Exhibit 7.10
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AGREEMENT AND PLAN OF MERGER
Among
▇▇▇▇▇▇▇'▇, INC.
MSC ACQUISITIONS, INC.
and
MERCANTILE STORES COMPANY, INC.
Dated as of May 16, 1998
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TABLE OF CONTENTS
ARTICLE I
THE OFFER ............................ 2
SECTION 1.1 The Offer ................................................... 2
SECTION 1.2 Company Action .............................................. 3
ARTICLE II
THE MERGER ............................ 4
SECTION 2.1 The Merger ................................................. 4
SECTION 2.2 Closing; Effective Time .................................... 4
SECTION 2.3 Effects of the Merger ...................................... 4
SECTION 2.4 Certificate of Incorporation; By-Laws ...................... 5
SECTION 2.5 Directors and Officers ..................................... 5
SECTION 2.6 Conversion of Securities ................................... 5
SECTION 2.7 Treatment of Options ....................................... 6
SECTION 2.8 Dissenting Shares and Section 262 Shares ................... 6
SECTION 2.9 Surrender of Shares; Stock Transfer Books .................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................... 8
SECTION 3.1 Organization and Qualification; Subsidiaries ............... 8
SECTION 3.2 Certificate of Incorporation and By-Laws ................... 8
SECTION 3.3 Capitalization ............................................. 8
SECTION 3.4 Authority Relative to This Agreement ....................... 9
SECTION 3.5 No Conflict; Required Filings and Consents ................. 10
SECTION 3.6 Compliance ................................................. 10
SECTION 3.7 SEC Filings; Financial Statements .......................... 11
SECTION 3.8 Absence of Certain Changes or Events ....................... 11
SECTION 3.9 Absence of Litigation ...................................... 12
SECTION 3.10 Employee Benefit Plans ..................................... 12
SECTION 3.11 Tax Matters ................................................ 14
SECTION 3.12 Offer Documents; Proxy Statement ........................... 14
SECTION 3.13 Environmental Matters ...................................... 15
SECTION 3.14 Real Estate Matters ........................................ 17
SECTION 3.15 Brokers .................................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER .............................. 18
SECTION 4.1 Corporate Organization ..................................... 18
SECTION 4.2 Authority Relative to This Agreement ....................... 18
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SECTION 4.3 No Conflict; Required Filings and Consents ................. 18
SECTION 4.4 Offer Documents; Proxy Statement ........................... 19
SECTION 4.5 Brokers .................................................... 20
SECTION 4.6 Funds ...................................................... 20
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER .......................... 20
SECTION 5.1 Conduct of Business of the Company Pending the Merger ...... 20
ARTICLE VI
ADDITIONAL AGREEMENTS ................................. 22
SECTION 6.1 Stockholders Meeting ....................................... 22
SECTION 6.2 Proxy Statement ............................................ 22
SECTION 6.3 Company Board Representation; Section 14(f) ................ 23
SECTION 6.4 Access to Information; Confidentiality ..................... 24
SECTION 6.5 No Solicitation of Transactions ............................ 25
SECTION 6.6 Employee Benefits Matters .................................. 26
SECTION 6.7 Directors' and Officers' Indemnification and Insurance ..... 27
SECTION 6.8 Postponement of Annual Meeting ............................. 28
SECTION 6.9 Notification of Certain Matters ............................ 28
SECTION 6.10 Further Action; Reasonable Best Efforts .................... 28
SECTION 6.11 Public Announcements ....................................... 29
SECTION 6.12 Disposition of Litigation .................................. 29
ARTICLE VII
CONDITIONS OF MERGER ................................. 29
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger . 29
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER ........................... 30
SECTION 8.1 Termination ................................................ 30
SECTION 8.2 Effect of Termination ...................................... 31
SECTION 8.3 Fees and Expenses .......................................... 32
SECTION 8.4 Amendment .................................................. 33
SECTION 8.5 Waiver ..................................................... 33
ARTICLE IX
GENERAL PROVISIONS .................................. 33
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements 33
SECTION 9.2 Notices .................................................... 33
SECTION 9.3 Certain Definitions ........................................ 34
SECTION 9.4 Severability ............................................... 35
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SECTION 9.5 Entire Agreement; Assignment ............................... 36
SECTION 9.6 Parties in Interest ........................................ 36
SECTION 9.7 Governing Law .............................................. 36
SECTION 9.8 Headings ................................................... 36
SECTION 9.9 Counterparts ............................................... 36
SECTION 9.10 Knowledge .................................................. 36
SECTION 9.11 Specific Performance ....................................... 36
Annex A - Offer Conditions
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AGREEMENT AND PLAN OF MERGER, dated as of May 16, 1998 (this
"Agreement"), among ▇▇▇▇▇▇▇'▇, INC., a Delaware corporation ("Parent"), MSC
ACQUISITIONS, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and MERCANTILE STORES COMPANY, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and the stockholders of the
Company to enter into this Agreement with Parent and Purchaser, providing for
the merger (the "Merger") of Purchaser with the Company in accordance with the
General Corporation Law of the State of Delaware ("DGCL"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent and Purchaser have
each approved the Merger of Purchaser with the Company in accordance with the
DGCL upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MMC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("MMC MergerSub"), and Minot Mercantile Corporation,
a Delaware corporation ("Holding Co."), have entered into a merger agreement,
dated as of the date hereof (the "Holding Co. Merger Agreement"), pursuant to
which MMC MergerSub will be merged with and into Holding Co. (the "Holding Co.
Merger"), and Holding Co. shall be the surviving corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, WMI Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("WMI MergerSub"), and Woodbank ▇▇▇▇▇, Inc., a
Delaware corporation ("Woodbank"), have entered into a merger agreement, dated
as of the date hereof (the "Woodbank Merger Agreement"), pursuant to which WMI
MergerSub will be merged with and into Woodbank (the "Woodbank Merger"), and
Woodbank shall be the surviving corporation; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and each of Holding Co., Woodbank, various family trust
entities (collectively, the "Related Sellers") have entered into a stockholders'
agreement, dated as of the date hereof (the "Stockholders' Agreement"), pursuant
to which, among other things, the Related Sellers have granted an option in
favor of Parent with respect to the shares of Company Common Stock (as defined
herein) respectively held by such persons, subject to the terms and conditions
contained therein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
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ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall, as soon as reasonably practicable after the date
hereof (and in any event within five business days from the date of public
announcement of the execution hereof), commence an offer (the "Offer") to
purchase for cash all of the issued and outstanding shares of Common Stock, par
value $.14 2/3 per share (referred to herein as either the "Shares" or "Company
Common Stock"), of the Company at a price of $80.00 per Share, net to the seller
in cash. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer shall be subject only to the satisfaction or waiver by
Purchaser of the Offer Conditions. Purchaser expressly reserves the right, in
its sole discretion, to waive any such condition (other than the Minimum
Condition as defined in the Offer Conditions) and make any other changes in the
terms or conditions of the Offer, provided that, unless previously approved by
the Company in writing, no change may be made which decreases the price per
Share payable in the Offer, changes the form of consideration payable in the
Offer (other than by adding consideration), reduces the maximum number of Shares
to be purchased in the Offer, modify or amend the Offer Conditions or otherwise
amend the Offer in a manner adverse to holders of the Shares. Purchaser
covenants and agrees that, subject to the terms and conditions of this
Agreement, including but not limited to the Offer Conditions, it will accept for
payment and pay for Shares as soon as it is permitted to do so under applicable
law; provided that, Purchaser shall have the right, in its sole discretion, to
extend the Offer for up to five business days, notwithstanding the prior
satisfaction of the Offer, in order to attempt to satisfy the requirements of
Section 253 of the DGCL. It is agreed that the Offer Conditions are for the
benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (except for any action or
inaction by Purchaser or Parent constituting a breach of this Agreement) or,
except with respect to the Minimum Condition, may be waived by Purchaser, in
whole or in part at any time and from time to time, in its sole discretion.
Purchaser further agrees that the Holding Co. Merger and the Woodbank Merger
will not be closed until the Offer Conditions are otherwise satisfied or waived
by Purchaser, and immediately prior to the purchase of the Shares by Purchaser
pursuant to the Offer. Purchaser agrees that, so long as this Agreement is in
effect and all of the Offer Conditions are satisfied other than the conditions
to the Offer set forth in clause (h) of Annex A and the Minimum Condition, at
the request of the Company the Purchaser, at its option, shall extend the Offer
until the earlier of (1) such time as such conditions are satisfied or waived,
and (2) the date chosen by the Company which shall not be later than (x) the
Outside Date (as defined herein), (y) the earliest date on which the Company
reasonably believes such condition will be satisfied; provided, that the Company
may request further extensions up until the Outside Date if the Offer Conditions
set forth in clause (h) and the Minimum Condition are still the only Offer
Condition not satisfied unless this Agreement has been terminated pursuant to
the provisions of Article VIII.
(b) As soon as reasonably practicable on the date the Offer is
commenced, Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with
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respect to the Offer with the Securities and Exchange Commission (the "SEC").
The Schedule 14D-1 shall contain an Offer to Purchase and forms of the related
letter of transmittal (which Schedule 14D-1, Offer to Purchase and other
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "Offer Documents"). Parent and Purchaser agree that
the Company and its counsel shall be given an opportunity to review the Schedule
14D-1 before it is filed with the SEC. Parent, Purchaser and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents that shall have become false or misleading in any material respect,
and Parent and Purchaser further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
SECTION 1.2 Company Action. (a) The Company hereby approves of
and consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on May 15, 1998, has unanimously
(A) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are advisable and are fair to and in the
best interests of the holders of Shares, (B) approved this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
and (C) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to Purchaser thereunder and adopt this Agreement;
provided, however, that prior to the consummation of the Offer, if the Company's
Board of Directors by majority vote shall have determined in good faith, based
upon the advice of outside counsel to the Company, that failure to modify or
withdraw its recommendation would constitute a breach of the Board's fiduciary
duty under applicable law, the Board of Directors may so modify or withdraw its
recommendation; and (ii) ▇▇▇▇▇▇▇, Sachs & Co. (the "Financial Adviser") has
delivered to the Board of Directors of the Company its opinion that the
consideration to be received by holders of Shares, other than Parent and
Purchaser, pursuant to each of the Offer and the Merger is fair to such holders
from a financial point of view. The Company has been authorized by the Financial
Adviser to permit, subject to prior review and consent by such Financial
Adviser, the inclusion of such fairness opinion (or a reference thereto) in the
Schedule 14D-9 referred to below and the Proxy Statement referred to in Section
3.12. The Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company's Board of Directors described in this Section
1.2(a).
(b) The Company shall file with the SEC, contemporaneously
with the commencement of the Offer pursuant to Section 1.1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D- 9"), containing the
recommendations of the Company's Board of Directors described in Section
1.2(a)(i) and shall promptly mail the Schedule 14D-9 to the stockholders of the
Company. The Schedule 14D-9 and all amendments thereto will comply in all
material respects with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder. The
Company, Parent and Purchaser each agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 that shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
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(c) In connection with the Offer, if requested by Purchaser,
the Company shall promptly furnish Purchaser with mailing labels, security
position listings, any non-objecting beneficial owner lists and any available
listings or computer files containing the names and addresses of the record
holders of Shares, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including but not limited to updated
lists of stockholders, mailing labels, security position listings and
non-objecting beneficial owner lists) and such other assistance as Parent,
Purchaser or their agents may reasonably require in communicating the Offer to
the record and beneficial holders of Shares. Subject to the requirements of law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer and the Merger, Parent
and each of its affiliates and associates shall hold in confidence the
information contained in any of such lists, labels or additional information
and, if this Agreement is terminated, shall promptly deliver to the Company all
copies of such information then in their possession.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined in Section 2.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). At Parent's election,
any direct or indirect subsidiary of Parent other than Purchaser may be merged
with and into the Company instead of the Purchaser. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 2.2 Closing; Effective Time. Subject to the provisions
of Article VII, the closing of the Merger (the "Closing") shall take place in
New York City at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as soon as practicable but in no event later than
the first business day after the satisfaction or waiver of the conditions set
forth in Article VII, or at such other place or at such other date as Parent and
the Company may mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date". At the Closing, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger or a certificate of ownership and 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 2.3 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 Purchaser shall vest in the Surviving Corporation, and all debts,
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liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Restated Certificate of Incorporation of the Company (as amended,
the "Certificate of Incorporation"), as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided therein and under the DGCL.
(b) At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Purchaser and as
provided by law.
SECTION 2.5 Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation (directors of the Company
shall tender their resignations effective upon the Effective Time), and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed (as the case may be) and
qualified.
SECTION 2.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to
Section 2.6(b), Shares held by Holding Co. or Woodbank and any
Dissenting Shares (as defined in Section 2.8(a)) shall be cancelled,
extinguished and converted into the right to receive $80.00 in cash or
any higher price that may be paid pursuant to the Offer (the "Merger
Consideration") payable to the holder thereof, without interest, upon
surrender of the certificate formerly representing such Share in the
manner provided in Section 2.9, less any required withholding taxes.
(b) Each share of Company Common Stock held in the treasury of
the Company and each Share owned by the Company, Parent, Purchaser or
any other direct or indirect subsidiary of such persons, in each case
immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted
into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
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SECTION 2.7 Treatment of Options. Immediately prior to the
Effective Time, the Company shall cause each of the 95,500 outstanding options
to purchase Company Common Stock under the Company's 1996 Option Plan as set
forth in Schedule 2.7 to the Company Disclosure Letter (an "Option"), whether or
not then exercisable or vested, to be cancelled by the Company, and the holder
thereof to 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 previously
subject to such Option and (b) the excess, if any, of the Merger Consideration
over the exercise price per Share previously subject to such Option (such
payment to be net of applicable withholding taxes).
SECTION 2.8 Dissenting Shares and Section 262 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 shall have delivered a written demand for appraisal
of such shares of Company Common Stock 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 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 2.6(a) of this Agreement, without any
interest thereon.
(b) The Company shall give Parent (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 Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.9 Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
to act as agent for the holders of Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Shares
shall become entitled pursuant to Section 2.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 2.9(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Parent, as
Parent directs.
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(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that, except as set forth in the letter (the "Company Disclosure
Letter") delivered by the Company to Purchaser prior to the date of execution of
this Agreement:
SECTION 3.1 Organization and Qualification; Subsidiaries. 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 approvals is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect (as defined below) or prevent or
materially delay the consummation of the Offer or the Merger. 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 its 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 as are not
reasonably likely, individually or in the aggregate, 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 would be
materially adverse to the assets, liabilities, results of operations, financial
condition or business of the Company and its subsidiaries taken as a whole,
other than, as a result of changes in general economic conditions in the United
States.
SECTION 3.2 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws of the Company as currently in
effect. Such Certificate of Incorporation and ByLaws are in full force and
effect and no other organizational documents are applicable to or binding upon
the Company. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
SECTION 3.3 Capitalization. The authorized capital stock of
the Company consists of 36,887,475 shares of Company Common Stock. As of May 16,
1998, (a) 36,748,550 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 and (b) 138,925 shares of Company Common
Stock were held in the treasury of the Company. Since May 16, 1998, no options
to purchase shares of Company Common Stock have been granted and no shares of
Company Common Stock have been issued and the total number of Options
outstanding as of May 16, 1998 was 95,500. Except (i) as set forth above and
(ii) as a result of the exercise of Options outstanding as of May 16, 1998,
there are outstanding (A) no shares of capital stock or other voting securities
of the Company, (B) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(C) no options or other rights to acquire from the Company, and no obligation of
the Company
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to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (D) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "Company Securities"). There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. There are no
outstanding contractual obligations of the Company or any of its subsidiaries 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. Each of
the outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and all such
shares are owned by the Company or another wholly owned subsidiary of the
Company as set forth in Schedule 3.3 to the Company Disclosure Letter and are
owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations in voting rights, charges or other encumbrances of any
nature whatsoever, except where the failure to own such shares free and clear is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect. The Company has delivered to Parent prior to the date hereof a
list of the subsidiaries and affiliates of the Company which evidences, among
other things, the percentage of capital stock or other equity interests owned by
the Company, directly or indirectly, in such subsidiaries or associated
entities. No entity in which the Company owns, directly or indirectly, less than
a 50% equity interest is, individually or when taken together with all such
other entities, material to the business of the Company and its subsidiaries
taken as a whole other than the Metro North Company.
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. 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
adoption of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock if and to the extent required by applicable law,
and the filing of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by Parent and
Purchaser, 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 and the transactions
contemplated hereby (including but not limited to the Offer and the Merger and
the transactions contemplated by the Holding Co. Merger Agreement, Woodbank
Merger Agreement and the Stockholders Agreements and the transactions
contemplated by each such agreement) so as to render inapplicable hereto and
thereto (a) the limitation on business combinations contained in Section 203 of
the DGCL (or any similar provision) and (b) the restriction on "business
10
combinations" with "related persons" contained in Article EIGHTH of the
Certificate of Incorporation. As a result of the foregoing actions subject to
the applicability of Section 253 of the DGCL, the only vote required to
authorize the Merger is the affirmative vote of a majority of the outstanding
Shares.
SECTION 3.5 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement 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
subsidiaries; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i), (ii) and (iii) 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, judgment or decree applicable to
the Company or any of its subsidiaries or by which its 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, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, 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, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, except for
(i) applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), state securities, takeover and "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, permits, actions, filings or notifications the failure of which
to make or obtain are not, individually or in the aggregate, reasonably likely
to (x) prevent or materially delay the Company from performing its obligations
under this Agreement or (y) have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, 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 are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
11
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company
and, to the extent applicable, each of its then or current subsidiaries, has
filed all forms, reports, statements and documents required to be filed with the
SEC since January 1, 1995 (collectively, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
regulations promulgated thereunder, each as in effect on the date so filed. None
of the SEC Reports (including but not limited to any financial statements or
schedules included or incorporated by reference therein) contained when filed,
or (except to the extent revised or superseded by a subsequent filing with the
SEC) contains, any untrue statement of a material fact or omitted 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 consolidated balance sheets of the
Company as of January 31, 1998 and February 1, 1997 and the related statements
of consolidated income and retained earnings, and statements of consolidated
cash flows for each of the three fiscal years ended January 31, 1998, February
1, 1997 and February 3, 1996, included in its Annual Reports on Form 10-K for
the fiscal years ended January 31, 1998, in each case, including any related
notes thereto, as filed with the SEC (collectively, the "Company Financial
Statements"), 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 in all material
respects 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) There are no liabilities of the Company or any of its
subsidiaries of any kind whatsoever, whether or not accrued and whether or not
contingent or absolute, that are material to the Company and its subsidiaries,
taken as a whole, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of the Company and its subsidiaries at January 31,
1998, including the notes thereto, (ii) the SEC Reports, (iii) liabilities
incurred on behalf of the Company in connection with this Agreement and the
contemplated Merger, and (iv) liabilities incurred in the ordinary course of
business consistent with past practice since January 31, 1998, none of which
are, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
(d) The Company has heretofore furnished or made available to
Parent a complete and correct copy of any amendments or modifications which have
not yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Securities Act and the rules and regulations promulgated thereunder or the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 3.8 Absence of Certain Changes or Events. Since
January 31, 1998, except as contemplated by this Agreement or as disclosed in
the SEC Reports filed and publicly available prior to the date of this Agreement
or as disclosed in Schedule 3.8 to the Company Disclosure Letter, the Company
and its subsidiaries have conducted their businesses only in the
12
ordinary course and in a manner consistent with past practice and, since such
date, there has not been: (i) any changes in the assets, liabilities, results of
operation, financial condition or business of the Company or any of its
subsidiaries having or reasonably likely to have a Material Adverse Effect; (ii)
any condition, event or occurrence which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect; (iii) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Company or any of its subsidiaries which is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; (iv) any
change by the Company in its accounting methods, principles or practices; (v)
any revaluation by the Company of any of its material assets, including but not
limited to writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any entry by the
Company or any of its subsidiaries into any commitment or transactions material
to the Company and its subsidiaries taken as a whole (other than commitments or
transactions entered into in the ordinary course of business); (vii) any
declaration, setting aside or payment of any dividends or distributions in
respect of the Shares other than the regular quarterly dividend in the amount of
$.32 per share; (viii) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, or any
other increase in the compensation payable or to become payable to any present
or former directors, officers or key employees of the Company or any of its
subsidiaries, except for increases in base compensation in the ordinary course
of business consistent with past practice, or any employment, consulting or
severance agreement or arrangement entered into with any such present or former
directors, officers or key employees; or (ix) any other action which, if it had
been taken after the date hereof, would have required the consent of Parent
under Section 5.1.
SECTION 3.9 Absence of Litigation. Except as disclosed in the
SEC Reports filed and publicly available prior to the date of this Agreement,
there are no suits, claims, actions, proceedings or investigations pending or,
to the best knowledge of the Company, threatened against the Company or any of
its subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect. As of the date hereof,
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,
is reasonably likely to have a Material Adverse Effect or prevent or materially
delay consummation of the transactions contemplated hereby.
SECTION 3.10 Employee Benefit Plans. Except (i) as set forth
in the SEC Reports filed and publicly available prior to the date of this
Agreement or (ii) as is not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect or prevent or materially delay the
consummation of the Offer or the Merger:
(a) Schedule 3.10 to the Company Disclosure Letter contains 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,
13
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, whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of the
Company or any of its subsidiaries, has any present or future right to
benefits or under which the Company or any of its subsidiaries has any
present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the
"Company Plans".
(b) With respect to each Company Plan, the Company has
delivered or made available to Parent 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
or other funding instrument; (ii) the most recent determination letter,
if applicable; (iii) any summary plan description and other written
communications by the Company or any of its subsidiaries to their
employees concerning the extent of the benefits provided under a
Company Plan; 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) (i) Each Company Plan has been established and
administered in accordance with its terms, and in material compliance
with the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification, and
nothing has occurred, whether by action or failure to act, that would
cause the loss of such qualification; (iii) no event has occurred and
no condition exists that would subject the Company or any of its
subsidiaries, either directly or by reason of their affiliation with
any member of their "Controlled Group" (defined as any organization
which is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine,
lien or penalty imposed by ERISA, the Code or other applicable laws,
rules and regulations; (iv) for each Company Plan with respect to which
a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form since the date
thereof; and (v) no "reportable event" (as such term is defined in
ERISA section 4043), "prohibited transaction" (as such term is defined
in ERISA section 406 and Code section 4975) or "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred with respect to any
Company Plan.
(d) With respect to each of the Company Plans that is subject
to Title IV of ERISA, as of the Effective Time, the assets of each such
Company Plan are at least equal in value to the present value of the
accrued benefits (vested and unvested) of the participants in such
Company Plan on a termination basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
14
(e) Neither the Company nor any subsidiary is a party to any
multiemployer plan within the meaning of section 4001(a)(3) of ERISA or
any collective bargaining agreement.
(f) With respect to any Company Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
are pending or, to the knowledge of the Company, threatened, and (ii)
no facts or circumstances exist, to the knowledge of the Company, that
could give rise to any such actions, suits or claims.
(g) No Company Plan exists that could result in the payment to
any present or former employee of the Company or any of its
subsidiaries of any money or other property or accelerate or provide
any other rights or benefits to any present or former employee of the
Company or any of its subsidiaries as a result of the transaction
contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G.
SECTION 3.11 Tax Matters. The Company and each of its
subsidiaries, and any consolidated, combined, unitary or aggregate group for tax
purposes of which the Company or any of its subsidiaries is or has been a member
has timely filed all Tax Returns required to be filed by it in the manner
provided by law, has paid all Taxes (including interest and penalties) shown
thereon to be due and has provided adequate reserves in its financial statements
according to generally accepted accounting principles for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns. All such
Tax Returns were true, correct and complete in all material respects. Except as
has been disclosed to Parent in Schedule 3.11 to the Company Disclosure Letter:
(i) no material claim for unpaid Taxes has become a lien or encumbrance of any
kind against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries; (ii) as of the date
hereof no audit of any Tax Return of the Company or any of its subsidiaries is
being conducted by a Tax authority; and (iii) no extension of the statute of
limitations on the assessment of any Taxes has been granted by the Company or
any of its subsidiaries and is currently in effect. As used herein, "Taxes"
shall mean any taxes of any kind, including but not limited to those on or
measured by or referred to as income, gross receipts, capital, 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 authority. As used herein, "Tax
Return" shall mean any return, report or statement required to be filed with any
governmental authority with respect to Taxes.
SECTION 3.12 Offer Documents; Proxy Statement. Neither the
Schedule 14D-9, nor any of the information supplied by the Company for inclusion
in the Offer Documents, shall, at the respective times such Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to stockholders, as the case may be,
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 were made, not
misleading. Neither the proxy statement to be sent to the stockholders of the
Company in connection with the Stockholders Meeting (as
15
defined in Section 6.1) or the information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, is herein referred to as the "Proxy Statement"), shall,
at the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to stockholders and at the time of the Stockholders Meeting, if
any, and at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Purchaser or any of their
respective representatives which is contained in the Schedule 14D-9 or the Proxy
Statement. The Schedule 14D-9 and the Proxy Statement will comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 3.13 Environmental Matters. (a) Except as disclosed in
SEC Reports filed and publicly available prior to the date of this Agreement and
to the extent that the inaccuracy of any of the following (or the circumstances
giving rise to such inaccuracy), individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect or prevent or materially
delay consummation of the Offer or the Merger:
(i) the Company and its subsidiaries are, and within
the period of all applicable statutes of limitation have been, in
compliance with all applicable Environmental Laws;
(ii) the Company and its subsidiaries hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current operations and for any property
owned, leased, or otherwise operated by any of them, and are, and
within the period of all applicable statutes of limitation have been,
in compliance with all such Environmental Permits;
(iii) no review by, or approval of, any Governmental
Authority or other person is required under any Environmental Law in
connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby;
(iv) neither the Company nor any of its subsidiaries has
received any Environmental Claim (as hereinafter defined) against any
of them, and the Company has no knowledge of any such Environmental
Claim being threatened;
(v) to the knowledge of the Company, Hazardous
Materials are not present on any property owned, leased, or operated by
the Company or any of its subsidiaries, that is reasonably likely to
form the basis of any Environmental Claim against any of them; and the
Company has no reason to believe that Hazardous Materials are present
on any other property that is reasonably likely to form the basis of
any Environmental Claim against any of them;
16
(vi) the Company has no knowledge of any material
Environment Claim pending or threatened, or of the presence or
suspected presence of any Hazardous Materials that is reasonably likely
to form the basis of any Environmental Claim, in any case against any
person or entity whose liability the Company or any of its subsidiaries
has or may have retained or assumed either contractually or by
operation of law. or against any real property which the Company or any
of its subsidiaries formerly owned, leased, or operated, in whole or in
part; and
(vii) to the knowledge of the Company, the Company has
informed the Parent and the Purchaser of: all material facts which the
Company reasonably believes could form the basis of a material
Environmental Claim against the Company or any of its subsidiaries
arising out of the non-compliance or alleged non-compliance with any
Environmental Law, or the presence or suspected presence of Hazardous
Materials at any location.
(b) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter,
or notice (written or oral) of noncompliance, violation, or liability,
by any person or entity asserting liability or potential liability
(including without limitation liability or potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Laws
or Environmental Permits, or (iii) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other
legally enforceable requirement (including, without limitation, common
law) of any foreign government, the United States, or any state, local,
municipal or other governmental authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of
human health as affected by the environment or Hazardous Materials
(including without limitation employee health and safety) or the
environment (including without limitation indoor air, ambient air,
surface water, groundwater, land surface, subsurface strata, or plant
or animal species).
"Environmental Permits" means all permits, licenses,
registrations, approvals, exemptions and other filings with or
authorizations by any Governmental Authority under any Environmental
Law.
"Governmental Authority" means any government, any state or
other political subdivision thereof and any entity (including, without
limitation, a court) exercising
17
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof), petroleum products, asbestos, asbestos-containing
materials, pollutants, contaminants, radioactivity, electromagnetic
fields and all other materials, whether or not defined as such, that
are regulated pursuant to any Environmental Laws or that could result
in liability under any applicable Environmental Laws.
SECTION 3.14 Real Estate Matters. (a) The Company or its
subsidiaries has good, valid, and, in the case of Owned Properties (as defined
below), marketable fee title to: (i) all of the material real property and
interests in real property owned by the Company or its subsidiaries, except for
properties sold or otherwise disposed of in the ordinary course of business (the
"Owned Properties"), and (ii) all of the material leasehold estates in all real
properties leased by the Company or its subsidiaries, except leasehold interests
terminated in the ordinary course of business (the "Leased Properties"; the
Owned Properties and Leased Properties being sometimes referred to herein as the
"Real Properties"), in each case free and clear of all mortgages, liens,
security interests, easements, covenants, rights-of-way, subleases and other
similar restrictions and encumbrances ("Encumbrances"), except for Encumbrances
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(b) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, are not reasonably likely to have a Material Adverse Effect:
(i) each of the agreements by which the Company has obtained a leasehold
interest in each Leased Property (individually, a "Lease" and collectively, the
"Leases") is in full force and effect in accordance with its respective terms
and the Company or its subsidiary is the holder of the lessee's or tenant's
interest thereunder; to the knowledge of the Company, there exists no default
under any Lease and no circumstance exists which, with the giving of notice, the
passage of time or both, is reasonably likely to result in such a default; the
Company and its subsidiaries have complied with and timely performed all
conditions, covenants, undertakings and obligations on their parts to be
complied with or performed under each of the Leases; the Company and its
subsidiaries have paid all rents and other charges to the extent due and payable
under the Leases; (ii) there are no leases, subleases, licenses, concessions or
any other contracts or agreements granting to any person or entity other than
the Company or any of its subsidiaries any right to the possession, use,
occupancy or enjoyment of any Real Property or any portion thereof; (iii) the
current operation and use of the Real Properties does not violate any statute,
law, regulation, rule, ordinance, permit, requirement, order or decree now in
effect; the use being made of each Real Property at present is in conformity
with the certificate of occupancy issued for such Real Property; (iv) there are
no existing, or to the knowledge of the Company, threatened, condemnation or
eminent domain proceedings (or proceedings in lieu thereof) affecting the Real
Properties or any portion thereof; (v) no default or breach exists under any of
the covenants, conditions, restrictions, rights-of-way, or easements, if any,
affecting all or any portion of a Real Property, which are to be performed or
complied with by the Company or any of its subsidiaries; and (vi) all the
buildings, structures, equipment and other tangible
18
assets of the Company (whether owned or leased) are in normal operating
condition (normal wear and tear excepted) and are fit for use in the ordinary
course of business.
(c) Neither the Company nor any of its subsidiaries is
obligated under or bound by any option, right of first refusal, purchase
contract, or other contractual right to sell or dispose of any Owned Property or
any portions thereof or interests therein which property, portions and
interests, individually or in the aggregate, are material to the Company and its
subsidiaries.
SECTION 3.15 Brokers. No broker, finder or investment banker
(other than the Financial Adviser) 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 Parent information concerning the fee which
will be payable to the Financial Advisor in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
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 is not, individually or in the
aggregate, reasonably likely to prevent the consummation of the Offer or the
Merger.
SECTION 4.2 Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
other than filing and recordation of appropriate merger documents as required by
the DGCL. This Agreement has been duly executed and delivered by Parent and
Purchaser and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by Parent and
Purchaser do not and will not: (i)
19
conflict with or violate the respective certificates of incorporation or by-laws
of Parent or Purchaser; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) 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, judgment or
decree applicable to Parent or Purchaser or by which either of them or 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, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Purchaser is a party or by
which Parent or Purchaser or any of their respective 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 are not, individually
or in the aggregate, reasonably likely to prevent or materially delay the
consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, except (i) for applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated thereunder,
the HSR Act, state securities, takeover and "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, permits, actions, filings or
notifications the failure of which to make or obtain are not, individually or in
the aggregate, reasonably likely to prevent the consummation of the Offer or the
Merger.
SECTION 4.4 Offer Documents; Proxy Statement. The Offer
Documents, as filed pursuant to Section 1.1, will not, at the time such Offer
Documents are filed with the SEC or are first published, sent or given to
stockholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The information
supplied by Parent for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to stockholders, at the time of the
Stockholders Meeting (as defined in Section 6.1), if any, or at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading. Notwithstanding the foregoing, Parent and
Purchaser make 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 or the Offer
Documents. The Offer Documents, as amended and supplemented, will comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
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SECTION 4.5 Brokers. No broker, finder or investment banker
(other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated) 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
Parent or Purchaser.
SECTION 4.6 Funds. Parent or Purchaser, at the expiration date
of the Offer and at the Effective Time, will have the funds necessary to
consummate the Offer and the Merger, respectively.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, unless Parent shall otherwise agree in writing,
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 and in a manner consistent with past practice; and
the Company and its subsidiaries shall each use its reasonable best efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. 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, directly or indirectly do, or commit to do, any of the
following without the prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation
or by-laws or equivalent organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (i) 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 of up to 95,500 shares of Common Stock required to be issued
pursuant to the terms of Options outstanding as of May 16, 1998) or
(ii) any material assets of the Company or any of its subsidiaries,
except for sales of inventory in the ordinary course of business and in
a manner 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 regular quarterly
dividends consistent with past practice, in an amount not to exceed
$.32 per share);
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(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) incur any indebtedness for
borrowed money (except for drawdowns on the Company's existing credit
facility in the ordinary course of business consistent with past
practice) or issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person; (iii) enter into
any contract or agreement other than in the ordinary course of business
consistent with past practice; or (iv) except as set forth in Schedule
5.1(e)(iv) of the Company Disclosure Letter, other than as provided in
the Company's capital expenditure budget (a copy of which was provided
to Parent) authorize any single capital expenditure which is in excess
of $200,000 or capital expenditures which are, in the aggregate, in
excess of $1,000,000 for the Company and its subsidiaries taken as a
whole;
(f) Except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement, 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 officers of the Company in the ordinary course of business in
accordance with past practice, or grant any severance or termination
pay not currently required to be paid under existing severance plans to
or enter into 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, or establish,
adopt, enter into or amend or terminate any collective bargaining
agreement or Company Plan, including, but not limited to, 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;
(g) Except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting practices or principles used by it;
(h) Make any material Tax election, change any material method
of Tax accounting 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 which is material 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 not
constituting an inactive subsidiary (other than the Merger);
22
(k) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (i) in
the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Company Financial
Statements or incurred in the ordinary course of business and
consistent with past practice and (ii) of liabilities required to be
paid, discharged or satisfied pursuant to the terms of any contract in
existence on the date hereof (including, without limitation, benefit
plans relating to directors); or
(l) 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(k) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken, or would result in any of the conditions set forth
in Annex A not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. (a) If adoption of this
Agreement is required by applicable law, the Company, acting through its Board
of Directors, shall in accordance with and subject to applicable law and the
Company's Certificate of Incorporation and By-Laws, (i) duly call, give notice
of, convene and hold a meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of adopting this Agreement
and the transactions contemplated hereby (the "Stockholders Meeting") and (ii)
except if the Board of Directors by majority vote determines in good faith,
based on the advice of outside legal counsel to the Company that to do so would
constitute a breach of fiduciary duty under applicable law, (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 adoption of this Agreement and
the written opinion of the Financial Adviser that the consideration to be
received by the stockholders of the Company pursuant to the Offer and the Merger
is fair to such stockholders and (B) use its reasonable best efforts to obtain
the necessary adoption of this Agreement. At the Stockholders Meeting, Parent
and Purchaser shall cause all Shares then owned by them and their subsidiaries
to be voted in favor of adoption of this Agreement.
(b) Notwithstanding the foregoing, in the event that Purchaser
shall acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Purchaser, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 253 of the DGCL.
SECTION 6.2 Proxy Statement. If required by applicable law, as
soon as practicable following Parent's request, the Company shall file with the
SEC under the Exchange Act and the rules and regulations promulgated thereunder,
and shall use its reasonable best efforts
23
to have cleared by the SEC, the Proxy Statement with respect to the Stockholders
Meeting. Parent, Purchaser and the Company will cooperate with each other in the
preparation of the Proxy Statement; without limiting the generality of the
foregoing, each of Parent and Purchaser 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 the
other parties hereto, 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 cause such Proxy Statement to be mailed to the Company's stockholders at the
earliest practicable time.
SECTION 6.3 Company Board Representation; Section 14(f). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence and including
any vacancies or unfilled newly-created directorships) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any affiliate of Purchaser bears to the total number of Shares then
outstanding, and the Company shall amend, or cause to be amended its by-laws to
provide for each of the matters set forth in this Section 6.3 and shall, at such
time, promptly take all action necessary to cause Purchaser's designees to be so
elected, including either increasing the size of the Board of Directors or
securing the resignations of incumbent directors or both. At such times, the
Company will use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the board of (i) each
committee of the Board of Directors, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board, in each
case only to the extent permitted by law. Until Purchaser acquires a majority of
the outstanding Shares on a fully diluted basis, the Company shall use its
reasonable best efforts to ensure that all the members of the Board of Directors
and such boards and committees as of the date hereof who are not employees of
the Company shall remain members of the Board of Directors and such boards and
committees.
(b) The Company's obligations to appoint designees to its
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 information statement provided to stockholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.3. Parent or Purchaser will supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
(c) In addition to any vote of the Board of Directors required
by law, the Certificate of Incorporation or the By-laws of the Company,
following the election or appointment of Purchaser's designees pursuant to this
Section 6.3 and prior to the Effective Time, the concurrence of a majority of
the directors of the Company then in office who are neither designated by
Purchaser nor are employees of the Company (the "Disinterested Directors") will
24
be required to authorize any amendment, or waiver of any term or condition, of
this Agreement or the Certificate of Incorporation or By-Laws of the Company,
any termination of this Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations or other acts of
Purchaser or waiver or assertion of any of the Company's rights hereunder, the
awarding of the $3 million pursuant to the terms of the Company's incentive
performance plan, and any other consent or action by the Board of Directors with
respect to this Agreement. Notwithstanding Section 6.3(a) hereof, the number of
Disinterested Directors shall be not less than three; provided, however, that,
in such event, if the number of Disinterested Directors shall be reduced below
three for any reason, the remaining Disinterested Director(s) shall be entitled
to designate persons to fill such vacancies who shall be deemed to be
Disinterested Directors for purposes of this Agreement, or if no Disinterested
Directors then remain, the other directors who were directors prior to the date
hereof shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of the Company, Parent or Purchaser, and
such persons shall be deemed to be Disinterested Directors for purposes of this
Agreement.
SECTION 6.4 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 and other agents to,
afford the officers, employees, auditors and other agents of Parent, and
financing sources who shall agree to be bound by the provisions of this Section
6.4 as though a party hereto, complete access, consistent with applicable law,
at all reasonable times to its officers, employees, agents, properties, offices,
plants and other facilities and to all books and records, and shall furnish
Parent and such financing sources with all financial, operating and other data
and information as Parent, through its officers, employees or agents, or such
financing sources may from time to time reasonably request. Notwithstanding the
foregoing, any such investigation or consultation shall be conducted in such a
manner as not to interfere unreasonably with the business or operations of the
Company or its subsidiaries.
(b) As soon as practicable after the date of this Agreement,
Company and Parent shall cooperate in good faith to develop a plan (the "Plan")
with respect to the communications with their respective employees and the
employees of their respective subsidiaries regarding the transactions
contemplated by this Agreement. Prior to consummation of the Offer, Parent shall
use its reasonable best efforts to coordinate any communications to the
Company's employees (including employees of the Company's subsidiaries) through
the officers of the Company and in a manner that will not disrupt the operations
of the Company.
(c) All information obtained by Parent and Purchaser pursuant
to this Section 6.4 shall be kept confidential in accordance with the
Confidentiality Agreement, dated on or about May 7, 1998 (the "Parent
Confidentiality Agreement"), between Parent and the Company; provided, that
Parent shall not be prohibited from sharing information with any potential
purchaser of assets in connection with the future divestiture of any of the
Company's stores or assets.
(d) No investigation pursuant to this Section 6.4 shall affect
any representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
25
SECTION 6.5 No Solicitation of Transactions. The Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity interest
in, the Company or any of its subsidiaries or any business combination with or
involving the Company or any of its subsidiaries. At any time prior to
consummation of the Offer, the Company may, directly or indirectly, furnish
information and access, in each case only in response to a request for such
information or access to any person made after the date hereof which was not
encouraged, solicited or initiated by the Company or any of its affiliates or
any of its or their respective officers, directors, employees, representatives
or agents after the date hereof, pursuant to appropriate confidentiality
agreements containing terms and conditions (including standstill provisions)
that are no less favorable than the terms and conditions contained in the Parent
Confidentiality Agreement, and may participate in discussions and negotiate with
such person concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction (including an exchange of stock or assets)
involving the Company or any subsidiary or division of the Company, in each case
(whether furnishing information and access or participating in discussions and
negotiations) only if such person has submitted a written proposal to the Board
of Directors of the Company relating to any such transaction and the Board by a
majority vote determines in good faith, based upon the advice of outside counsel
to the Company, that failing to take such action would constitute a breach of
the Board's fiduciary duty under applicable law. The Board shall provide a copy
of any such written proposal to Parent immediately after receipt thereof, shall
notify Parent immediately if any proposal (oral or written) is made and shall in
such notice, indicate in reasonable detail the identity of the offeror and the
terms and conditions of any proposal and shall keep Parent promptly advised of
all developments which could reasonably be expected to culminate in the Board of
Directors withdrawing, modifying or amending its recommendation of the Offer,
the Merger and the other transactions contemplated by this Agreement. Except as
set forth in this Section 6.5, neither the Company or any of its affiliates, nor
any of its or their respective officers, directors, employees, representatives
or agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Purchaser, any affiliate or associate of Parent and Purchaser or any designees
of Parent or Purchaser) concerning any merger, sale of any material portion or
assets, sale of any shares of capital stock or similar transactions (including
an exchange of stock or assets) involving the Company or any subsidiary or
division of the Company; provided, however, that nothing herein shall prevent
the Board from taking, and disclosing to the Company's stockholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to any tender offer; provided, further, that the Board shall not
recommend that the stockholders of the Company tender their Shares in connection
with any such tender offer unless the Board by majority vote shall have
determined in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law. The Company agrees not to release
any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party, unless the Board by
majority vote shall have determined in good faith, based upon the advice of
outside counsel, that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board of
Directors under applicable law.
26
SECTION 6.6 Employee Benefits Matters. (a) On and after the
Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the terms
of any compensation arrangements, employment agreements and employee or director
benefit plans, programs and policies in existence as of the date hereof for all
employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries (including all compensation and benefits earned
through the Effective Time pursuant to the Company Plans set forth in Schedule
3.10(a) of the Company Disclosure Letter). Parent and the Company agree that the
Surviving Corporation and its subsidiaries shall pay promptly or provide when
due all compensation and benefits required to be paid pursuant to the terms of
any individual agreement with any employee, former employee, director or former
director in effect as of the date hereof and disclosed in Schedule 3.10(a) of
the Company Disclosure Letter.
(b) Except as set forth in Schedule 6.6(b) of the Company
Disclosure Letter, Parent shall cause the Surviving Corporation, for the period
commencing at the Effective Time and ending on the second anniversary thereof,
to provide employee benefits under plans, programs and arrangements which, in
the aggregate, will provide benefits to the employees of the Surviving
Corporation and its subsidiaries (other than employees covered by a collective
bargaining agreement) which are no less favorable in the aggregate than those
provided to Parent's similarly situated employees pursuant to the plans,
programs and arrangements (other than those related to the equity securities of
the Company) of Parent and its subsidiaries in effect on the date hereof and
employees covered by collective bargaining agreements shall be provided with
such benefits as shall be required under the terms of any applicable collective
bargaining agreement; provided, however, that nothing herein shall prevent the
amendment or termination of any specific plan, program or arrangement, require
that the Surviving Corporation provide or permit investment in the securities of
Parent, the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law. Employees of the Surviving Corporation shall be
given credit for all service with the Company and its subsidiaries, to the same
extent as such service was credited for such purpose by the Company, under each
employee benefit plan, program, or arrangement of the Parent in which such
employees are eligible to participate for purposes of eligibility and vesting;
provided, however, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service.
(c) If employees of the Surviving Corporation and its
subsidiaries become eligible to participate in a medical, dental or health plan
of Parent or its subsidiaries, Parent shall cause such plan to (i) waive any
preexisting condition limitations for conditions covered under the applicable
medical, health or dental plans of the Company and its subsidiaries and (ii)
honor any deductible and out-of-pocket expenses incurred by the employees and
their beneficiaries under such plans during the portion of the calendar year
prior to such participation.
(d) Nothing in this Section 6.6 shall require the continued
employment of any person or, with respect to clauses (b) and (c) hereof, prevent
the Company and/or the Surviving Corporation and their subsidiaries from taking
any action or refraining from taking any action
27
which the Company and its subsidiaries prior to the Effective Time, could have
taken or refrained from taking.
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the Certificate of Incorporation and
By-laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers or employees of the Company.
(b) Parent shall use its reasonable best efforts to cause to
be maintained in effect for six years from the Effective Time the current
policies of the directors' and officers' liability insurance maintained by the
Company (provided that Parent may substitute therefor policies of at least the
same coverage containing terms and conditions which are not materially less
advantageous) with respect to matters occurring prior to the Effective Time to
the extent such insurance is reasonably available.
(c) For six years after the Effective Time, Parent agrees that
it will or will cause the Surviving Corporation to indemnify and hold harmless
each present and former director and officer of the Company, determined as of
the Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") (but only to the extent such
Costs are not otherwise covered by insurance and paid) incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (collectively, "Claims"), arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time, to
the fullest extent permitted under applicable law (and Parent shall, or shall
cause the Surviving Corporation to, also advance expenses as incurred to the
fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
(d) Any Indemnified Party wishing to claim indemnification
under Section 6.7(c), upon learning of any such Claim, shall promptly notify
Parent thereof, but the failure to so notify shall not relieve Parent of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice Parent. In the event of any such Claim (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Parties and Parent shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues that raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Parent shall be obligated pursuant to
28
this paragraph (d) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such Indemnified
Parties would present such counsel with a conflict of interest, (ii) the
Indemnified Parties will cooperate in the defense of any such matter and (iii)
Parent shall not be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld; and provided,
further, that Parent shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
SECTION 6.8 Postponement of Annual Meeting. The Company shall
as soon as possible indefinitely postpone its annual meeting of stockholders
currently scheduled for May 27, 1998, and shall take no action unless compelled
by legal process to reschedule such annual meeting or to call a special meeting
of stockholders of the Company except in accordance with this Agreement unless
and until this Agreement has been terminated in accordance with its terms.
SECTION 6.9 Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of the occurrence or non-occurrence of (i) 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 in any material respect
and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy in any material respect 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 6.9 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10 Further Action; Reasonable 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 appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
but not limited to (i) cooperation in the preparation and filing of the Offer
Documents, the Schedule 14D-9, the Proxy Statement, any required filings under
the HSR Act and any amendments to any thereof, (ii) cooperation with respect to
consummating the financing for the Offer and the Merger and (iii) using its
reasonable best efforts to promptly make all required regulatory filings and
applications including, without limitation, responding promptly to requests for
further information and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries and Parent and its
subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Offer and
the Merger. 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.
(b) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly
29
furnishing the other with copies of notices or other communications received by
Parent or the Company, as the case may be, or any of their subsidiaries, from
any governmental authority with respect to the Offer or the Merger or any of the
other transactions contemplated by this Agreement. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
the HSR Act or any other antitrust law.
(c) Each party shall timely and promptly make all filings
which are required under the HSR Act and Parent shall pay the filing fee. Each
party will furnish to the other such necessary information and reasonable
assistance as it may request in connection with its preparation of such filings.
Each party will supply the other with copies of all correspondence, filings or
communications between such party or its representatives and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice or
any other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby.
SECTION 6.11 Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Offer or the Merger and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with its
securities exchange.
SECTION 6.12 Disposition of Litigation. (a) The Company agrees
that it will not settle any litigation currently pending, or commenced after the
date hereof, against the Company or any of its directors by any stockholder of
the Company relating to the Offer or this Agreement, without the prior written
consent of Parent (which shall not be unreasonably withheld).
(b) 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 Offer or the Merger and will cooperate with Parent and
Purchaser to resist any such effort to restrain or prohibit or otherwise oppose
the Offer or the Merger.
ARTICLE VII
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 at or prior to the Effective Time of the
following conditions:
(a) If required by the DGCL, this Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance
30
with the Company's Certificate of Incorporation and the DGCL (which the
Company has represented shall be solely the affirmative vote of a
majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by
any United States, foreign, federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger; provided, however, that prior to invoking
this condition each party agrees to comply with Section 6.10.
(c) Purchaser shall have purchased Shares pursuant to the
Offer.
(d) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
ARTICLE VIII
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 Parent, Purchaser and the
Company;
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States shall have issued a final order, injunction,
decree, judgment or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Offer or the Merger and such
order, injunction, decree, judgment, ruling or other action is or shall
have become final and nonappealable; provided, however, that prior to
invoking this right of termination each party agrees to comply with
Section 6.10;
(c) By Parent if due to an occurrence or circumstance which
resulted in a failure to satisfy any of the Offer Conditions (other
than as a result of a breach by Parent or Purchaser of its obligations
hereunder), Purchaser shall have (i) terminated the Offer or (ii)
failed to pay for Shares pursuant to the Offer on or prior to the
Outside Date (as defined below);
(d) By the Company if (i) there shall have been a material
breach of any covenant or agreement on the part of Parent or the
Purchaser contained in this Agreement which materially adversely
affects Parent's or Purchaser's ability to consummate (or materially
delays commencement or consummation of) the Offer, and which shall not
have been cured prior to the earlier of (A) 10 business days following
notice of such breach and (B) two business days prior to the date on
which the Offer expires, (ii)
31
Purchaser shall have (A) terminated the Offer or (B) failed to pay for
Shares pursuant to the Offer on or prior to the Outside Date (unless
such failure is caused by or results from the failure of any
representation or warranty of the Company to be true and correct in any
material respect or the failure of the Company to perform in any
material respect any of its covenants or agreements contained in this
Agreement) or (iii) prior to the purchase of Shares pursuant to the
Offer, any person shall have made a bona fide offer to acquire the
Company (A) that the Board of Directors of the Company by majority vote
determines in its good faith judgment is more favorable to the
Company's stockholders than the Offer and the Merger and (B) as a
result of which the Board of Directors by majority vote determines in
good faith, based upon the advice of outside counsel, that it is
obligated by its fiduciary obligations under applicable law to
terminate this Agreement, provided that such termination under this
clause (iii) shall not be effective until the Company has made payment
of the full fee and expense reimbursement required by Section 8.3; or
(e) By Parent prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation,
warranty, covenant or agreement on the part of the Company contained in
this Agreement which is reasonably likely to have a Material Adverse
Effect, which shall not have been cured prior to the earlier of (A) 10
business days following notice of such breach and (B) two business days
prior to the date on which the Offer expires, (ii) the Board shall have
withdrawn or modified (including by amendment of the Schedule 14D-9) in
a manner adverse to Purchaser its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended another
offer or transaction in accordance with Section 6.5, shall have
resolved to effect any of the foregoing, or (iii) the Minimum Condition
shall not have been satisfied by the expiration date of the Offer as it
may have been extended pursuant hereto and on or prior to such date (A)
any person (including the Company but not including Parent or
Purchaser) shall have made a public announcement, disclosure or
communication to the Company with respect to a Third Party Acquisition
or (B) any person (including the Company or any of its affiliates or
subsidiaries), other than Parent or any of its affiliates, shall have
become (and remain at the time of termination) the beneficial owner of
19.9% or more of the Shares (unless such person shall have tendered and
not withdrawn such person's Shares pursuant to the Offer). As used
herein, the "Outside Date" shall mean the latest of (I) 70 days
following the date hereof or (II) the date that all conditions to the
Offer set forth in paragraph (h) of the Offer Conditions, the
satisfaction of which involve compliance with or otherwise relate to
any United States antitrust or competition laws or regulations
(including any enforcement thereof), have been satisfied for a period
of 10 business days; provided that in no event shall the Outside Date
be later than January 31, 1999.
SECTION 8.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
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 wilful breach
hereof; provided, further, that the payment of the termination fee set forth in
Section 8.3(a)(i) shall be considered with respect to the calculation of any
damages resulting from any such wilful breach by the Company.
32
SECTION 8.3 Fees and Expenses. (a) If:
(i) Parent terminates this Agreement pursuant to
Section 8.1(e)(i) hereof, or if the Company terminates this Agreement
pursuant to Section 8.1(d)(ii) hereof under circumstances that would
have permitted Parent to terminate this Agreement pursuant to Section
8.1(e)(i) hereof, and within 12 months thereafter, the Company enters
into an agreement with respect to a Third Party Acquisition, or a Third
Party Acquisition occurs, involving any party (or any affiliate or
associate thereof) (x) with whom the Company (or its agents) had any
discussions with respect to a Third Party Acquisition, (y) to whom the
Company (or its agents) furnished information with respect to or with a
view to a Third Party Acquisition or (z) who had submitted a proposal
or expressed any interest publicly or to the Company in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) prior to
such termination; or
(ii) (A) the Company terminates this Agreement pursuant
to 8.1(d)(iii) or (B) the Company terminates this Agreement pursuant to
Section 8.1(d)(ii)(B) hereof and at such time Parent would have been
permitted to terminate this Agreement under Section 8.1(e)(ii) or (iii)
hereof or (C) Parent terminates this Agreement pursuant to Section
8.1(e)(ii) or (iii) hereof;
then the Company shall pay to Parent and Purchaser, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with any termination contemplated by Section
8.3(a)(ii) above, a fee, in cash, of $88,288,000, provided, however, that the
Company in no event shall be obligated to pay more than one such fee with
respect to all such agreements and occurrences and such termination. The payment
of any expenses pursuant to Section 8.3(b) shall be credited against the payment
of any fee pursuant to Section 8.3(a).
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger or similar
business combination by any person other than Parent, Purchaser or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of 20.0% or
more of the book or fair market value of the consolidated assets of the Company
and its subsidiaries, taken as a whole; or (iii) the acquisition by a Third
Party of 20.0% or more of the outstanding Shares.
(b) Upon the termination of this Agreement (i) under
circumstances in which Parent shall have been entitled to terminate this
Agreement pursuant to Section 8.1(e)(i) hereof (whether or not expressly
terminated on such basis) or (ii) if any of the representations and warranties
of the Company contained in this Agreement were untrue or incorrect in any
material respect when made and at the time of termination remained untrue or
incorrect in any material respect and such misrepresentation materially
adversely affected the consummation (or materially delayed commencement or
consummation) of the Offer, then the Company shall reimburse Parent, Purchaser
and their affiliates (not later than one business day after submission of
statements therefor) for all actual documented out-of-pocket fees and expenses
actually incurred by any of them or on their behalf in connection with the Offer
and the Merger and the consummation of all transactions contemplated by this
Agreement (including, without limitation,
33
fees and disbursements payable to financing sources, investment bankers, counsel
to Purchaser or Parent or any of the foregoing, and accountants) up to a maximum
amount of $3 million; provided, however, that in no circumstances shall any
payment be made under this Section 8.3(b) after a payment has been made under
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.
SECTION 8.4 Amendment. Subject to Section 6.3, 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 adoption of the Agreement by the stockholders of
the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, 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 only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
ARTICLE IX
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 Article II, Section 6.6, Section 6.7 and Article IX shall survive the
Effective Time and those set forth in Section 6.4, Section 8.3 and Article IX
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
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
34
if to Parent or Purchaser:
▇▇▇▇▇▇▇'▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with additional copies to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
if to the Company:
Mercantile Stores Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
with a further copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
SECTION 9.3 Certain Definitions. For purposes of this
Agreement, the term:
"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;
"beneficial owner" with respect to any Shares means a person
who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates
or associates (as such term is defined in Rule 12b-2 of the Exchange
Act) has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange
35
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares; provided, however, that no person
nor any affiliate or associate of such person shall be deemed to be the
beneficial owner of any securities by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to which
shares neither such person nor any such affiliate or associate is
otherwise deemed the beneficial owner.
"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;
"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
January 31, 1998 were prepared;
"person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company,
the Surviving Corporation, Parent or such other person, as the case may
be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
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.
36
SECTION 9.5 Entire Agreement; Assignment. This Agreement,
together with the Stockholders Agreement, Parent Confidentiality Agreement, the
Holding Co. Merger Agreement and the Woodbank Merger 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
Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of Parent, 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 nothing
in this Agreement, express or implied, except for the provisions of Section 6.7,
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 Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
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.
SECTION 9.10 Knowledge. As used in this Agreement, the terms
"the best knowledge of the Company", "known to the Company" or words of similar
import used herein with respect to the Company shall mean the actual knowledge
of any Company Executive, together with the knowledge a reasonable business
person would have obtained after making reasonable inquiry and after exercising
reasonable diligence with respect to the matters at hand. The "Company
Executives" shall consist of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇. As used in this Agreement,
the terms "the best knowledge of Parent", "known to Parent" or words of similar
import used herein with respect to Parent shall mean the actual knowledge of any
Parent Executive, together with the knowledge a reasonable business person would
have obtained after making reasonable inquiry and after exercising reasonable
diligence with respect to the matters at hand. The "Parent Executives" shall
consist of the executive officers of Parent as listed in the latest proxy
statement or registration statement of Parent filed with the SEC.
SECTION 9.11 Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in
37
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which such party is entitled at law or in
equity. In addition, each of the parties hereto (i) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of Delaware, and (iv) consents to service being made
through the notice procedures set forth in Section 9.2.
38
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
▇▇▇▇▇▇▇'▇, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
MSC ACQUISITIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
MERCANTILE STORES COMPANY, INC.
By:
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
▇▇▇▇▇▇▇'▇, INC.
By:
----------------------------
Name:
Title:
MSC ACQUISITIONS, INC.
By:
----------------------------
Name:
Title:
MERCANTILE STORES COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings
set forth in the attached Merger Agreement.
Notwithstanding any other provision of the Offer, but subject
to the terms and conditions of the Merger Agreement, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant to
the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered pursuant to the
Offer, and may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) to the extent permitted by the Merger
Agreement if, (i) at the expiration of the Offer, a number of shares of Company
Common Stock which, together with any Shares owned, directly or indirectly, by
Parent or Purchaser (including the shares of Company Common Stock to be acquired
pursuant to the Holding Co. Merger and Woodbank Merger), constitutes more than
50% of the voting power (determined on a fully-diluted basis), on the date of
purchase, of all the securities of the Company entitled to vote generally in the
election of directors or in a merger shall not have been validly tendered and
not properly withdrawn prior to the expiration of the Offer, the ("Minimum
Condition") or (ii) at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment of Shares, any of the following conditions
occurs or has occurred:
(a) there shall have been entered any order, preliminary or
permanent injunction, decree, judgment or ruling in any action or
proceeding before any court or governmental, administrative or
regulatory authority or agency, or any statute, rule or regulation
enacted, entered, enforced, promulgated, amended or issued that is
applicable to Parent, Purchaser, the Company or any subsidiary or
affiliate of Purchaser or the Company or the Offer or the Merger, by
any legislative body, court, government or governmental, administrative
or regulatory authority or agency that is reasonably likely to have the
effect of: (i) making illegal or otherwise directly or indirectly
restraining or prohibiting the making of the Offer in accordance with
the terms of the Merger Agreement, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates or the consummation of the Merger; (ii) prohibiting the
ownership or operation of the Company and its subsidiaries by Parent or
any of Parent's subsidiaries, (iii) imposing limitations on the ability
of Parent, Purchaser or any of Parent's affiliates effectively to
acquire or hold or to exercise full rights of ownership of the Shares,
including without limitation the right to vote any Shares acquired or
owned by Parent or Purchaser or any of its affiliates on all matters
properly presented to the stockholders of the Company, including
without limitation the adoption of the Merger Agreement or the right to
vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (iv) requiring divestiture by
Parent or Purchaser or any of their affiliates of any Shares; provided,
that prior to invoking this condition each party agrees to comply with
Section 6.10.
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(b) there shall have occurred any event that is reasonably
likely to have a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices (other than suspensions or
limitations triggered on the New York Stock Exchange by price
fluctuations on a trading day) for, securities on any national
securities exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
a commencement of a war or material armed hostilities or other material
national calamity directly involving the United States or materially
adversely affecting the consummation of the Offer or (v) in the case of
any of the foregoing existing at the time of commencement of the Offer,
a material acceleration or worsening thereof;
(d) (A) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Purchaser the approval or recommendation of the Offer, the Merger or
the Merger Agreement, or approved or recommended any takeover proposal
or any other acquisition of Shares other than the Offer, (B) any such
person or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or a merger, consolidation or other
business combination with or involving the Company or any of its
subsidiaries, or (C) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified by reference to a
Material Adverse Effect shall not be true and correct, or any such
representations and warranties that are not so qualified shall not be
true and correct in any respect that is reasonably likely to have a
Material Adverse Effect, in each case as if such representations and
warranties were made at the time of such determination;
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated with
the consent of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer or the Merger shall not have
expired or been terminated; or
(i) each of the Holding Co. Merger and the Woodbank Merger
shall not have been consummated in accordance with the terms of the
Holding Co. Merger Agreement and the Woodbank Merger Agreement,
respectively;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (except for any
action or inaction by Purchaser or
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any of its affiliates constituting a breach of the Merger Agreement) giving rise
to any such condition, makes it inadvisable to proceed with the Offer or with
such acceptance for payment of or payment for Shares or to proceed with the
Merger.
The foregoing conditions are for the sole benefit of Purchaser
and may be asserted by Purchaser regardless of the circumstances giving rise to
any such condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or (other than the
Minimum Condition) may be waived by Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
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