideration for
exchange in accordance with this Article 2. Such funds shall be invested by the
Exchange Agent as directed by the Company, provided that such investments shall
be (i) securities issued or directly and fully guaranteed or insured by the
United Stated government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (ii)
certificates of deposit, eurodollar time deposits and bankers' acceptances with
maturities not exceeding six months and overnight bank deposits with any
commercial bank, depository institution or trust company incorporated or doing
business under the laws of the United States of America, any state thereof or
the District of Columbia, provided that such commercial bank, depository
institution or trust company has, at the time of investment, (A) capital and
surplus exceeding $250 million and (B) outstanding short-term debt securities
which are rated at least A-1 by Standard & Poor's Rating Group Division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.
or carry an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease to publish ratings of investments, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (i) and (ii) above entered into
with any financial institution meeting the qualifications specified in clause
(ii) above, (iv) commercial paper having a rating in the highest rating
categories from Standard & Poor's Rating Group Division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc. or ▇▇▇▇▇'▇ Investors Service, Inc. or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease to publish ratings of investments and in each case maturing
within six months after the date of acquisition and (v) money market mutual or
similar funds having assets in excess of $1 billion. Any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Company upon the Company's request.
(b) Exchange Procedures for Shares of Company Common Stock. As soon as
practicable after the Effective Time, each holder of an outstanding certificate
or certificates which prior thereto represented shares of Company Common Stock
shall, upon surrender to the Exchange Agent of such certificate or certificates
and acceptance thereof by the Exchange Agent, be entitled to a certificate or
certificates representing the number of full shares of Company Common Stock, if
any, to be retained by the holder thereof pursuant to this Agreement and the
amount of cash, if any, into which the number of shares of Company Common Stock
previously represented by such certificate or certificates surrendered shall
have been converted pursuant to this Agreement. The Exchange Agent shall accept
such certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices. After the Effective Time, there shall
be no further transfer on the records of the Company or its transfer agent of
certificates representing shares of Company Common Stock which have been
converted, in whole or in part, pursuant to this Agreement into the right to
receive cash, and if such certificates are presented to the Company for
transfer, they shall be cancelled against delivery of cash and, if appropriate,
certificates for retained Company Common Stock. If any certificate for such
Company Common Stock is to be issued in, or if cash is to be remitted to, a name
other than that in which the certificate for Company Common Stock surrendered
for exchange is registered, it shall be a condition of such exchange or payment
that the certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange or payment shall pay to the Company or its
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transfer agent any transfer or other taxes required by reason of the issuance of
certificates for Company Common Stock pursuant hereto in a name other than that
of, or payment to a person other than, the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or its transfer
agent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.5(b), each certificate for shares of Company
Common Stock shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by Section 2.1. No interest will be paid or will accrue on any cash
payable as Merger Consideration or in lieu of any fractional shares of Company
Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to retained Company Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
certificate for shares of Company Common Stock with respect to the shares of
retained Company Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.5(e)
until the surrender of such certificate in accordance with this Article 2.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the holder of the certificate representing
whole shares of retained Company Common Stock issued in connection therewith,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of retained Company Common Stock to which
such holder is entitled pursuant to Section 2.5(e) and the proportionate amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of retained Company Common
Stock, and (ii) at the appropriate payment date, the proportionate amount of
dividends or other distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such surrender payable
with respect to such whole shares of retained Company Common Stock.
(d) No Further Ownership Rights in Company Common Stock Exchanged. All
cash paid or shares of Company Common Stock retained upon the surrender for
exchange of certificates representing shares of Company Common Stock in
accordance with the terms of this Article 2 (including any cash paid pursuant to
Section 2.5(e)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such certificates.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of retained Company Common Stock shall be issued pursuant to a Mixed
Election in connection with the Merger, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of the
Company after the Merger. Notwithstanding any other provision of this Agreement,
each record holder of shares of Company Common Stock exchanged pursuant to a
Mixed Election in connection with the Merger who would otherwise have been
entitled to receive a fraction of a share of retained Company Common Stock
(after taking into account all shares of Company Common Stock delivered by such
holder) shall receive, in lieu thereof, a cash payment (without interest) equal
to an amount equal to the same fraction of $75,000 as is equal to the fraction
of one share of Company Common Stock such holder would have been entitled to
otherwise retain.
(f) Termination of Exchange Fund. Any portion of the Merger Consideration
deposited with the Exchange Agent pursuant to this Section 2.5 (the "Exchange
Fund") which remains undistributed to the holders of the certificates
representing shares of Company Common Stock for six months after the Effective
Time shall be delivered to the Company, upon demand, and any holders of shares
of Company Common Stock prior to the Merger who have not theretofore complied
with this Article 2 shall thereafter look only to the Company and only as
general creditors thereof for payment of their claims for cash, if any, retained
Company Common Stock, if any, any cash in lieu of fractional shares of retained
Company Common Stock, or any dividends or distributions with respect to retained
Company Common Stock to which such holders may be entitled.
(g) No Liability. None of Newco, the Company or the Exchange Agent shall
be liable to any person in respect of any shares of retained Company Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock shall not have been
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surrendered prior to one year after the Effective Time (or immediately prior to
such earlier date on which any cash, if any, any cash in lieu of fractional
shares of retained Company Common Stock, or any dividends or distributions with
respect to retained Company Common Stock in respect of such certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.5(b)), any such cash, dividends or distributions in respect
of such certificate shall, to the extent permitted by applicable law, become the
property of the Company, free and clear of all claims or interest of any person
previously entitled thereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Newco that, except as set
forth in the Section of the Disclosure Schedule delivered in connection with
this Agreement as of the date hereof (the "Disclosure Schedule") relating to the
correlative Section of this Article 3:
SECTION 3.1 Organization and Qualification; Subsidiaries. (a) Each of the
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approval would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (as defined below).
Each of the Company and each of its Subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. When used in connection with the
Company or any of its Subsidiaries, the term "Material Adverse Effect" means any
change or effect that (a) either individually or in the aggregate with all other
changes or effects, is materially adverse to the business, condition (financial
or otherwise), or results of operations of the Company and its Subsidiaries
taken as a whole or (b) would prevent consummation of, or materially adversely
affect the ability of the parties hereto to consummate, the transactions
contemplated by this Agreement.
(b) The only direct or indirect Subsidiaries of the Company are those
listed in Section 3.1(b) of the Disclosure Schedule. Except as set forth in
Section 3.1(b) of the Disclosure Schedule, all the outstanding shares of capital
stock of and other equity interests in each such Subsidiary have been validly
issued and are fully paid and non-assessable and are owned (of record and
beneficially) by the Company, by another Subsidiary of the Company or by the
Company and another such Subsidiary, free and clear of all pledges, claims,
mortgages, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"). Section 3.1(b) sets forth a list of
any other person that owns capital stock of and other equity interests in any
Subsidiary of the Company, and the amount of such capital stock so owned. Except
for the ownership interests set forth in Section 3.1(b) of the Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any other person.
SECTION 3.2 Certificates of Incorporation and By-Laws. The Company has
heretofore furnished to Newco complete and correct copies of the certificate of
incorporation and the by-laws of the Company and each of its Subsidiaries as
currently in effect. Such certificates of incorporation and by-laws are in full
force and effect and no other organizational documents are applicable to or
binding upon the Company or such Subsidiaries. The Company and its Subsidiaries
are not in violation of any of the provisions of their respective certificates
of incorporation or by-laws.
SECTION 3.3 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 5,000,000 shares of
Preferred Stock, $.10 par value per share (the "Company Preferred Stock"). As of
July 31, 1997, (i) 21,098,785 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
were issued free of preemptive (or similar) rights, (ii) 21,691 shares of
Company Common Stock were held in the treasury of the
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Company and (iii) an aggregate of 512,000 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Options. Other than the shares of Company
Common Stock reserved for issuance as set forth in the preceding clause (iii),
no capital stock or other equity interests in the Company or any of its
Subsidiaries is issuable upon exercise of the Options. As of the date hereof, no
shares of Company Preferred Stock are, and as of the Closing Date no shares of
Preferred Stock will be, issued and outstanding. Since July 31, 1997, the
Company has not issued or reserved for issuance (a) any shares of capital stock
or other voting securities of the Company or any of its Subsidiaries, except as
a result of the exercise of Options outstanding at July 31, 1997 or (b) any
Options, except as described in this Section 3.3. All shares of Company Common
Stock subject to issuance as aforesaid pursuant to Options, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable
and free of preemptive (or similar) rights. To the knowledge of the Company,
other than as provided in the Voting Agreement, there are no irrevocable proxies
with respect to shares of capital stock or other equity interests in the Company
or any Subsidiary of the Company. Except as set forth in Section 3.3 of the
Disclosure Schedule, there are no agreements or arrangements pursuant to which
the Company is or could be required to register shares of Company Common Stock
or other securities under the Securities Act of 1933, as amended (the
"Securities Act"), or other agreements or arrangements with or among any
securityholders of the Company with respect to securities of the Company. There
are no outstanding bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except for the Options, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity or
voting securities of the Company or of any of its Subsidiaries, or any
securities exchangeable for or convertible into capital stock or other equity or
voting securities of the Company or any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking, and there are not outstanding any equity equivalents, interests
in the ownership or earnings of the Company or any of its Subsidiaries or other
similar rights (collectively, with the Options, "Company Securities") and there
are no other options, calls, warrants or other similar rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of or equity or voting interests in the Company or any of its
Subsidiaries to which the Company or any of its Subsidiaries is a party. Except
as set forth in Section 3.3 of the Disclosure Schedule, there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities or any outstanding Company Common Stock
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity. As of the
date hereof, the only outstanding indebtedness for borrowed money of the Company
and its Subsidiaries is set forth in Section 3.3 of the Disclosure Schedule (the
"Company Debt"). Except as set forth in Section 3.3 of the Disclosure Schedule,
(i) the loans and other extensions of credit under the Company Debt are each
prepayable on not more than 30 days notice, without additional cost other than
reimbursement of customary breakage costs, and (ii) interest payable with
respect to each of the loans and other extensions of credit under the Company
Debt is calculated on the basis of a floating interest rate.
SECTION 3.4 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. Assuming the accuracy of Newco's representations contained
in Section 4.7 (without giving effect to the knowledge qualification thereof),
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, the approval of this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock, and the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly
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and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Newco, constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms. The Board of Directors of the Company has approved
this Agreement, the Voting Agreement (including the option contemplated thereby)
and, to the extent necessary, the Employment Arrangements and the transactions
contemplated hereby and thereby (including the Merger) (provided, in the case of
the Voting Agreement and the Employment Arrangements, that such approval is
limited to the forms provided to the Company at the time of execution hereof
without giving effect to any amendments, modifications or waivers thereunder not
approved by the Company) so as to render inapplicable hereto and thereto the
limitation on business combinations contained in Section 203 of the DGCL (or any
similar provision). As a result of the foregoing actions, assuming the accuracy
of Newco's representations contained in Section 4.7 (without giving effect to
the knowledge qualification thereof), the only vote required to authorize the
Merger is the affirmative vote of a majority of the outstanding shares of
Company Common Stock. To the knowledge of the Company, no state takeover statute
or similar statute or regulation, other than Section 203 of the DGCL, applies or
purports to apply to this Agreement, the Merger, the Voting Agreement, the
Employment Arrangements, or any of the other transactions contemplated hereby or
thereby. No provision of the certificate of incorporation, by-laws or other
governing instruments of the Company or any of its Subsidiaries would, directly
or indirectly, restrict or impair the ability of Newco or its affiliates to
vote, or otherwise to exercise the rights of a stockholder with respect to,
securities of the Company and its Subsidiaries that may be acquired or
controlled by Newco or its affiliates or permit any stockholder to acquire
securities of the Company on a basis not available to Newco in the event that
Newco were to acquire securities of the Company, and neither the Company nor any
of its Subsidiaries has any rights plan, preferred stock or similar arrangement
which have any of the aforementioned consequences.
SECTION 3.5 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby by the Company do not and
will not: (i) conflict with or violate the certificate of incorporation or
by-laws of the Company or the equivalent organizational documents of any of its
Significant Subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i) and (ii) of subsection (b) below have
been obtained and all filings described in such clauses have been made, conflict
with or violate any law, rule, regulation, order, ordinance, judgment, arbitral
award or decree applicable to the Company or any of its Subsidiaries or by which
they or any of their respective properties are bound or affected; or (iii)
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, alteration, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any loan, credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, concession, franchise or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or its or any of
their respective properties are bound or affected, except (A) in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect and (B) in the case of
clause (iii), other than as set forth on Section 3.5(a) of the Disclosure
Schedule.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by the
Company do not and will not require any consent, approval, authorization, order
or permit of, action by, registration, declaration or filing with or notice or
notification to, any Federal, state, local or foreign government or any court,
arbitral authority, administrative agency or commission or other governmental
authority, official or agency, domestic or foreign (a "Governmental Entity"),
except for (i) the applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, the Securities Act and the rules and regulations promulgated
thereunder, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and state securities or "Blue Sky" laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, orders, permits, actions,
registrations, declarations, filings, notices or notifications the failure of
which to make
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or obtain would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 3.6 Compliance. The conduct of the business of each of the
Company and each of its Subsidiaries complies with all laws, rules, regulations,
orders, ordinances, judgments, arbitral awards and decrees applicable thereto,
except for violations or failures so to comply, if any, that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is, or has received any
notice or has knowledge that any other party is, in default or violation of any
loan, credit agreement, note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, concession, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of their respective properties
are bound or affected, except for any such conflicts, defaults or violations
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports, statements and documents required to be filed with the
Securities and Exchange Commission (the "SEC") since October 15, 1996
(collectively, including all exhibits and schedules thereto and documents
incorporated therein by reference, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act, and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, as
applicable, each as in effect on the date so filed. No SEC Report contained,
when filed, any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except to the extent
revised or superseded by a subsequent filing with the SEC (a copy of which has
been provided to Newco prior to the date hereof), none of the SEC Reports filed
prior to the date hereof contains any untrue statement of a material fact or
omits to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial statements of
the Company (including any related notes thereto) included in the SEC Reports,
complies as to form in all material respects with all applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly presents
the consolidated financial position of the Company and its Subsidiaries at the
respective date thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated.
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and its Subsidiaries at December 31, 1996, including the notes
thereto, neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or Events. Since December 31,
1996, except as contemplated by this Agreement, disclosed in the SEC Reports
filed and publicly available prior to the date of this Agreement or disclosed in
Section 3.8 of the Disclosure Schedule, the Company and its Subsidiaries have
conducted their businesses only in the ordinary course of business consistent
with past practice and, since such date, there has not been (i) any condition,
event or occurrence which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or (ii) any action which, if it had
been taken after the date hereof, would have required the consent of Newco under
Section 5.1 hereof.
SECTION 3.9 Absence of Litigation. There are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries, or any
properties or rights of the Company or any of its Subsidiaries, before any
Governmental Entity, that individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, and, to the knowledge of the
Company, no basis for any such suit, claim, action, proceeding or investigation
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exists. Neither the Company nor any of its Subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which, insofar as can be
reasonably foreseen, in the future would reasonably be expected to have a
Material Adverse Effect. As of the date hereof, no officer or director of the
Company is a defendant in any litigation commenced by stockholders of the
Company with respect to the performance of his or her duties as an officer
and/or director of the Company under any Federal, state, local or foreign law
(including litigation under Federal and state securities laws). Except as set
forth in Section 3.9 of the Disclosure Schedule, to the knowledge of the
Company, there exist no indemnification agreements with any of the directors and
officers of the Company. Each of the director indemnification agreements
referred to in item A.2. of Section 3.9 of the Disclosure Schedule is in the
form included as Exhibit 10(l) to the Company's Form 10-K for the year ended
December 31, 1996.
SECTION 3.10 Properties. (a) The Company or one of its Subsidiaries has
(i) good and marketable fee title to the real property owned in fee by the
Company or any of its Subsidiaries (collectively, the "Owned Properties") and
(ii) good and valid leasehold title or other occupancy right to the real
property leased, subleased or licensed by the Company or any of its Subsidiaries
(collectively, the "Leased Properties") (Owned Properties and Leased Properties
being sometimes referred to herein collectively as the "Company Properties"), in
each case free and clear of all options to purchase or lease (in the case of the
Owned Properties), leases, subleases, rights of first offer, conditions of
limitation, easements, Liens, covenants, rights-of-way and other restrictions
(collectively, "Title Matters"), except for such Title Matters set forth in
Section 3.10(a) of the Disclosure Schedule, which Title Matters, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Section 3.10(a) of the Disclosure Schedule sets forth a complete and
accurate list and description of all Owned Properties and all Leased Properties.
(b) Each agreement under which real property is leased, subleased or
licensed to the Company or one of its Subsidiaries (collectively, the "Company
Leases") is in full force and effect in accordance with its respective terms and
the Company or one of its Subsidiaries is the holder of the lessee's or tenant's
interest thereunder and there exists no default under any of the Company Leases
by the Company or any of its Subsidiaries and no circumstance exists which, with
the giving of notice, the passage of time or both could result in such a
default, except for such defaults or other circumstances which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Section 3.10(b) of the Disclosure Schedule, the
transfer of the shares of Company Common Stock or the consummation of any other
part of the transactions contemplated hereby does not violate the terms of any
of the Company Leases. Except as set forth in Section 3.10(b) of the Disclosure
Schedule, no Company Lease is subject to any pledge, Lien, sublease, assignment,
license or other agreement granting to any third party any interest in such
Company Lease or any right to the use or occupancy of any Leased Property.
Except as set forth in Section 3.10(b) of the Disclosure Schedule, true and
complete copies of the Company Leases have previously been delivered to Newco,
including (without limitation) all amendments or modifications thereof and all
side letters or other instruments affecting the obligations of any party
thereunder. The lessee under each Company Lease is now in possession of the
applicable Leased Property.
(c) Each of the Company and its Subsidiaries has all permits necessary to
own or operate its Owned Real Property and Leased Real Property as currently
owned, and no such permits will be required, as a result of the Merger or the
other transactions contemplated hereby, to be issued after the Closing in order
to permit the Company following the Merger to continue to own or operate such
Company Properties, other than any such permits the absence of which would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 3.10(c) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received, with respect to any Owned Real Property or Leased
Real Property, any written notice of default or any written notice of
noncompliance with respect to applicable Federal, state, local and foreign laws
and regulations relating to zoning, building, fire, use restriction or safety or
health codes which have not been remedied in all respects which would reasonably
be expected to have a Material Adverse Effect. There is no pending or, to the
knowledge of the Company, threatened condemnation or other governmental taking
of any of the Owned Real Property or Leased Real Property. All buildings,
structures, improvements and fixtures located on, under, over or within the
Company Properties, and all other aspects of each of the Company Properties, (A)
are in good operating condition and repair and are structurally sound and free
of any
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material defects; and (B) are suitable, sufficient and appropriate in all
respects for their current and contemplated uses.
SECTION 3.11 Employee Benefit Plans. (a) Section 3.11(a) of the
Disclosure Schedule contains, to the knowledge of the Company, a true and
complete list of each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including without limitation multiemployer plans within the meaning
of ERISA Section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this Agreement or
otherwise), under which any employee or former employee of the Company or any of
its Subsidiaries has, or could reasonably be expected to have, any present or
future right to benefits or under which the Company or any Subsidiary of the
Company has, or could reasonably be expected to have, any present or future
material liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans". Section
3.11(a) of the Disclosure Schedule also contains a true and complete description
of all severance plans of the Company or any of its Subsidiaries. No Company
Plan is a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA
or is an "employee pension plan" within the meaning of Section 3(2) of ERISA
subject to Title IV of ERISA.
(b) With respect to each Company Plan, the Company has delivered or made
available to Newco a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or description of any oral
communication) by the Company or any of its Subsidiaries which modify in any
significant respect the benefits provided under the terms of any Company Plan in
a manner not reflected in any of the documents otherwise described in this
subsection (b); and (iv) for the three most recent years (A) the Form 5500 and
attached schedules; (B) audited financial statements; and (C) actuarial
valuation reports.
(c) With respect to all the Company Plans, except as set forth in the SEC
Reports: (i) all Company Plans are in compliance with all applicable law,
including the Internal Revenue Code of 1986, as amended (the "Code"), and ERISA,
including in compliance with all filing and reporting requirements, except as
would not reasonably be expected to have a Material Adverse Effect; (ii) the
aggregate projected benefit obligations of each pension plan that is subject to
Title IV of ERISA (as of the date of the most recent actuarial valuation
prepared for such Plan) do not exceed the fair market value of the assets of
such pension plan (as of the date of such valuation), and, to the knowledge of
the Company, no material adverse change has occurred with respect to the
financial condition of such plan since such last valuation; (iii) each of the
Company Plans which is intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified and such determination has not been modified, revoked or limited by
failure to satisfy any condition thereof or by a subsequent amendment thereto or
a failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such Company
Plans, and the period for making any such necessary retroactive amendments has
not expired; (iv) no act, omission or transaction (individually or in the
aggregate) has occurred with respect to any Company Plan that has resulted or
could result in any material liability (direct or indirect) of the Company or
any of its Subsidiaries under Sections 409 or 502(c)(i) or (l) of ERISA or
Chapter 43 of Subtitle (A) of the Code; (v) there is no pending or, to the
knowledge of the Company, threatened litigation or administrative agency
proceeding relating to any Company Plan (other than benefit claims in the
ordinary course); (vi) the Company has no obligations under any unfunded
deferred compensation plans; (vii) neither the Company, its Subsidiaries nor any
entity that is treated as a single employer with the Company or its Subsidiaries
under Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") has
incurred or reasonably expects to incur any Lien or liability to the Pension
Benefit Guaranty Corporation, any Pension Plan or otherwise under Sections 3.02
or 6.01 et seq. of Title IV of ERISA (other than the payment of contributions or
premiums, none of which are overdue) or under Sections 412,
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4971 or 4980B of the Code; and (viii) neither the Company nor any of its
Subsidiaries makes any contributions to or has any obligation to create or
contribute to any multiemployer plan (within the meaning of Section 3(37) of
ERISA) or a multiple employer plan (within the meaning of Section 413(c) of the
Code).
(d) Except as specifically contemplated by this Agreement or as disclosed
in Section 3.11(d) of the Disclosure Schedule, the consummation of the Merger
and the other transactions contemplated hereby will not (x) entitle any employee
or director of the Company or any of its Subsidiaries to severance pay, or (y)
accelerate the time of payment or vesting or trigger any payment of compensation
or benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Company Plans.
SECTION 3.12 Tax Matters. For purposes of this Section 3.12 and Section
3.11, any reference to the Company or its Subsidiaries shall include any
corporation that merged or was liquidated with and into the Company or any of
its Subsidiaries. Except as would not individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect:
(a) All Tax Returns required to be filed by or with respect to the
Company and its Subsidiaries have been timely filed. The Company and its
Subsidiaries have (i) timely paid all Taxes that are due, or that have been
asserted in writing by any taxing authority to be due, from or with respect
to it for the periods ending prior to the date hereof or (ii) provided
adequate reserves in its financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax Returns.
(b) No claim for unpaid Taxes has become a Lien against the property
of the Company or any of its Subsidiaries or is being asserted against the
Company or any of its Subsidiaries.
(c) The statute of limitations with respect to the Tax Returns of the
Company and its Subsidiaries and of each affiliated group (within the
meaning of the Code) of which the Company and any of its Subsidiaries are
or have been a member for all periods through the respective years
specified in Section 3.12 of the Disclosure Schedule has expired. 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, Taxes due from or with respect to the Company
or any Subsidiary of the Company for any taxable period, and no power of
attorney granted by or with respect to the Company or any Subsidiary of the
Company relating to Taxes is currently in force.
(d) No audit or other proceeding by any Governmental Entity has
formally commenced and no notification has been given to the Company or any
Subsidiary of the Company that such an audit or other proceeding is pending
or threatened with respect to any Taxes due from or with respect to the
Company or any Subsidiary of the Company or any Tax Return filed by or with
respect to the Company or any Subsidiary of the Company. No assessment of
Tax has been proposed in writing against the Company or any Subsidiary of
the Company or any of their assets or properties.
(e) As of the Effective Time, neither the Company nor any of the
Subsidiaries shall be a party to, be bound by or have any obligation under,
any Tax sharing agreement or similar contract or arrangement.
(f) There is no contract or agreement, plan or arrangement by the
Company or any Subsidiary of the Company 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 its Subsidiaries by reason
of Section 162(m) or Section 280G of the Code or otherwise, as now in
effect or as in effect as of the Effective Time.
(g) As used herein, "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any Governmental Entity. As used herein,
"Tax Return" shall mean any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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SECTION 3.13 Environmental Laws. (a) Except as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect: (i)
the Company and its Subsidiaries hold, and, to the knowledge of the Company, are
in compliance with, all Environmental Permits, and the Company and its
Subsidiaries are otherwise in compliance with all applicable Environmental Laws
and there are no circumstances that might prevent or interfere with such
compliance in the future; (ii) none of the Company or any of its Subsidiaries
has received any Environmental Claim, and the Company is not aware of any
threatened Environmental Claim or of any circumstances, conditions or events
that could reasonably be expected to give rise to a Environmental Claim, against
the Company or any of its Subsidiaries; (iii) none of the Company or any of its
Subsidiaries has entered into or agreed to any consent decree, order or
agreement under any Environmental Law, and none of the Company or any of its
Subsidiaries is subject to any judgment, decree, order or other requirement
relating to compliance with any Environmental Law or to investigation, cleanup,
remediation or removal of regulated substances under any Environmental Law; (iv)
to the knowledge of the Company, there are no (A) underground storage tanks, (B)
polychlorinated biphenyls, (C) asbestos or asbestos-containing materials, (D)
urea-formaldehyde insulation, (E) sumps, (F) surface impoundments, (G)
landfills, (H) sewers or septic systems or (I) other Hazardous Materials present
at any facility owned, leased, operated or otherwise used by the Company or any
of its Subsidiaries that could reasonably be expected to give rise to a
liability of the Company or any of its Subsidiaries under any Environmental
Laws; (v) to the knowledge of the Company, there are no past (including, without
limitation, with respect to assets or businesses formerly owned, leased or
operated by the Company or any of its Subsidiaries) or present actions,
activities, events, conditions or circumstances, including without limitation
the release, threatened release, migration, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that could reasonably be
expected to give rise to a material liability of the Company or any of its
Subsidiaries under any Environmental Laws or any contract or agreement; (vi) no
modification, revocation, reissuance, alteration, transfer, or amendment of the
Environmental Permits, or any review by, or approval of, any third party of the
Environmental Permits is required in connection with the execution or delivery
of this Agreement or the consummation of the transactions contemplated hereby or
the continuation of the business of the Company or its Subsidiaries following
such consummation; (vii) to the knowledge of the Company, Hazardous Materials
have not been generated, transported, treated, stored, disposed of, released or
threatened to be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used by the Company
or any of its Subsidiaries, in violation of, or in a manner or to a location
that could give rise to a material liability under, any Environmental Laws; and
(viii) to the knowledge of the Company, the Company and its Subsidiaries have
not assumed, contractually or by operation of law, any liabilities or
obligations under any Environmental Laws.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on
or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, whether or
not owned, leased or operated by the Company or any of its Subsidiaries,
(ii) circumstances forming the basis of any violation or alleged violation
of any Environmental Law or Environmental Permit or (iii) otherwise
relating to obligations or liabilities under any Environmental Laws.
"Environmental Laws" means all applicable Federal, state, local and
foreign statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection
of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, the
Solid Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the Safe Drinking Water
Act, all as amended, and similar state, local and foreign laws.
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"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required under Environmental Laws for the
Company and its Subsidiaries, including without limitation in connection
with the operations of the Company's and its Subsidiaries' facilities and
otherwise to conduct their respective businesses.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos containing
materials, pollutants, contaminants and all other materials, substances and
forces, including but not limited to electromagnetic fields, regulated
pursuant to, or that could form the basis of liability under, any
Environmental Law.
SECTION 3.14 Intellectual Property. Except as would not reasonably be
expected to have a Material Adverse Effect: (i) the Company and each of its
Subsidiaries owns, or is licensed or otherwise has the right to use (in each
case, free and clear of any Liens of any kind), all Intellectual Property used
in or necessary for the conduct of its business as currently conducted; (ii) no
claims are pending or, to the knowledge of the Company, threatened, and the
Company and its Subsidiaries have not received any notice or notification
alleging, that the Company or any of its Subsidiaries is infringing on or
otherwise violating the rights of any person with regard to any Intellectual
Property owned by, licensed to and/or used by the Company or its Subsidiaries
and, to the knowledge of the Company, there is no basis therefor; (iii) neither
the Company nor any of its subsidiaries has infringed upon or misappropriated,
or is infringing upon or misappropriating, any U.S. or foreign patents or
copyrights or any U.S., state or foreign trademarks, or other Intellectual
Property rights of any person; (iv) to the knowledge of the Company, no person
is infringing on or otherwise violating any right of the Company or any of its
Subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or its Subsidiaries; and (v) the execution and delivery of this
contemplated hereby do not and will not conflict with or result in any violation
or default (with or without notice or lapse of time or both) or give rise to any
right, license or Lien relating to Intellectual Property, or right of
termination, alteration, amendment, cancellation or acceleration of any
Intellectual Property right or obligation, or the loss or encumbrance of any
Intellectual Property or benefit related thereto, or result in or require the
creation, imposition or extension of any Lien upon any Intellectual Property or
right. For purposes of this Agreement, "Intellectual Property" means all
intellectual property or other proprietary rights of every kind, including,
without limitation, all domestic or foreign patents, patent applications,
inventions (whether or not patentable), processes, products, technologies,
discoveries, copyrightable and copyrighted works, apparatus, trade secrets,
trademarks (registered and unregistered) and trademark applications and
registrations, brand names, certification marks, service marks and service ▇▇▇▇
applications and registrations, trade names, trade dress, copyright
registrations, design rights, customer lists, marketing and customer
information, mask works, rights, know-how, licenses, technical information
(whether confidential or otherwise), software, and all documentation thereof.
The items disclosed on Section 3.14 of the Disclosure Schedule do not and will
not, in any material respect, limit the ability of the Company and its
Subsidiaries to conduct their business in the ordinary course of business
consistent with past practice, and do not and will not result in the imposition
of significant additional costs.
SECTION 3.15 Labor Matters. Except as disclosed in Section 3.15 of the
Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization; (ii) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries is the
subject of any proceeding asserting that it or any of its Subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (iii) there is no
strike, work stoppage or other labor dispute involving the Company or any of its
Subsidiaries pending or, to the Company's knowledge, threatened; (iv) to the
knowledge of the Company, no action, suit, complaint, charge, arbitration,
inquiry, proceeding or investigation by or before any Governmental Entity
brought by or on behalf of any employee, prospective employee, former employee,
retiree, labor organization or other representative of its employees is pending
or threatened against the Company or any of its Subsidiaries; (v) to the
knowledge of the Company, no grievance is pending or threatened against the
Company or any of its Subsidiaries; and
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(vi) neither the Company nor any of its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Entity
relating to employees or employment practices.
SECTION 3.16 Business Relationships; No Restrictive Agreements. (a) The
relationships of the Company and its Subsidiaries with its customers,
distributors, licensors, designers and suppliers are satisfactory in all
material respects and the execution of this Agreement and the consummation of
the Merger and the transactions contemplated hereby will not materially
adversely affect the relationships of the Company and its Subsidiaries with such
customers, distributors, licensors, designers and suppliers.
(b) The Company and its Subsidiaries are not parties to or bound by any
agreement, contract, policy, license, document, instrument, arrangement or
commitment that limits the freedom of the Company or any of its Subsidiaries to
compete in any line of business or with any person or in any geographic area or
which would so limit the freedom of the Company or any of its Subsidiaries or
affiliates after the Effective Time.
SECTION 3.17 Form S-4; Proxy Statement. None of the information supplied
by the Company for inclusion in (i) the registration statement on Form S-4 to be
filed with the SEC by the Company in connection with the retention of Company
Common Stock following the Merger (such Form S-4, as amended or supplemented, is
herein referred to as the "Form S-4") will, at the time the Form S-4 is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders Meeting (as defined in Section 6.1) (such proxy statement, as
amended or supplemented, is herein referred to as the "Proxy Statement") will,
at the date it is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, except that no representation is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied in writing by Newco specifically for inclusion in
the Proxy Statement. The Form S-4 will, as of its effective date, and the
prospectus contained therein will, as of its date, comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Agreement, the
parties agree that statements made and information in the Form S-4 and the Proxy
Statement relating to the Federal income tax consequences of the transactions
herein contemplated to holders of Company Common Stock shall be deemed to be
supplied by the Company and not by Newco.
SECTION 3.18 Brokers. No broker, finder or investment banker other than
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. (the "Company Financial Advisor") is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company. The Company has heretofore furnished to Newco a
complete and correct copy of all agreements between the Company and the Company
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereby. Assuming the amount of net
debt reflected in the Company's financial records as of June 30, 1997, as
provided to the Company Financial Advisor, is the same amount at the Closing,
the aggregate fees payable under such agreements would be approximately $2.0
million. Compensation for the Company Financial Advisor's services in connection
with the transactions contemplated by this Agreement will be calculated on the
Closing Date and will be based on the Aggregate Consideration (as such term is
defined in the letter agreement, dated July 8, 1997, between the Company
Financial Advisor and the Company) paid in such transactions.
SECTION 3.19 Opinion of Company Financial Advisor. The Company has
received the opinion of the Company Financial Advisor dated the date of this
Agreement, to the effect that the Cash Election Price to be received in the
Merger by the Company's stockholders, other than the Stockholder, is fair to
such stockholders from a financial point of view.
SECTION 3.20 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has by unanimous vote of the disinterested
directors present (which directors constituted a
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quorum) (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, and the Voting Agreement and the transactions
contemplated thereby, taken together, based on the availability of the Cash
Election Price to any stockholder who so elects, are fair to and in the best
interests of the stockholders of the Company (other than the Stockholder), 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.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco hereby represents and warrants to the Company that:
SECTION 4.1 Corporate Organization. Newco is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has the requisite corporate power and authority and any necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, reasonably be expected to
prevent the consummation of the Merger. Newco was formed on June 23, 1997 solely
for the purpose of engaging in the transactions contemplated hereby. Newco has
not (i) incurred, nor will it incur prior to and including the Effective Time,
directly or indirectly, any liabilities or obligations, (ii) engaged in any
business activity or transaction, or (iii) entered into any agreement or
arrangement with any person or entity, except, in any such case, in connection
with its organization or the negotiation of this Agreement, the Voting
Agreement, the Employment Arrangements, the financing of the transactions
contemplated hereby and the performance thereof.
SECTION 4.2 Authority Relative to This Agreement. Newco has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Newco and
the consummation by Newco of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Newco are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL). This Agreement has been duly and validly executed and delivered by
Newco and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Newco enforceable against
it in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Newco does not and will
not: (i) conflict with or violate the certificate of incorporation or by-laws of
Newco; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i) and (ii) of subsection (b) below have been obtained
and all filings described in such clauses have been made, conflict with or
violate any law, rule, regulation, order, ordinance, judgment, arbitral award or
decree applicable to Newco or by which it or any of its properties are bound or
affected; or (iii) result in any breach or violation of or constitute a default
(or an event which with notice or lapse of time or both could become a default)
or result in the loss of a material benefit under, or give rise to any right of
termination, amendment, alteration, acceleration or cancellation of, or result
in the creation of a Lien on any of the properties or assets of Newco pursuant
to, any loan, credit agreement, note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, concession, franchise or other instrument or
obligation to which Newco is a party or by which Newco or any of its properties
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, reasonably be expected to prevent the
consummation of the Merger.
(b) The execution, delivery and performance of this Agreement by Newco and
the consummation of the transactions contemplated hereby by Newco do not and
will not require any consent, approval, authorization,
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order or permit of, action by, registration, declaration or filing with or
notice or notification to, any Governmental Entity, except for (i) the
applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the Securities Act and the rules and
regulations promulgated thereunder, the HSR Act, and state securities or "Blue
Sky" laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the DGCL, and (iii) such consents, approvals,
authorizations, orders, permits, actions, registrations, declarations, filings,
notices or notifications the failure of which to make or obtain would not,
individually or in the aggregate, reasonably be expected to prevent the
consummation of the Merger.
SECTION 4.4 Form S-4; Proxy Statement. None of the information supplied
in writing by Newco specifically for inclusion in (i) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, and at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the Proxy Statement will, at the date it is first mailed
to the Company's stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, Newco makes no representation or
warranty with respect to any information supplied by the Company or any of its
representatives which is contained in or incorporated by reference in any of the
foregoing documents.
SECTION 4.5 Brokers. No broker, finder or investment banker (other than
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Newco. A copy of the fee
arrangement has previously been provided to the Company. Unless the Merger is
consummated, the Company shall not be responsible for the payment of any such
fees to ▇▇▇▇▇▇▇, Sachs & Co.
SECTION 4.6 Financing. Attached as Annexes A-1 to A-3 of the Disclosure
Schedule are true and complete copies of the letters, dated the date hereof,
issued in connection with the financing of the transactions contemplated by this
Agreement. The terms and conditions of the letters attached as Annexes A-1 to
A-3 of the Disclosure Schedule are satisfactory to Newco. As of the date of this
Agreement, Newco has been advised by its independent accountants that such
accountants believe the Merger will be recorded as a recapitalization for
financial reporting purposes.
SECTION 4.7 Newco Not an Interested Stockholder. As of the date of this
Agreement, to the knowledge of Newco, neither Newco nor any of its affiliates is
an "interested stockholder" as such term is defined in Section 203 of the DGCL.
SECTION 4.8 Solvency of the Company Following the Merger. Newco believes
that, immediately after the Effective Time and after giving effect to the Merger
and the transactions contemplated hereby, the Company will not (i) be insolvent
(either because its financial condition is such that the sum of its debts is
greater than the fair market value of its assets or because the fair saleable
value of its assets is less than the amount required to pay its probable
liability on its existing debts as they mature), (ii) have unreasonably small
capital with which to engage in its business or (iii) have incurred debts beyond
its ability to pay as they become due.
ARTICLE 5.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business Pending the Merger. The Company covenants
and agrees that, during the period from the date hereof to the Effective Time,
unless Newco gives its prior written consent, the businesses of the Company and
its Subsidiaries shall be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and in compliance with applicable laws;
and the Company and its Subsidiaries shall each use its reasonable best efforts
(i) to preserve substantially intact the business organization of the Company
and its Subsidiaries,
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(ii) to keep available the services of the present officers, employees and
consultants of the Company and its Subsidiaries and (iii) to preserve the
present relationships of the Company and its Subsidiaries with customers,
distributors, licensors, designers and suppliers and other persons with which
the Company or any of its Subsidiaries has significant business relations.
Except as expressly contemplated by this Agreement, by way of amplification and
not limitation, neither the Company nor any of its Subsidiaries shall, between
the date of this Agreement and the Effective Time, except as set forth in
Section 5.1 of the Disclosure Schedule, directly or indirectly take, or propose
or commit to take, any of the following actions without the prior written
consent of Newco:
(a) amend or otherwise change the certificate of incorporation or
by-laws or equivalent organizational documents of the Company or any of its
Subsidiaries;
(b) issue, deliver, sell, lease, sell and leaseback, pledge, mortgage,
dispose of or encumber or subject to any Lien, or authorize or commit to
the issuance, delivery, sale, lease, sale/leaseback, pledge, mortgage,
disposition or encumbrance of or to the subjection to any Lien, (A) any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock) of the Company or any of its
Subsidiaries (except for the issuance and delivery of shares of Company
Common Stock issuable in accordance with the terms of Options outstanding
as of the date hereof, and upon the terms in effect as of the date hereof)
or (B) any assets of the Company or any of its Subsidiaries, other than
inventory or other assets sold, leased or disposed of in the ordinary
course of business consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, other than dividends or distributions by a
direct or indirect wholly owned Subsidiary of the Company to the Company
and/or other direct or indirect wholly owned Subsidiaries of the Company;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock, or any
other ownership interest (including but not limited to stock appreciation
rights or phantom stock), of the Company or any of its Subsidiaries or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom stock),
other than in connection with the exercise of Options outstanding on the
date hereof pursuant to Section 8.3 of the Stock Plan;
(e) (i) other than with respect to borrowings and repayments in the
ordinary course of business under the lines of credit listed on Schedule
5.1(e)(i) (which borrowings shall not in aggregate amount exceed $18
million in U.S. dollars at any one time outstanding and shall not have
interest rate periods extending beyond the Effective Time), repurchase,
repay, incur or cause or permit to exist any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person, or enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any person
other than the Company or a direct or indirect wholly owned Subsidiary of
the Company; (ii) enter into, terminate, waive, modify or amend any
material contract, license or agreement, other than in the ordinary course
of business consistent with past practice; or (iii) except as set forth in
the Company's capital budget which is set forth in Section 5.1(e)(iii) of
the Disclosure Schedule, authorize any single expenditure for any capital
or acquisition (including without limitation any acquisition of any
corporation, partnership or other business enterprise or division thereof
by share purchase, merger, consolidation or otherwise) other than capital
expenditures not to exceed $50,000 individually or $200,000 in the
aggregate;
(f) (i) increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or wages
of employees of the Company or its Subsidiaries, who are not directors or
officers of the Company, in the ordinary course of business and consistent
in all material
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respects with the Company's budget, (ii) grant any severance or termination
pay not currently required to be paid under existing severance plans to, or
enter into or modify in any material or economic respect any employment,
consulting or severance agreement or arrangement with, any present or
former director, officer or other employee of the Company or any of its
Subsidiaries, except for the granting of severance or termination pay, in
the ordinary course of business consistent with past practice, to
nonexecutive employees who are terminated by the Company after the date
hereof, (iii) establish, adopt, enter into or amend or terminate any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees or (iv) terminate the existing employment arrangements with any
of the individuals listed in Section 5.1(f) of the Disclosure Schedule or
take any action that would constitute a breach of any such arrangements or
take any action (other than consummation of the Merger) which would cause
any change-of-control, severance or similar payment to be payable to any
such individual or make any payment of any bonus or other extraordinary or
termination payment which such individual has agreed to waive, modify or
amend in connection with the Employment Arrangements;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change in any material respect
any of the accounting practices or principles used by it;
(h) make any material tax election or settle or compromise any
material Federal, state, local or foreign Tax liability;
(i) settle or compromise any pending or threatened suit, action or
claim for in excess of $100,000 per suit, action or claim, and $250,000 in
the aggregate, or which relates to the transactions contemplated hereby;
(j) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than this
Agreement and the Merger); or
(k) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(j).
ARTICLE 6
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. The Company, acting through its Board
of Directors, will, as promptly as practicable following the date of
effectiveness of the Form S-4 and in consultation with Newco, (i) duly call,
give notice of, convene and hold a meeting of its stockholders for the purpose
of considering and adopting and approving this Agreement and the transactions
contemplated hereby (the "Stockholders Meeting") and (ii) (A) include in the
Proxy Statement the unanimous recommendation of the Board of Directors that the
stockholders of the Company vote in favor of the approval of this Agreement and
the transactions contemplated hereby and the written opinion of the Company
Financial Advisor that the Cash Election Price to be received by the
stockholders of the Company, other than the Stockholder, pursuant to the Merger,
is fair to such stockholders from a financial point of view, (B) include along
with the Proxy Statement a Form of Election, and (C) use its best efforts to
hold such meeting and obtain the necessary approval of this Agreement and the
transactions contemplated hereby by its stockholders, as soon as practicable
after the date hereof.
SECTION 6.2 Form S-4 and Proxy Statement. Promptly following the date of
this Agreement, the Company shall prepare the Proxy Statement, and the Company
shall prepare and file with the SEC the Form S-4, in which the Proxy Statement
will be included. The Company shall use its best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company shall use its best efforts to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. The Company
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shall also take any action required to be taken under any applicable state
securities or "Blue Sky" laws in connection with the registration and
qualification in connection with the Merger of capital stock of the Company
following the Merger. The information provided by the Company for use in the
Form S-4, and to be supplied by Newco in writing specifically for use in the
Form S-4, shall, at the time the Form S-4 becomes effective and on the date of
the Stockholders Meeting referred to above, be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading, and the
Company and Newco each agree to correct any information provided by it for use
in the Form S-4 which shall have become false or misleading. The foregoing
notwithstanding, from and after the Effective Time, the Company will have no
obligation to maintain the registration of the Company Common Stock or to make
any further filings under any federal or state securities or "Blue Sky" laws
with respect to the Company Common Stock, except as may then be required by law,
and, to the extent not prohibited by applicable law, may terminate any such
prior registration. Newco and the Company will cooperate with each other in the
preparation of the Proxy Statement and the Form S-4; without limiting the
generality of the foregoing, the Company will immediately notify Newco of the
receipt of any comments from the SEC, the effectiveness of the Form S-4 and any
request by the SEC for any amendment to the Proxy Statement or the Form S-4 or
for additional information. All filings with the SEC, including the Proxy
Statement and the Form S-4 and any amendment thereto, and all mailings to the
Company's stockholders in connection with the Merger, including the Proxy
Statement, shall be subject to the prior review, comment and approval of Newco.
Newco will furnish to the Company the information relating to it required by the
Exchange Act and the rules and regulations promulgated thereunder to be set
forth in the Proxy Statement. The Company agrees to use its reasonable best
efforts, after consultation with Newco, to respond promptly to any comments made
by the SEC with respect to the Proxy Statement (and any preliminary version
thereof filed by it) and the Form S-4.
SECTION 6.3 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, the Company shall, and shall cause its
Subsidiaries, officers, directors, employees, auditors, environmental auditors,
counsel, financial advisors and other agents to, afford Newco and its
representatives and potential financing sources, reasonable access at all
reasonable times to its officers, employees, agents, properties, offices,
warehouses and other facilities and to all books, contracts and records, and
shall furnish Newco and such financing sources with all financial, operating and
other data and information as Newco, its representatives or such financing
sources may from time to time reasonably request. During such period, the
Company shall, and shall cause its Subsidiaries, officers, employees and
representatives to, furnish promptly to Newco a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities or "Blue Sky" laws.
(b) Each of the Company and Newco agrees with respect to all confidential
information relating to the other party (the "Disclosing Party") that is or has
been furnished or disclosed to the first party (the "Receiving Party") on, after
or before the date hereof including, but not limited to, information regarding
the Disclosing Party's organization, personnel, business activities, customers,
policies, assets, finances, costs, sales, revenues, rights, obligations,
liabilities and strategies ("Confidential Information"), that, unless and until
the transactions contemplated by this Agreement shall have been consummated, (1)
such Confidential Information is confidential and/or proprietary to the
Disclosing Party and entitled to and shall receive treatment as such by the
Receiving Party and (2) the Receiving Party will, and will require all of its
directors, officers, employees, representatives, stockholders, agents and
advisors (including attorneys, accountants, consultants, bankers and financial
advisors) who have access to such Confidential Information to, hold in
confidence and not disclose to others nor use (except in respect of the
transactions contemplated by this Agreement or as required by law or in a court,
administrative, or regulatory proceeding) any such Confidential Information;
provided, however, that the Receiving Party shall not have any restrictive
obligation with respect to any Confidential Information which (x) is or becomes
publicly known through no wrongful act or omission of, or violation of the terms
hereof by, the Receiving Party or (y) becomes known to the Receiving Party from
a source which, to the best of the Receiving Party's knowledge, has no
confidentiality obligation with respect to such Confidential Information at the
time of receipt of such Confidential Information. The Receiving Party shall
provide Confidential Information only to its directors, officers, employees,
representatives, stockholders, agents, advisors (including attorneys,
accountants, consultants, bankers and financial advisors) and potential
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financing sources who have a need to know such Confidential Information in
connection with the transactions contemplated by this Agreement.
(c) No investigation pursuant to this Section 6.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.4 No Solicitation. (a) The Company and its Subsidiaries and
their respective officers, directors, employees, representatives, agents and
advisors (including attorneys, accountants, consultants, bankers and financial
advisors) shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any Acquisition
Transaction (as defined below). The Company agrees that, prior to the Effective
Time, it shall not, and shall not authorize or permit any of its Subsidiaries or
any of its or its Subsidiaries' directors, officers, employees, agents,
representatives or advisors (including attorneys, accountants, consultants,
bankers and financial advisors), directly or indirectly, to, solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
merger, liquidation, recapitalization, consolidation or other business
combination involving the Company or its Subsidiaries or acquisition or exchange
of any capital stock or any material portion of the assets (except for
acquisitions of assets in the ordinary course of business consistent with past
practice) of the Company or its Subsidiaries, or any combination of the
foregoing (an "Acquisition Transaction"), or negotiate, explore or otherwise
engage in substantive discussions with any person (other than Newco) with
respect to any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated hereby; provided that the Company
may furnish information to, and negotiate or otherwise engage in substantive
discussions with, any party who delivers a bona fide written proposal for an
Acquisition Transaction if the Company's Board of Directors determines in good
faith and upon the advice from its outside legal counsel, that failing to take
such action would constitute a breach of the fiduciary duties of the Company's
Board of Directors and such a proposal is, in the opinion of the Company's Board
of Directors, more favorable to the Company's stockholders (other than the
Stockholder) from a financial point of view than the transactions contemplated
by this Agreement.
(b) From and after the execution of this Agreement, the Company shall
immediately advise Newco in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to Newco a copy of any such
proposal or inquiry, if it is in writing, or a written summary of any such
proposal relating to an Acquisition Transaction if it is not in writing. The
Company shall promptly advise Newco of any development relating to such
proposal, including the results of any discussions or negotiations with respect
thereto.
SECTION 6.5 ESOP. The Company shall cooperate with Newco in taking all
steps necessary or appropriate so that, effective as of the Effective Time, the
Company's Employee Stock Ownership Plan (the "ESOP") shall be amended so as to
(i) eliminate the right of participants in the ESOP to receive distributions in
the form of employer securities, (ii) terminate the status of the ESOP as an
employee stock ownership plan, (iii) provide that the Merger Consideration
received by the ESOP in the Merger shall not be reinvested in employer
securities, (iv) freeze benefit accruals under the ESOP, and (v) vest all
participants in the ESOP in their account balances in the ESOP.
SECTION 6.6 Directors' and Officers' Indemnification and
Insurance. (a) For six years after the Effective Time, the Company shall
indemnify all present and former directors, officers, employees and agents of
the Company for acts or omissions occurring prior to the Effective Time to the
fullest extent now provided in the Company's certificate of incorporation and
by-laws consistent with applicable law, to the extent such acts or omissions are
uninsured (provided, that to the extent that during any such period insurance
does not fully indemnify any person contemplated to be indemnified in accordance
with the terms of this Section 6.6, the Company shall indemnify such person in
accordance with such terms), and shall, in connection with defending against any
action for which indemnification is available hereunder, and subject to Section
6.6(c) hereof, reimburse and advance expenses to such officers, directors,
employees and agents, from time to time upon receipt of reasonably sufficient
supporting documentation, for any reasonable costs and expenses reasonably
incurred by such officers, directors, employees and agents in connection with
such defense;
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provided that such advancement and reimbursement shall be conditioned upon such
officer's, director's, employee's or agent's agreement promptly to return such
amounts to the Company if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-appealable,
that indemnification of such officer or director in the manner contemplated
hereby is prohibited by applicable law. In addition to the foregoing, the
Company will comply with its obligations under the indemnification agreements
referred to in item A.2. of Section 3.9 of the Disclosure Schedule, subject to
the terms and provisions thereof.
(b) The Company shall maintain in effect for six years from the Effective
Time policies of directors' and officers' liability insurance containing terms
and conditions which are not less advantageous than those policies maintained by
the Company at the date hereof, with respect to matters occurring prior to the
Effective Time, to the extent available, and having the maximum available
coverage under the current policies of directors' and officers' liability
insurance; provided that (i) the Company following the Merger shall not be
required to spend in excess of a $770,000 annual premium therefor; provided
further that if the Company following the Merger would be required to spend in
excess of a $770,000 premium per annum to obtain insurance having the maximum
available coverage under the current policies, the Company will be required to
spend $770,000 to maintain or procure insurance coverage pursuant hereto,
subject to availability of such (or similar) coverage and (ii) such policies may
in the sole discretion of the Company be one or more "tail" policies for all or
any portion of the full six year period.
(c) In furtherance of and not in limitation of the preceding paragraphs,
Newco agrees that the officers and directors of the Company who are defendants
in all litigation commenced by stockholders of the Company, whether before or
after the date of this Agreement, with respect to (x) the performance of their
duties at or prior to the Effective Time as such officers and/or directors under
Federal or state law (including without limitation litigation under Federal and
state securities laws) or (y) this Agreement, the Voting Agreement and the
transactions contemplated hereby (the "Subject Litigation") shall be entitled to
be represented, at the reasonable expense of the Company, in the Subject
Litigation by one counsel (and one local counsel in each jurisdiction in which a
case is pending), each of which such counsel shall be selected by a plurality of
such officer/director defendants, subject to the approval of the Company, which
approval shall not be unreasonably withheld; provided that neither Newco nor the
Company shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and that a condition
to any further indemnification payments provided in Section 6.6(a) shall be that
such officer/ director defendant shall not have settled any Subject Litigation
without the consent of Newco and the Company; and provided further that neither
Newco nor the Company shall have any obligation hereunder to any
officer/director defendant when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such officer/director defendant in the
manner contemplated hereby is prohibited by applicable law.
SECTION 6.7 Notification of Certain Matters. The Company shall give
prompt notice to Newco, and Newco shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Newco, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 6.8 Further Action; Best Efforts. (a) Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use its reasonable
best efforts to take, or cause to be taken, all action, and to do or cause to be
done, and to assist and cooperate with the parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Voting Agreement, including but not limited to (i) cooperation in the
preparation and filing of the Form S-4, the Proxy Statement, any required
filings under the HSR Act and any amendments to any thereof, (ii) determining
whether any filings are required to be made or consents, approvals, waivers,
licenses, permits or authorizations are required to be obtained (or, which if
not obtained, would result in an event of default, termination, amendment,
alteration or acceleration of any agreement or
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any put right under any agreement) under any applicable law or regulation or
from any Governmental Entities or third parties, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by this Agreement, and (iii) promptly making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such consents, approvals, permits or authorizations. The Company
shall not take any action to restrict, limit or prohibit Newco's ability to
exercise all of its rights and obligations under the Voting Agreement, and the
Company and its Board of Directors has provided and shall provide and maintain
all approvals required under Section 203 of the DGCL in order to permit such
exercise; provided, however, that the Company and its Board of Directors will
not be prohibited from taking any action required by the Board of Directors'
fiduciary duties it deems reasonably appropriate in response to Newco attempting
to acquire any shares of Company Common Stock other than those subject to the
option under Section 4 of the Voting Agreement (the "Voting Agreement Option"),
except the Company and the Board of Directors will not revoke, amend or restrict
the approvals under Section 203 of the DGCL referred to above, or attempt to
assert that such approvals are not valid or are inapplicable.
(b) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the shares of Company
Common Stock from The Nasdaq Stock Market Inc.'s (the "NASDAQ") National Market,
provided that such delisting shall not be effective until after the Effective
Time. The parties also acknowledge that it is Newco's intent that the shares of
retained Company Common Stock following the Merger will not be quoted on the
NASDAQ National Market or listed on any national securities exchange.
(c) The Company agrees to provide, and will cause its Subsidiaries and its
and their respective officers, employees and advisors to provide, all necessary
cooperation in connection with the arrangement of any financing to be
consummated contemporaneous with or at or after the Closing in respect of the
transactions contemplated by this Agreement, including without limitation,
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting or
placement agreements, pledge and security documents, other definitive financing
documents, or other requested certificates or documents, including a certificate
of the chief financial officer of the Company with respect to solvency matters,
comfort letters of accountants and legal opinions as may be requested by Newco
or its sources of financing. The parties acknowledge that the payment of any
fees by the Company in connection with any commitment letters shall be subject
to the occurrence of the Closing. In addition, in conjunction with the obtaining
of any such financing, the Company agrees, at the request of Newco, to call for
prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing indebtedness or equipment leases of the Company and
its Subsidiaries; provided that no such prepayment, redemption or renegotiation
shall themselves actually be made effective until contemporaneous with or after
the Effective Time.
(d) The Company shall cooperate with any reasonable requests of Newco or
the SEC related to the recording of the Merger as a recapitalization for
financial reporting purposes, including, without limitation, to assist Newco and
its affiliates and representatives with any presentation to the SEC with regard
to such recording and to include appropriate disclosure with regard to such
recording in all filings with the SEC and all mailings to stockholders made in
connection with the Merger. In furtherance of the foregoing, the Company shall
provide to Newco, and Newco shall provide to the Company, for the prior review
of Newco's and the Company's advisors, any description of the transactions
contemplated by this Agreement which is meant to be disseminated.
(e) (i) Newco hereby agrees to use its reasonable best efforts, subject to
normal conditions, to arrange the financing described in Annexes A-1 and A-2 of
the Disclosure Schedule in respect of the transactions contemplated by this
Agreement, including using its reasonable best efforts (A) to assist the Company
in the negotiation of definitive agreements with respect thereto and (B) to
satisfy all conditions applicable to Newco in such definitive agreements. Newco
will keep the Company informed of the status of its efforts to arrange such
financing, including making reports with respect to significant developments. In
the event Newco is unable to arrange any portion of such financing in the manner
or from the sources originally contemplated,
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Newco will use its reasonable best efforts, subject to normal conditions, to
arrange any such portion from alternative sources on substantially similar terms
to those contemplated in such Annexes A-1 and A-2.
(ii) Subject to the Company having received the proceeds of the
financing described in Section 7.2(f) on terms satisfactory to Newco, Newco
at the Closing will be capitalized with an equity contribution of $67.5
million (including contributions of Company Common Stock by certain
employee stockholders valued at the Cash Election Price per share and
including issuances of restricted stock valued at the purchase price paid
by investors purchasing shares of Newco for cash). Newco will be under no
obligation pursuant to the preceding sentence unless and until the Company
receives the proceeds of the financing described in Section 7.2(f) on terms
satisfactory to Newco. In addition, Newco will be under no obligation under
any circumstances to be capitalized with equity of more than $67.5 million
(calculated as described above).
(f) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such necessary action.
SECTION 6.9 Public Announcements. Prior to the Effective Time, neither
Newco nor the Company will issue any press release or public statement with
respect to the transactions contemplated by this Agreement, including the
Merger, or the Voting Agreement, without the other party's prior consent, except
as may be required by applicable law, court process or by obligations pursuant
to its inclusion in the NASDAQ National Market. In addition to the foregoing,
Newco and the Company will consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any such press release or
other public statements with respect to such transactions. The parties agree
that the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon prior
to the issuance thereof.
SECTION 6.10 Disposition of Litigation. The Company will not voluntarily
cooperate with any third party which has sought or may hereafter seek to
restrain or prohibit or otherwise oppose the Merger and will cooperate with
Newco to resist any such effort to restrain or prohibit or otherwise oppose the
Merger.
SECTION 6.11 Affiliates. Prior to the Closing Date, the Company shall
deliver to Newco a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person who
makes a Mixed Election to deliver to Newco on or prior to the Closing Date a
written agreement substantially in the form attached as Annex A hereto.
SECTION 6.12 Stop Transfer Order. The Company shall notify the Company's
transfer agent that there is a stop transfer order with respect to all of the
Subject Shares (as defined in the Voting Agreement) and that the Voting
Agreement places limits on the voting of the Subject Shares.
SECTION 6.13 Transfer Taxes. Newco shall pay when due any and all
transfer, documentary, sales, use, registration and other similar taxes
(including without limitation any applicable stock transfer (except as provided
in Section 2.5(b)) and real property taxes) and related amounts incurred as a
result of the Merger and the transactions contemplated hereby.
SECTION 6.14 Employee Plans and Benefits. (a) Subject to applicable law,
the Company will honor in accordance with their terms all existing employment
agreements and employee benefits plans between the Company or any of its
Subsidiaries and any officer, director or employee of the Company or any of its
Subsidiaries; provided that nothing in this Section 6.14(a) shall prevent the
Company from amending or terminating any such agreements or plans in accordance
with the terms thereof.
(b) Newco agrees that, for at least two years from the Effective Time,
subject to applicable law, the Company and its Subsidiaries will provide
benefits to their employees as a group (and not necessarily on an
individual-by-individual or group-by-group basis) which will, in the aggregate,
be similar to those currently provided by the Company and its Subsidiaries to
their employees; provided that the Company and its Subsidiaries will not be
under any obligation to retain any employee or group of employees.
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ARTICLE 7
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(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.
(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 preventing
the consummation of the Merger shall be in effect; provided, however, that
the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Form S-4. To the extent required by applicable law, the Form S-4
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order, and any
material "Blue Sky" and other state securities laws applicable to the
registration and qualification of the retained Company Common Stock
following the Merger shall have been complied with.
SECTION 7.2 Conditions to Obligation of Newco. The obligation of Newco to
effect the Merger is further subject to the satisfaction or waiver at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as
to materiality shall be true and correct and any such representations and
warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing as though made at
and as of the Closing. Newco shall have received a certificate signed on
behalf of the Company by a senior executive officer of the Company to the
effect set forth in this paragraph.
(b) Performance of Obligations of the Company. The Company shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing (except for such failures to perform
as, either individually or in the aggregate, have not had or would not
reasonably be expected to have, a Material Adverse Effect).
(c) Consents, Etc. Newco shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained,
except where the failure to obtain such licenses, permits, consents,
approvals, authorizations, qualifications and orders would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; provided, however, that in any case, the consents and
amendments set forth in Section 7.2(c) of the Disclosure Schedule shall
have been obtained.
(d) No Material Litigation. There shall not be pending by any
Governmental Entity any suit, action or proceeding (or by any other person
any suit, action or proceeding which has a reasonable likelihood of
success) (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement or the Voting Agreement or seeking to obtain from Newco, the
Company or any of their respective Subsidiaries or affiliates any damages
that are material to any such party, (ii) seeking to prohibit or limit the
ownership or operation by Newco, the Company or any of its Subsidiaries of
any material portion of the business or assets of the Company or any of its
Subsidiaries, (iii) seeking to impose limitations on the ability of Newco
(or any designee of
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Newco pursuant to the Voting Agreement) or any stockholder of Newco or the
Company to acquire or hold, or exercise full rights of ownership of, any
shares of Company Common Stock, including, without limitation, the right to
vote the Company Common Stock on all matters properly presented to the
stockholders of the Company or (iv) seeking to prohibit Newco or any of its
affiliates from effectively controlling in any material respect the
business or operations of the Company or its Subsidiaries.
(e) Affiliate Letters. Newco shall have received the agreements
referred to in Section 6.11.
(f) Financing. Newco and the Company shall have received the proceeds
of financing on the terms and conditions set forth in Annexes A-1 through
A-3 of the Disclosure Schedule or upon terms and conditions which are, in
the reasonable judgement of Newco, substantially equivalent thereto, and to
the extent that any terms and conditions are not set forth in Annexes A-1
through A-3 of the Disclosure Schedule, on terms and conditions reasonably
satisfactory to Newco.
(g) Recapitalization Accounting. Newco shall be reasonably satisfied
that the Merger shall be recorded as a recapitalization for financial
reporting purposes (provided that if Newco is advised that the SEC finally
determines that recapitalization treatment will not be available, Newco
will advise the Company within 30 days of receipt of such final
determination whether it intends to waive such condition and if it advises
the Company that it has determined not to so waive, the Company may
terminate this Agreement pursuant to Section 8.1(c) as if the date of such
advice from Newco was deemed to be December 31, 1997 for purposes of
Section 8.1(c)).
(h) Employees. Newco shall be reasonably satisfied that the
Employment Arrangements are in full force and effect and that the
individuals who are listed on Schedule 5.1(f) will be employed by the
Company following the Effective Time pursuant to the Employment
Arrangements and such employees will not have been paid nor have the right
to receive any payment from Newco or the Company of any severance,
change-of-control, or similar payments as a result, in whole or in part, of
the consummation of any of the transactions contemplated hereby, except as
expressly provided in the Employment Arrangements.
(i) Mixed Consideration Election. Effective as of the Effective Time,
the Stockholder shall have made and not revoked a Mixed Election with
respect to at least 15,024,616 shares of Company Common Stock owned by the
Stockholder immediately prior to the Effective Time.
(j) Tax Indemnification Agreement. The Tax Indemnification Agreement,
dated as of the date hereof, among the Company, the Estate of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ shall be in full force and effect and
enforceable by the Company following the Effective Time, in accordance with
the terms as in effect on the date hereof and in the form provided to Newco
on the date hereof, or as it may be amended with the consent of Newco.
SECTION 7.3 Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Newco set forth in this Agreement that are qualified as to
materiality shall be true and correct and any such representations and
warranties of Newco set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing as though made at and as of
the Closing. The Company shall have received a certificate signed on behalf
of Newco by a senior executive officer of Newco to the effect set forth in
this paragraph.
(b) Performance of Obligations of Newco. Newco shall have performed
the obligations required to be performed by it under this Agreement at or
prior to the Closing (except for such failures to perform as would not,
either individually or in the aggregate, materially adversely affect the
ability of Newco to consummate the transactions herein contemplated or to
perform its obligations hereunder).
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Newco and the Company;
(b) by either Newco or the Company if any court of competent
jurisdiction, arbitrator or other Governmental Entity shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or any of
the transactions contemplated by this Agreement or the Voting Agreement, or
otherwise altering the terms of any of the foregoing in any significant
respect, and such order, decree, ruling or other action is or shall have
become final and nonappealable;
(c) by either Newco or the Company if the Merger shall not have been
consummated on or before December 31, 1997, provided that the right to
terminate this Agreement under this Section 8.1(c) shall not be available
to the party whose action or failure to act has been the cause of or
resulted in the failure of the Merger to occur on or before such date where
such action or failure to act constitutes a breach of this Agreement;
(d) by Newco if any required approval of the stockholders of the
Company shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof; or
(e) by the Company if, prior to receipt of the Company Stockholder
Approval, the Board of Directors of the Company approves an Acquisition
Transaction, on terms which the Board of Directors of the Company has
determined in good faith (i) to be more favorable to the Company and its
stockholders (other than the Stockholder) than the transactions
contemplated by this Agreement and (ii) based upon the advice of its
outside counsel, that failing to approve such Acquisition Transaction and
terminate this Agreement would constitute a breach of the fiduciary duties
of the Board of Directors of the Company under applicable law; provided
that the termination described in this Section 8.1(e) shall not be
permissible unless and until the Company shall have provided Newco prior
written notice at least three business days prior to such termination that
the Board of Directors of the Company has authorized and intends to effect
the termination of this Agreement pursuant to this Section 8.1(e), the
Company shall otherwise be in compliance in all material respects with its
obligations under this Agreement and on or prior to such termination the
Company shall have paid to Newco the fee described in Section 8.3(a).
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall, except as provided
in Section 9.1, forthwith become void and there shall be no liability on the
part of any party hereto except as set forth in Section 8.3 and Section 9.1;
provided, however, that nothing herein shall relieve any party from liability
for any breach hereof.
SECTION 8.3 Fees and Expenses. (a) In the event that this Agreement is
terminated pursuant to Section 8.1(e) hereof, then the Company shall, prior to
such termination, pay Newco a termination fee of $8 million; provided, however,
that if Newco exercises the Voting Agreement Option, promptly upon receipt by
Newco of the shares subject to the Voting Agreement Option registered in the
name of Newco or its designee, Newco shall return such termination fee to the
Company; provided further that Newco shall not be required to return such
termination fee or, if already returned, the Company shall again pay such
termination fee to Newco, if the Company or its Board of Directors takes any
affirmative action preventing or restricting Newco or its designee from
acquiring shares of Company Common Stock (including pursuant to the tender offer
contemplated by the Voting Agreement) in addition to the shares acquired
pursuant to the Voting Agreement Option (provided that recommending not to
tender in a tender offer or not recommending in favor of such tender offer,
alone, shall not be deemed such an affirmative action).
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(b) In addition to any other amounts which may be payable or become
payable pursuant to Section 8.3(c), the Company shall (provided that the
Company is then in material breach of its representations, warranties,
covenants or other obligations under this Agreement), promptly following
termination of this Agreement pursuant to Section 8.1(c), but in no event
later than two business days following a written request by Newco therefor,
together with related bills or receipts, reimburse Newco and its
affiliates, in an aggregate amount of up to $3 million, for all reasonable
out-of-pocket expenses and fees (including, without limitation, fees
payable to all banks, investment banking firms and other financial
institutions, and their respective agents and counsel, and all fees of
counsel, accountants, financial printers, experts and consultants to Newco
and its affiliates), whether incurred prior to, on or after the date
hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement and the financing thereof;
provided that the Company shall not be required to make payment pursuant to
this Section 8.3(b) if it is obligated to make the payment required
pursuant to Section 8.3(a).
(c) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the
transactions contemplated hereby; provided, however, that if the Merger is
consummated, the Company shall pay the expenses of ▇▇▇▇▇▇▇, Sachs & Co.
referred to in Section 4.5.
SECTION 8.4 Amendment. Subject to the following sentence, this Agreement
may be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after approval of the Merger by the stockholders of the
Company, no amendment that by law would require the further approval by such
stockholders may be made without such approval. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby, but such extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Articles 1 and 2, Sections 6.5 and 6.6 and Articles 8 and 9 shall
survive the Effective Time and those set forth in Section 6.3(b) and Section
6.8(a) (as it relates to the Voting Agreement) and Articles 8 and 9 shall
survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the
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respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
if to Newco:
Confetti Acquisition, Inc.
c/o GS Capital Partners II, L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
Amscan Holdings, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Corporate Secretary
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended December 31, 1996 were prepared;
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act);
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(e) "Significant Subsidiary" has the meaning set forth in Section 1-02
of Regulation S-X promulgated by the SEC;
(f) "Subsidiary" or "Subsidiaries" of any person means any other
person in which such first person (either alone or through or together with
any other Subsidiary of such person), owns, directly or indirectly, 50% or
more of the stock or other equity interests or has the right, through
ownership of equity, contractually or otherwise, to elect at least half of
its Board of Directors or other governing body; and
(g) "transactions contemplated hereby," "transactions contemplated by
this Agreement" and other similar references shall include the Merger and
all other actions and transactions contemplated by this Agreement, the
Voting Agreement and the Employment Arrangements.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Newco may assign all or any of its rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of Newco, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, with respect to the
provisions of Sections 6.6 and 8.3, shall inure to the benefit of the persons or
entities benefitting from the provisions thereof who are intended to be
third-party beneficiaries thereof. Except as provided in the preceding sentence,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent the laws of the State of Delaware are
required to be applicable under applicable choice of law principles.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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[MERGER AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, Newco and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CONFETTI ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
------------------------------------
Title: Chairman of the Board
and President
AMSCAN HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
Title: President
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ANNEX A
TO AGREEMENT AND PLAN OF MERGER
FORM OF AFFILIATE LETTER
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.10 per
share ("Company Stock"), of Amscan Holdings, Inc., a Delaware corporation (the
"Company"), is entitled to retain and receive in connection with the merger (the
"Merger") of the Company with Confetti Acquisition, Inc., a Delaware
corporation, securities (collectively, the "Securities") of the Company. The
undersigned acknowledges that the undersigned may be deemed an "affiliate" of
the Company within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933 (the "Act"), although nothing contained herein should be
construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Securities retained by the
undersigned pursuant to the Merger may be restricted unless such transaction is
registered under the Act or an exemption from such registration is available.
The undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company that
the undersigned will not sell, assign or transfer any of the Securities retained
by the undersigned pursuant the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) in conformity with the volume and
other limitations of Rule 145 or (iii) in a transaction which, in the opinion of
independent counsel reasonably satisfactory to the Company or as described in a
"no-action" or interpretive letter from the Staff of the Securities and Exchange
Commission (the "SEC"), is not required to be registered under the Act.
In the event of a sale or other disposition by the undersigned of
Securities pursuant to Rule 145, the undersigned will supply the Company with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto.
The undersigned understands that the Company may instruct its transfer
agent to withhold the transfer of any Securities disposed of by the undersigned,
but that upon receipt of such evidence of compliance the transfer agent shall
effectuate the transfer of the Securities sold as indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Securities retained by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Company from independent counsel
reasonably satisfactory to the Company to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Securities and
(ii) the receipt by Newco of this letter is an inducement and a condition to
Newco's obligations to consummate the Merger.
Very truly yours,
Dated:
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ANNEX I
TO ANNEX A
TO AGREEMENT AND PLAN OF MERGER
[Name]
[Date]
On the undersigned sold the securities ("Securities") of
Amscan Holdings, Inc. (the "Company") described below in the space provided for
that purpose (the "Securities"). The Securities were retained by the undersigned
in connection with the merger of Confetti Acquisition, Inc., a Delaware
corporation, with and into the Company.
Based upon the most recent report or statement filed by the Company with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
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EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
CERTIFICATE OF INCORPORATION
OF
AMSCAN HOLDINGS, INC.
ARTICLE 1
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
AMSCAN HOLDINGS, INC.
ARTICLE 2
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City of Wilmington,
County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
ARTICLE 3
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the "DGCL").
ARTICLE 4
Section 4.1 The total number of shares of stock which the Corporation is
authorized to issue is 50,000,000 shares of Common Stock, having a par value of
$0.10 per share.
Section 4.2 Except as otherwise provided by law, the Common Stock shall
have the exclusive right to vote for the election of directors and for all other
purposes. Each share of Common Stock shall have one vote, and the Common Stock
shall vote together as a single class.
ARTICLE 5
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors of the Corporation (the "Board"), and
unless and except to the extent that the Bylaws of the Corporation shall so
require, the election of directors of the Corporation need not be by written
ballot.
ARTICLE 6
In furtherance and not in limitation of the powers conferred by law, the
Board is expressly authorized and empowered to make, alter and repeal the Bylaws
of the Corporation by a majority vote at any regular or special meeting of the
Board or by written consent, subject to the power of the stockholders of the
Corporation to alter or repeal any Bylaws made by the Board.
ARTICLE 7
The Corporation reserves the right at any time from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
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ARTICLE 8
Section 8.1 Elimination of Certain Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
If the DGCL is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
Section 8.2 Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employee Retirement Income Security Act of 1974) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the DGCL requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of the Board, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct
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which make it permissible under the DGCL for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the DGCL, nor an actual determination by the Corporation
(including its Board, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the DGCL.
* * *
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