EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
by and among
HFS INCORPORATED,
HJ ACQUISITION CORP.
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INC.
dated as of
November 19, 1997
Defined Term Section No.
Index of Defined Terms
Defined Term Section No.
Agreement.................................................... Recitals
Acquisition Proposal.......................................... 5.4
Appointment Date.............................................. 5.1
Benefit Plans................................................. 3.9(a)
Bylaws........................................................ 1.4
Articles of Incorporation..................................... 1.4
Certificates.................................................. 2.2(b)
Chief Scientist............................................... 3.10(p)
Closing....................................................... 1.6
Closing Date.................................................. 1.6
Code.......................................................... 3.9(a)
Company....................................................... Recitals
Company Agreements............................................ 3.4
Company Options............................................... 2.5(b)
Company SEC Documents......................................... 3.5
Confidentiality Agreement..................................... 5.2
Copyrights.................................................... 3.12(l)
Dissenting Shareholders....................................... 2.1(c)
D&O Insurance................................................. 5.10(b)
Effective Time................................................ 1.5
Encumbrances.................................................. 3.2(b)
ERISA.......................................................... 3.9(a)
ERISA Affiliate............................................... 3.9(a)
Exchange Act.................................................. 1.1(a)
Financial Statements.......................................... 3.5
GAAP.......................................................... 3.5
Governmental Entity........................................... 3.4
HSR Act....................................................... 3.4
Indemnified Party............................................. 5.9(a)
Intellectual Property......................................... 3.12
Licenses...................................................... 3.12(l)
Mask Works.................................................... 3.12(l)
Merger........................................................ 1.4
Merger Consideration.......................................... 2.1(c)
Minimum Condition............................................. 1.1(a)
Offer......................................................... 1.1(a)
Offer Documents............................................... 1.1(b)
Offer Price................................................... 1.1(a)
Offer to Purchase............................................. 1.1(a)
Option Exchange Ratio......................................... 2.5(a)
Option Plan................................................... 2.5(a)
Parent........................................................ Recitals
Defined Term Section No.
Parent Common Stock............................................ 2.5(a)
Parent Option.................................................. 2.5(a)
Parent Option Plan............................................. 2.5(a)
Patents........................................................ 3.12(l)
Paying Agent................................................... 2.2(a)
Preferred Stock................................................ 3.2(a)
Proxy Statement................................................ 1.8(a)
Purchaser...................................................... Recitals
Purchaser Common Stock......................................... 2.1
Schedule 14D-1................................................. 1.1(b)
Schedule 14D-9................................................. 1.2(b)
SEC............................................................ 1.1(b)
SEC Documents.................................................. 3.5
Secretary of State............................................. 1.5
Securities Act................................................. 3.5
Service........................................................ 3.9(g)
Shares......................................................... 1.1(a)
Special Meeting................................................ 1.8(a)
Stockholder Agreement.......................................... 1.2(a)
Subsidiary..................................................... 3.1
Surviving Corporation.......................................... 1.4
Taxes.......................................................... 3.10(r)
Tax Return.................................................... . 3.10(r)
Trademarks.................................................... . 3.12(l)
Transactions................................................... 1.2(a)
Unvested Company Option........................................ 2.5(a)
Vested Company Option.......................................... 2.5(b)
Voting Debt.................................................... 3.2(a)
TABLE OF CONTENTS
ARTICLE I THE OFFER AND MERGER................................
Section 1.1 The Offer...........................................
Section 1.2 Company Actions.....................................
Section 1.3 Directors...........................................
Section 1.4 The Merger..........................................
Section 1.5 Effective Time......................................
Section 1.6 Closing.............................................
Section 1.7 Directors and Officers of the
Surviving Corporation...............................
Section 1.8 Shareholders' Meeting...............................
Section 1.9 Merger Without Meeting of Shareholders..............
ARTICLE II CONVERSION OF SECURITIES............................
Section 2.1 Conversion of Capital Stock.........................
Section 2.2 Exchange of Certificates............................
Section 2.3 Transfer of Shares After the
Effective Time......................................
Section 2.4 Company Plans.......................................
Section 2.5 Certain Adjustments.................................
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......
Section 3.1 Organization........................................
Section 3.2 Capitalization......................................
Section 3.3 Authorization; Validity of Agreement;
Company Action......................................
Section 3.4 Consents and Approvals; No Violations...............
Section 3.5 SEC Reports and Financial Statements................
Section 3.6 Absence of Certain Changes..........................
Section 3.7 No Undisclosed Liabilities..........................
Section 3.8 Litigation..........................................
Section 3.9 Employee Benefit Plans; ERISA.......................
Section 3.10 Tax Matters.........................................
Section 3.11 Title and Condition of Properties...................
Section 3.12 Intellectual Property...............................
Section 3.13 Compliance with Laws................................
Section 3.14 Contracts...........................................
Section 3.15 Relationships with Franchisees......................
Section 3.16 Potential Conflicts of Interest.....................
Section 3.17 Information in Proxy Statement......................
Section 3.18 Opinion of Financial Advisor........................
Section 3.19 Brokers or Finders..................................
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER..........
Section 4.1 Organization........................................
Section 4.2 Authorization; Validity of Agreement;
8
Necessary Action....................................
Section 4.3 Consents and Approvals; No Violations...............
Section 4.4 Information in Proxy Statement......................
Section 4.5 Sec Reports and Financial Statements...............
ARTICLE V COVENANTS...........................................
Section 5.1 Interim Operations of the Company...................
Section 5.2 Access; Confidentiality.............................
Section 5.3 Consents and Approvals..............................
Section 5.4 No Solicitation.....................................
Section 5.5 Additional Agreements...............................
Section 5.6 Publicity...........................................
Section 5.7 Notification of Certain Matters.....................
Section 5.8 Directors' and Officers' Insurance and
Indemnification.....................................
ARTICLE VI CONDITIONS.........................................
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger...............................
Section 6.2 Conditions to Parent's and the Purchaser's
Obligations to Effect the Merger....................
ARTICLE VII TERMINATION.........................................
Section 7.1 Termination.........................................
Section 7.2 Effect of Termination..............................
ARTICLE VIII MISCELLANEOUS......................................
Section 8.1 Fees and Expenses...................................
Section 8.2 Amendment and Modification.........................
Section 8.3 Nonsurvival of Representations and
Warranties..........................................
Section 8.4 Notices.............................................
Section 8.5 Interpretation......................................
Section 8.6 Counterparts........................................
Section 8.7 Entire Agreement; No Third Party
Beneficiaries.......................................
Section 8.8 Severability........................................
Section 8.9 Governing Law.......................................
Section 8.10 Assignment..........................................
Section 8.11 Company's Knowledge.................................
Certain Conditions of the Offer.........................................Annex A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated as of November 19, 1997, by and among HFS Incorporated, a
Delaware corpo ration ("Parent"), JH Acquisition Corp., a Virginia corporation
and a wholly owned subsidiary of Parent (the "Purchaser"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Inc., a Virginia corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, Purchaser
and the Company has approved, and deems it advisable and in the best interests
of its respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to Parent and the Purchaser to enter into this Agreement,
the Company has entered into a Stock Option Agreement with Parent and the
Purchaser (the "Stock Option Agreement"), pursuant to which the Company has
granted to the Purchaser an option to purchase Shares (as hereinafter defined)
upon the terms and subject to the conditions set forth in the Stock Option
Agreement;
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to Parent and the Purchaser to enter into this Agreement,
certain shareholders of the Company have entered into a Shareholder Agreement,
dated as of the date hereof (the "Shareholder Agreement"), among Parent, the
Purchaser and the shareholders named therein providing, among other things, that
each such shareholder will tender its Shares pursuant to the Offer (as
hereinafter defined), will vote in favor of the Merger, and will grant a proxy
to Parent for that purpose;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1 The Offer.
(a) As promptly as practicable (but in no event
later than five business days after the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender
offer (the "Offer") for all of the outstanding shares of Common Stock, par value
$.02 per share (the "Shares"), of the Company at a price of $68.00 per Share,
net to the seller in cash (such price, or such other price per Share as may be
paid in the Offer, being referred to herein as the "Offer Price"), subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, that number of Shares which represents more than two-thirds of the Shares
outstanding on a fully diluted basis (without giving effect to any Shares
issuable pursuant to the Stock Option Agreement) (the "Minimum Condition") and
to the other conditions set forth in Annex A hereto. The obligations of the
Purchaser to commence the Offer and to accept for payment and to pay for any
Shares validly tendered on or prior to the expiration of the Offer and not
withdrawn shall be sub ject only to the Minimum Condition and the other
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement, the Minimum Condition and the other conditions set forth in
Annex A here to. The Purchaser shall not decrease the Offer Price or decrease
the number of Shares sought, or amend any other condition of the Offer in any
manner adverse to the holders of the Shares (other than with respect to
insignificant changes or amendments and subject to the last sentence of this
Section 1.1(a)) without the written consent of the Company (such consent to be
authorized by the Board of Directors of the Company or a duly authorized
committee thereof); provided, however, that if on the initial scheduled
expiration date of the Offer which shall be January 5, 1998 and which may not be
accelerated without the Company's prior written approval, all conditions to the
Offer shall not have been satisfied or waived, the Purchaser may, from time to
time, in its sole discretion, extend the expiration date for one or more periods
not to exceed an aggregate of 40 business days. The Pur chaser shall, on the
terms and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and pay for Shares tendered as soon as it is legally
permitted to do so under applicable law as long as such date is on or after
January 5, 1998; provided, however, that if, immediately prior to the initial
expiration date of the Offer (as it may be extended), the Shares tendered and
not withdrawn pursuant to the Offer equal less than 90% of the outstanding
Shares, the Purchaser may extend the Offer for one or more periods not to exceed
an aggregate of thirty business days, notwithstanding that all conditions to the
Offer are satisfied as of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer
is comenced, Parent and the Purchaser shall file with the United States
Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer (together with all amend ments and
supplements thereto and including the exhibits thereto, the "Schedule 14D-1").
Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of
letter of transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not mis leading, except
that no representation is made by Parent or the Purchaser with respect to
information furnished by the Company for inclusion in the Offer Documents. The
information supplied in writing by the Company for inclusion in the Offer
Documents and by Parent or the Purchaser for inclusion in the Schedule 14D-9 (as
hereinafter defined) will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not mislead ing. Each of Parent and the Purchaser will take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, will promptly
correct any information provided by it for use in the Offer Documents if and to
the extent that it shall have become false and misleading in any material
respect and the Purchaser will take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is filed with the SEC. In
addition, Parent and the Purchaser will provide the Company and its counsel in
writing with any comments, whether written or oral, Parent, the Purchaser or
their counsel may receive from time to time from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such com ments.
Section 2 Company Actions.
(a) The Company hereby approves of and consents
to the Offer and represents that the Board of Directors, at a meeting duly
called and held, has (i) unanimously deter mined that each of the Agreement, the
Offer and the Merger (as defined in Section 1.4) are fair to and in the best
interests of the shareholders of the Company, (ii) approved this Agreement, the
Stock Option Agreement, the Shareholders Agreement, and the transactions
contemplated hereby and thereby, including the Offer and the Merger
(collectively, the "Transactions"), and such approval constitutes approval of
the Offer, the Stock Option, this Agreement, the Stock Option Agreement, the
Shareholders Agreement and the Transactions, for purposes of Sections 13.1-727
and Sections 13.1-728.1 et seq. of the Virginia Stock Corporation Act (the
"VSCA") (iii) resolved to recommend that the shareholders of the Company accept
the Offer, tender their Shares thereunder to the Purchas er and approve and
adopt this Agreement and the Merger; provided, that such recommendation may be
withdrawn, modified or amended if, in the opinion of the Board of Directors,
only after receipt of (x) a written opinion from the Company's investment
banking firm that the Acquisition Proposal (as defined in Section 5.4(a)) is
superior, from a financial point of view, to the Offer and the Merger
and (y) advice from independent legal counsel to the Company to the effect that
the failure to with draw, modify or amend such recommendation would be likely to
result in the Board of Directors violating its fiduciary duties to the Company's
shareholders under applicable law. The Company represents that the actions set
forth in this Section 1.2(a) and all other actions it has taken in connection
therewith are sufficient to render the relevant provisions of Sections
13.1-725.1, 13.1-726 and 13.1-728.3 of the VSCA inapplicable to the
Transactions.
(b) Concurrently with the commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-9") which shall,
subject to the provisions of Section 5.4(b), contain the recommendation referred
to in clause (iii) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's shareholders, shall not contain any untrue state ment of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or the Purchaser for inclusion in the Schedule 14D-9. The Company further
agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. Each of the Company,
on the one hand, and Parent and the Purchaser, on the other hand, agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that it shall have become false and 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 to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given the opportunity to review the Schedule 14D-9 before it is filed with the
SEC. In addition, the Company agrees to provide Parent, the Purchaser and their
counsel with any comments, whether written or oral, that the Compa ny or its
counsel may receive from time to time from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments or other
communications.
(c) In connection with the Offer, the Company
will promptly furnish or cause to be furnished to the Purchaser mailing labels,
security position listings and any available listing or computer file containing
the names and addresses of all recordholders of the Shares as of a recent date,
and shall furnish the Purchaser with such additional information (including, but
not limited to, updated lists of holders of the Shares and their addresses,
mailing labels and lists of security positions) and assistance as the Purchaser
or its agents may reasonably request in communi cating the Offer to the record
and beneficial holders of the Shares. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or
representatives.
Section 3 Directors. Promptly upon the purchase of and payment
for any Shares by Parent or any of its subsidiaries which represents at least
two-thirds of the outstanding Shares (on a fully diluted basis), Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors on such Board (giving effect to the directors
designated by Parent pursuant to this sentence) multiplied by the percentage
that the number of Shares so accepted for payment bears to the total number of
Shares then outstanding. In furtherance thereof, the Company shall, upon request
of the Purchaser, use its best efforts promptly to secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elect ed to the Company's Board, and shall take all actions
available to the Company to cause Parent's designees to be so elected. At such
time, the Company shall also cause persons designated by Parent to constitute at
least the same percentage (rounded up to the next whole number) as is on the
Company's Board of Directors of (i) each committee of the Company's Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary (as
defined in Section 3.1) of the Company and (iii) each committee (or similar
body) of each such board. The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 1.3, including
mailing to shareholders the information required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's designees to be elected to the
Company's Board of Directors. Parent or the Purchaser will supply the Company
any information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.3 are in addition to and shall not limit any rights
which the Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
Section 4 The Merger. Subject to the terms and conditions of
this Agreement and in accordance with the applicable provisions of the VSCA, at
the Effective Time (as defined in Section 1.5), the Company and the Purchaser
shall consummate a merger (the "Merger") pursuant to which (a) the Purchaser
shall be merged with and into the Company and the separate corporate existence
of the Purchaser shall thereupon cease, (b) the Company shall be the successor
or surviv ing corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Virginia, and (c) the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in this Section 1.4.
Pursuant to the Merger, (x) the Articles of Incorporation of the Purchaser (the
"Articles of Incorporation"), as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation, and
(y) the Bylaws of the Purchaser (the "Bylaws"), as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, by the Articles of Incorporation or by
such Bylaws. The Merger shall have the effects specified in the VSCA.
Section 5 Effective Time. On the date of the Closing (as
defined in Section 1.6) (or on such other date as Parent and the Company may
agree) Parent, the Purchaser and the Company will cause Articles of Merger with
respect to the Merger to be executed and filed with the Virginia State
Corporation Commission as provided in the VSCA. The Merger shall become
effective upon the issuance by the State Corporation Commission of a certificate
of merger, such time being hereinafter referred to as the "Effective Time".
Section 1.6 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.7 Directors and Officers of the Surviving
Corporation. The directors and officers of the Purchaser at the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Articles of Incorporation and the
Bylaws.
Section 1.8 Shareholders' Meeting.
(a) If required by applicable law in order to
consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Special Meeting") as promptly
as practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use its best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy Statement
(as here inafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement, including any amendment or supplement thereto
(the "Proxy Statement") to be mailed to its shareholders, provided that
no amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel and (y) to
obtain the necessary approvals of the Merger and this Agreement by its
shareholders; and
(iii) subject to the provisions of Section 5.4(b),
include in the Proxy Statement the recommendation of the Board that shareholders
of the Company vote in favor
of the approval of the Merger and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all
of the Shares then owned by it, the Purchaser or any of its other subsidiaries
and affiliates in favor of the approval of the Merger and the adoption of this
Agreement.
Section 1.9 Merger Without Meeting of Shareholders.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser or
any other subsidiary of Parent shall acquire at least 90% of the outstanding
shares of each class of capital stock of the Company, pursuant to the Offer or
otherwise, the parties hereto shall, at the request of Parent and subject to
Article VI hereof, take all necessary and appropriate action to cause the Merger
to become effective as soon as prac ticable after such acquisition, without a
meeting of shareholders of the Company, in accordance with Section 13.1-719 of
the VSCA.
ARTICLE II
CONVERSION OF SECURITIES
Section 1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or holders of common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and
outstanding share of the Purchaser Common Stock shall be converted into and
become one fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent
-Owned Stock. All Shares that are owned by the Company as treasury stock and any
Shares owned by Parent, the Purchaser or any other wholly owned Subsidiary of
Parent shall be cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and
outstanding Share (other than Shares to be cancelled in accordance with Section
2.1(b)) shall be converted into the right to receive the Offer Price, payable to
the holder thereof, without interest (the "Merger Consideration"), upon
surrender of the certificate formerly representing such Share in the manner
provided in Section 2.2. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest.
Section 2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank
or trust company to act as agent for the holders of the Shares in connection
with the Merger (the "Paying Agent") to receive the funds to which holders of
the Shares shall become entitled pursuant to Section 2.1(c). Such funds shall be
invested by the Paying Agent as directed by Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail to each holder
of record of a certificate or certificates, which immediately prior to the
Effective Time represented outstanding Shares (the "Certificates"), whose Shares
were converted pursuant to Section 2.1 into the right to receive the Merger
Consid eration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, 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 the Certificate so surrendered shall forthwith be
cancelled. 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. Until surrendered as contemplated by
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights
in the Shares. 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 the Shares on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of the 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. If, after the Effective Time, Certifi ▇▇▇▇▇ are presented to
the Surviving Corporation for any reason, they shall be cancelled and ex changed
as provided in this Article II.
(d) Termination of Fund; No Liability. 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, without any interest thereon.
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.
Section 3 Transfer of Shares After the Effective Time. No
transfer of Shares shall be made on the stock transfer books of the Surviving
Corporation at or after the Effective Time.
Section 4 Company Plans.
(a) Except with respect to any Roll-Over Option (as
defined in Section 2.4(b), the Company shall take such actions as are
appropriate to provide that, immediately prior to the Effective Time, (i) all
options ("Company Options") outstanding under any of the Company's 1994 Long
Term Incentive Plan and the Non-Employee Director Stock Option Plan (together,
the "Option Plans"), whether or not then exercisable or vested, shall become
fully exercisable and vested, (ii) each Company Option that is then outstanding
shall be cancelled and (iii) in consid eration of such cancellation and in full
satisfaction of all rights of the holder under the Company Options, Parent shall
pay, or shall cause the Purchaser to pay, at the Effective Time, to the holder
of each Company Option an amount in cash in respect thereof equal to the product
of (A) the excess of the Merger Consideration over the exercise price per Share
of such Company Option, multiplied by (B) the number of Shares subject to such
Company Option (such payment to be net of applicable withholding taxes).
(b) With respect to each Company Option (a "Roll
-Over Option") as to which the holder thereof, no later than five days prior to
the Effective Time, shall have delivered to Parent his or her written election
to have such Roll-Over Options treated as provided in this Section 2.4(b),
Parent and the Company shall, effective as of the Effective Time, cause each
outstanding Roll-Over Option to be assumed by Parent and converted into a fully
vested option (or a new substi tute option shall be granted) (a "Parent
Option"), exercisable throughout the period specified in the original option
award agreement, to purchase shares of common stock, par value $.01 per share,
of Parent ("Parent Common Stock") issued under and pursuant to the terms and
conditions of Parent's 1993 Amended and Restated Stock Option Plan (or such
surviving plan as may result from the antic ipated merger of Parent with and
into CUC International Inc. ("CUC") pursuant to the Agreement and Plan of
Merger, dated as of May 27, 1997, between CUC and Parent), or any other similar
stock option plan of Parent adopted specifically for employees of the Company in
order to issue Parent Options as provided in this Section 2.4(b) (the "Parent
Option Plan"). The parties agree that (i) the number of shares of Parent Common
Stock subject to such Parent Option will be determined by multiplying the number
of Shares subject to the Roll-Over Option to be cancelled by the Option Exchange
Ratio (as hereinafter defined), rounding any fractional share down to the
nearest whole share, and (ii) the exercise price per share of such Parent Option
will be determined by dividing the exercise price per share under the Roll-Over
Option in effect immediately prior to the Effective
Time by the Option Exchange Ratio, and rounding the exercise price thus
determined up to the nearest whole cent, subject to appropriate adjustments for
stock splits and other similar events. Except as provided above, the converted
or substituted Parent Options shall be subject to the same terms and conditions
(including, without limitation, expiration date, vesting and exercise
provisions) as were applicable to the Roll-Over Options immediately prior to the
Effective Time. The Company and Parent shall take all necessary action to
facilitate and effect the substitution described in this Section 2.4(b). For
purposes of this Agreement, the "Option Exchange Ratio" shall be (x) the Offer
Price divided by (y) the average of the closing prices of the Parent Common
Stock on the New York Stock Exchange during the five trading days preceding the
fifth trading day prior to the Closing Date.
(c) Except as may be otherwise agreed to by
Parent or the Purchaser and the Company, the Option Plans shall terminate as of
the Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its Subsidiaries shall be deleted as of
the Effec tive Time and no holder of Company Options or any participant in the
Option Plans or any other plans, programs or arrangements shall have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof.
Section 5 Certain Adjustments. If after the date hereof and on
or prior to the Effective Time the Shares shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, or
any similar event shall occur (any such action, an "Adjustment Event"), the
terms of this Agree ment shall be adjusted accordingly, to provide to the
holders of such Shares the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend or similar event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the
Purchaser that all of the statements contained in this Article III are true and
correct as of the date of this Agreement (or, if made as of a specified date, as
of such date), except as set forth in the applicable section of the schedule
attached to this Agreement (the "Company Disclosure Schedule") or as
specifically set forth in the Company SEC Documents (as defined in Section 3.5)
that are listed on Schedule B of the Company Disclosure Schedule.
Section 1 Organization. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. As used in this Agreement, the term
"Subsidiary" shall mean all corporations or other entities in which the Company
or the Parent, as the case may be, owns a majority of the issued and outstanding
capital stock or similar interests. As used in this Agreement, any reference to
any event, change or effect being material or having a material adverse effect
on or with respect to any entity (or group of entities taken as a whole) means
such event, change or effect as is materially adverse to (i) the consolidated
financial condition, businesses, results of operations or prospects of such
entity (or, if used with respect there to, of such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to consummate the
transactions contemplated hereby. The Company and each of its Subsidiaries is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the prop erty owned, leased or operated by it or the
nature of the business conducted by it makes such quali fication or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not individually or in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Except as set
forth on Section 3.1 of the Company Disclosure Schedule, the Company does not
own, directly or indirectly, (i) any equity interest in any corporation or other
entity or (ii) marketable securities.
Section 2 Capitalization. (a) The authorized capital stock of
the Company consists of 30 million Shares and 1 million shares of preferred
stock, without par value (the "Preferred Stock"). As of the date hereof, (i)
6,664,982 Shares are issued and outstanding, (ii) no Shares are issued and held
in the treasury of the Company, (iii) no shares of Preferred Stock are issued
and outstanding, and (iv) 440,984 Shares are reserved for issuance upon exercise
of Company Options under the Option Plans. All the outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Company Options will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth on Section 3.2 of the Company Disclosure
Schedule, there are no bonds, debentures, notes or other indebtedness having
general voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except for (x) the warrants to purchase 10,000 Shares (the
"Warrants") issued pursuant to the Warrant Purchase Agreement, dated as of June
7, 1996 between the Company and NationsBank, N.A., (y) the 440,984 Company
Options, and (z) the transactions contemplated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding (ii) there are no existing options, warrants, calls,
preemptive rights, subscriptions 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, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment
and (iii) there are no outstanding contractual obligations of the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares, or
the capital stock of the Company, or any Subsidiary or affiliate of the Company
or to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
(b) Except as set forth on Section 3.2(b) of the
Company Disclosure Schedule, all of the outstanding shares of capital stock of
each of the Subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, claims or encumbrances ("Encumbrances").
(c) Except for the Shareholders Agreement, there
are no voting trusts or other agreements or understandings to which the Company
or any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries.
Section 3 Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Company of this Agreement and the
Stock Option Agreement, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by its Board of
Directors and, except for obtaining the approval of more than two-thirds of its
shareholders of the Merger Agreement in accordance with Section 13.1-718 of the
VSCA as contemplated by Section 1.8 here of, no other corporate action on the
part of the Company is necessary to authorize the execution and delivery by the
Company of this Agreement or the Stock Option Agreement and the consummation by
it of the transactions contemplated hereby and thereby. Each of this Agreement
and the Stock Option Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery hereof
and thereof by Parent and the Purchaser, is a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) The Board of Directors of the Company has
duly and validly unanimously approved the Transactions, including the Stock
Option, the Offer, the acquisition of Shares pursuant to the Offer, the
Shareholders Agreement and the Merger, for the purposes of Article 14 and
Article 14.1 of the VSCA such that the provisions of Article 14 and Article 14.1
of the VSCA will not apply to the transactions contemplated by this Agreement,
such approval occurring prior to the time the Purchaser became an "interested
shareholder", as that term is defined in Section 13.1-725 of the VSCA.
Section 4 Consents and Approvals; No Violations.
Except for the filings set forth in Section 3.4 of the Company Disclosure
Schedule and the filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), state securities or blue sky laws, and
the VSCA, none of the execution, delivery or perfor ▇▇▇▇▇ of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will (i)
con flict with or result in any breach of any provision of the Articles of
Incorporation, the Bylaws or similar organizational documents of the Company or
of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Gov ernmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, inden ture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
(the "Company Agreements") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, other than, in the case of clause (iii),
for such violations, breaches or defaults that individually or in the aggregate
would not (x) have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or (y) reasonably be expected to impair the
ability of the Company to perform its obligations under this Agreement. The
affirmative vote of the holders of more than two-thirds of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
Section 5 SEC Reports and Financial Statements. The Company
has filed with the SEC, and has heretofore made available to Parent, true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since April 30, 1995 under the Exchange Act
or the Securities Act of 1933, as amended (the "Securities Act") (as such
documents have been amended since the time of their filing, collectively, the
"Company SEC Docu ments"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. None of the
Company's Subsidiaries is required to file any forms, reports or other documents
with the SEC. The financial statements of the Company included in the Company
SEC Documents (the "Financial Statements") have been pre pared from, and are in
accordance with, the books and records of the Company and its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") (except in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of the Company and
its consolidated Subsidiaries as of the times and for the periods referred to
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 6 Absence of Certain Changes. Except as disclosed in
Section 3.6 of the Company Disclosure Schedule, and except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since April 30, 1997, the Company and its Subsidiaries have conducted
their respective businesses only in the ordi nary and usual course and (i) there
have not occurred any events or changes (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having or reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and (ii) the Company has not taken any action which would have been prohibited
under Section 5.1 hereof.
Section 7 No Undisclosed Liabilities. Except (a) as disclosed
in the Financial Statements and (b) for liabilities and obligations (x) incurred
in the ordinary course of business and consistent with past practice (y)
pursuant to the terms of this Agreement or (z) as set forth in Section 3.7 of
the Company Disclosure Schedule, since April 30, 1997 neither the Company nor
any of its Subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, con tingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or would be required by GAAP to be reflected on
a consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto).
Section 8 Litigation. (a) Except as set forth in Section 3.8
of the Company Disclosure Schedule, as of the date hereof, there are no suits,
claims, actions, proceedings, including, without limitation, arbitration
proceedings or alternative dispute resolution proceedings, or investi gations
pending or, to the Company's knowledge, threatened against the Company or any of
its Sub sidiaries before any Governmental Entity. Except as disclosed in Section
3.8 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree.
(b) Except as set forth in Section 3.8 of the Company
Disclosure Schedule, there are no suits, claims, actions, proceedings,
including, without limitation, arbitration proceedings or alternative dispute
resolution proceedings, or investigations pending, or to the Company's
knowledge, threatened against the Company or any of its Subsidiaries, or, to the
knowledge of the Company, any person acting as an agent or franchisee of the
Company, before any Governmental Entity, relating to any claims of unlawful
discrimination by any customers, potential customers, franchisees, potential
franchisees, employees or potential employees or others.
Section 9 Employee Benefit Plans; ERISA.
(a) Section 3.9(a) of the Company Disclosure
Schedule sets forth a true and complete list (or, in the case of an unwritten
plan, a description) of all material employee benefit plans, arrangements,
contracts or agreements (including employment agreements, severance agree ments
and managers' insurance plans) of any type, statutory or otherwise, (including
but not limited to plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained by the Company,
any of its Subsidiaries or any trade or business, whether or not incorporated
(an "ERISA Affiliate"), which together with the Company would be deemed a
"single employer" within the meaning of Section 414(b), 414(c) or 414(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), or the regulations,
issued under Section 414(o) of the Code ("Benefit Plans").
(b) With respect to each Benefit Plan: (i) if
intended to qualify under Section 401(a) of the Code, such plan so qualifies,
and its trust is exempt from taxation under Section 501(a) of the Code, no
condition exists that would reasonably be expected to affect such qualification,
and except as set forth on Section 3.9(b) of the Company Disclosure Schedule,
there have been no amendments to any such Benefit Plan which are not the subject
of a favorable deter mination letter; (ii) such plan has been administered in
all material respects in accordance with its terms and U.S. federal, state or
local, statutes, orders or governmental rules or regulations, including but not
limited to ERISA and the Code, no notice has been issued by any Governmental
Entity ques tioning or challenging such compliance, and no condition exists that
would be expected to affect such compliance; (iii) no breaches of fiduciary duty
have occurred which might reasonably be ex pected to give rise to material
liability on the part of the Company; (iv) no disputes are pending, or, to the
Company's knowledge, threatened that might reasonably be expected to give rise
to material liability on the part of the Company; (v) no prohibited transaction
(within the meaning of Section 406 of ERISA) has occurred that would give rise
to material liability on the part of the Company, any ERISA Affiliate or any of
their employees, shareholders or directors; and (vi) all contributions and
premiums due as of the date hereof in respect of any Benefit Plan (taking into
account any extensions for such contributions and premiums) have been made in
full or accrued on the Company's balance sheet forming part of the Financial
Statements.
(c) Except as set forth in Section 3.9(c) of the
Company Disclosure Schedule, neither the Company nor any ERISA Affiliate (i) has
incurred an accumulated funding deficiency, as defined in the Code and ERISA, or
(ii) has incurred any material liability under Title IV of ERISA with respect to
any employee benefit plan that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a
"welfare plan" (as defined in section 3(1) of ERISA), except as disclosed in
Section 3.9(d) of the Company Disclosure Schedule, no such plan provides medical
or death benefits with respect to current or former employ ees of the Company or
any of its Subsidiaries beyond their termination of employment, other than as
required by law.
(e) Except as set forth in Section 3.9(e) of the
Company Disclosure Schedule, neither the execution of this Agreement nor the
consummation of the transactions contem plated hereby will (i) entitle any
individual to severance pay or accelerate the time of payment or vesting, or
increase the amount, of compensation or benefits due to any individual.
(f) There is no Benefit Plan that is a "multiemp
▇▇▇▇▇ plan," as such term is defined in Section 3(37) of ERISA.
(g) With respect to each Benefit Plan, the
Company has previously delivered to Parent or its representatives accurate and
complete copies of all plan documents, summary plan descriptions, summary of
material modifications, trust agreements and other related agreements, including
all amendments to the foregoing; the most recent annual report; the annual and
periodic accounting of plan assets in respect of the two most recent plan years;
the most recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the actuarial valuation, to the extent any
of the foregoing may be applicable to a particular Benefit Plan, in respect of
the two most recent plan years.
Section 10 Tax Matters.
(a) Except as set forth in Section 3.10(a) of the
Fompany is or may be subject to taxation by that jurisdiction.
(b) Neither the Company nor any of its
Subsidiaries has violated any applicable law of any jurisdiction relating to the
payment and withholding of Taxes, including, without limitation, (x) withholding
of Taxes pursuant to Sections 1441 and 1442 of the Code and (y) withholding of
Taxes in respect of amounts paid or owing to any employee, creditor, independent
contractor, or other third party. The Company and each of its Subsidiaries have,
in the manner pre scribed by law, withheld and paid when due all Taxes required
to have been withheld and paid under all applicable laws.
(c) There are no Encumbrances upon the Shares or
any of the assets or properties of the Company or any of its Subsidiaries that
arose in connection with any failure (or al leged failure) to pay any Tax when
due.
(d) Except as set forth in Section 3.10(d) of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has waived any statute of limitations in any jurisdiction in respect of Taxes or
Tax Returns or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) Except as set forth in Section 3.10(e) of
the Company Disclosure Schedule, no federal, state, local or foreign audits,
examinations or other administrative proceedings have been commenced or are
pending with regard to any Taxes or Tax Returns of the Company or of any of its
Subsidiaries. No notification has been received by the Company or by any of its
Subsidiaries that such an audit, examination or other proceeding is pending or
threatened with respect to any Taxes due from or with respect to or attributable
to the Company or any of its Subsidiaries or any Tax Return filed by or with
respect to the Company or any of its Subsidiaries.
(f) During their most recent five taxable years
respectively, neither the Company nor any of its Subsidiaries has made a change
in accounting methods (nor has any taxing authority proposed in writing any such
adjustment or change of accounting method), received a ruling from any taxing
authority or signed an agreement with any taxing authority which could have a
material adverse effect on the Company or any of its Subsidiaries, or has
entered into any closing or similar agreement with any taxing authority.
(g) Neither the Company nor any of its
Subsidiaries is a party to, is bound by or has any obligation under any Tax
sharing agreement, Tax indemnification agreement or similar contract or
arrangement.
(h) No power of attorney with respect to any
matter relating to Taxes or Tax Returns has been granted by or with respect to
the Company or any of its Subsidiaries.
(i) Neither the Company nor any of its
Subsidiaries is a party to any agreement, plan, contract or arrangement that
could result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code or the
payment of any amount that is not deductible by reason of Section 162(m) of the
Code.
(j) Neither the Company nor any of its
Subsidiaries has filed a consent pursuant to Section 341(f) of the Code (or any
predecessor provision) concerning collapsible corporations, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a "subsection (f)
asset" (as such term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries.
(k) None of the Subsidiaries of the Company is a
controlled foreign corporation within the meaning of Section 957 of the Code or
a passive foreign investment company within the meaning of Section 1296 of the
Code.
(l) The Company has delivered to Parent complete
and accurate copies of each of: (A) all audit, examination and similar reports
and all letter rulings and technical advice memoranda relating to United States
federal, state, local, and foreign Taxes due from or with respect to the Company
and its Subsidiaries; (B) all United States federal, state and local, and
foreign Tax Returns, Tax examination reports and similar documents filed by the
Company and its Subsidiaries; and (C) all closing agreements entered into by the
Company and its Subsidiaries with any taxing authority and all statements of Tax
deficiencies assessed against or agreed to by the Company and its Subsidiaries.
The Company will deliver to the Purchaser all materials with respect to the fore
going for all matters arising after the date hereof.
(m) As used in this Agreement, the following
terms shall have the following meanings:
(i) "Tax" or "Taxes" shall mean all taxes, charges,
fees, duties, levies, penalties or other assessments imposed by any
federal, state, local or foreign governmental authority, including, but
not limited to, income, gross receipts, excise, property, sales, gain,
use, license, custom duty, unemployment, capital stock, transfer,
franchise, payroll, with holding, social security, minimum estimated,
and other taxes, and shall include interest, penalties or additions
attributable thereto; and
(ii) "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating
to Taxes, including any schedule or at tachment thereto, and including
any amendment thereof.
Section 11 Title and Condition of Properties. Except as set
forth on Section 3.11 of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries own any real property. The Company and its
Subsidiaries own good and marketable title, free and clear of all Encumbrances,
to all of the personal property and assets shown on the Balance Sheet or
acquired after April 30, 1997 except for (A) assets which have been disposed of
to nonaffiliated third parties since April 30, 1997 in the ordinary course of
business, (B) Encumbrances reflected in the Balance Sheet, (C) Encumbrances or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and which do not materially detract from the
value or materi ally interfere with the present or presently contemplated use of
the assets subject thereto or affected thereby, and (D) Encumbrances for current
Taxes not yet due and payable. All of the equipment (including computer
hardware) and other tangible personal property and assets owned or used by the
Company and its Subsidiaries are in good condition and repair, except for
ordinary wear and tear not caused by neglect, and are useable in the ordinary
course of business. The personal property and assets reflected on the Balance
Sheet or acquired after April 30, 1997, the rights under the Company Agreements
and the Intellectual Property (as defined in Section 3.12) owned or used by the
Compa ny under valid license, collectively include all assets necessary to
provide, produce, franchise, sell and license the services and products
currently provided, produced, franchised, sold and licensed by the Company and
its Subsidiaries and to conduct the business of the Company and its Subsidiaries
as presently conducted or as currently contemplated to be conducted.
Section 12 Intellectual Property.
(a) As used in this Agreement, "Intellectual Property" means
all of the fol lowing, in which the Company holds or owns any rights which are
necessary to conduct the business of the Company and its Subsidiaries as
presently conducted or as currently proposed to be conduct ed: (i) trademarks,
trade dress, service marks, logos, trade names, corporate names and all regis
trations and applications to register the same; (ii) patents and pending patent
applications, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extensions thereof; (iii) copyrights, rights of
publicity, rights in any semi-conductor chip product works or "mask works" and
all registrations and applications to register the same; (iv) all computer
software programs, including without limitation, all source code and object
code; databases and compilations, including all data and compilations of data;
all descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing; and all documentation, including user
manuals and training materials relating to the foregoing (collectively,
"Computer Software"); (v) all technology, know-how, trade secrets and
proprietary processes and formulae; and (vi) all licenses and agreements to
which the Company or any of the Subsidiaries is a party which relate to any of
the foregoing, including but not limited to Computer Software licenses other
than shrink-wrap licenses for off-the-shelf applications ("Licenses").
(b) Except as otherwise set forth on Section 3.12(b) of the
Company Disclosure Schedule, the Company or its Subsidiaries owns or has the
right to use, sell or license all Intellectual Property, free and clear of all
Encumbrances. Section 3.12(b) of the Company Disclosure Schedule contains a true
and complete list of all of the following Intellectual Property: (i) copyright
registra tions and applications and material unregistered copyrights; (ii)
trademark and service ▇▇▇▇ registra tions and applications and material
unregistered trademarks, service marks and trade names; (iii) ▇▇▇ ents and
patent applications; (iv) Computer Software; and (v) material Licenses.
(c) Except as set forth in Section 3.12(c) of the Company
Disclosure Schedule, all Computer Software (i) was developed (x) by employees of
the Company or its Subsidiaries within the scope of their employment or (y) as
"works-made-for-hire" as that term is defined under Section 101 of the United
States copyright laws, pursuant to a written agreement; (ii) was assigned to the
Company or its Subsidiaries pursuant to a written agreement; (iii) is used in
accordance with rights granted to the Company or its Subsidiaries pursuant to a
written License; or (iv) is in the public domain. Except as set forth in Section
3.12(c) of the Company Disclosure Schedule, no former or present employees,
officers or directors of the Company hold any right, title or interest directly
or indirectly, in whole or in part, in or to any Computer Software or any other
Intellectual Property.
(d) No breach or default (or event which with notice or lapse
of time or both would result in an event of default) by the Company or any of
its Subsidiaries exists or has occurred under any of the Licenses, and the
consummation of the transactions contemplated by this Agree ment will not
violate or conflict with or constitute such a default, result in a forfeiture
under, or con stitute a basis for termination of any such License.
(e) Except as set forth in Section 3.12(e) of the Company
Disclosure Schedule, to the Company's knowledge the conduct of the Company's and
its Subsidiaries' business and the use of the Intellectual Property do not
infringe, violate or misuse any intellectual property rights or any other
proprietary right of any person or give rise to any obligations to any person as
a result of co- authorship, or co-inventorship. Neither the Company nor any of
the Subsidiaries have received any notice of any claims or threats that the
Company's and its Subsidiaries' use of any of the Intellectual Property
infringes, violates or misuses, or is otherwise in conflict with any
Intellectual Property or proprietary rights of any third party or that any of
the Intellectual Property is invalid or unenforceable, nor to the Company's
knowledge, is there a basis for such a claim. Except as set forth in Section
3.12(e) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has sent to any other person any notice or claim of any present or
threatened infringe ment, violation or misuse by any other person of any of the
Intellectual Property and, to the Company's knowledge, there are no such
infringements, violations or misuses.
(f) The Company and its Subsidiaries have used reasonable
efforts to maintain the confidentiality of its trade secrets and other
confidential Intellectual Property.
Section 13 Compliance with Laws. (a) The Company and its
Subsidiaries are in compliance with, and have not violated any applicable law,
rule or regulation of any United States federal, state, local or foreign
government or agency thereof which materially affects the business, properties
or assets of the Company and its Subsidiaries, including without limitation all
laws, rules or regulations relating to Taxes and the preparation and electronic
filing of Tax Returns, and no notice, charge, claim, action or assertion has
been received by the Company or any of its Subsidiar ies or has been filed,
commenced or, to the Company's knowledge, threatened against the Company or any
of its Subsidiaries alleging any such violation. All licenses, permits and
approvals required under such laws, rules and regulations are in full force and
effect, except where the failure to have such licenses, permits and approvals
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(b) The terms and conditions of (i) the accelerated
check requests, refund anticipation loans and other financial products offered
from time to time by the Company, its Subsidiaries and franchisees
(collectively, the "Bank Products"), and (ii) all franchise arrangements entered
into, including the form of Franchise Agreement attached from time to time to
the Company's Franchise Offering Circular, currently comply, and have at all
times in the past complied, with all applicable laws, rules or regulations of
any United States federal, state, local or foreign gov ernment or agency
thereof, including without limitation all laws, rules or regulations relating to
Taxes.
(c) Except as set forth in Section 3.13 of the
Company Disclosure Schedule, the procedures utilized by, and the practices of,
the Company and each of its Subsidiaries for the preparation and electronic
filing of Tax Returns currently comply, and have at all times in the past
complied, with all applicable laws, rules or regulations of any United States
federal, state, local or foreign government or agency thereof, including without
limitation all laws, rules or regula tions relating to Taxes and the preparation
and electronic filing of Tax Returns.
(d) Except as set forth in Section 3.13 of the
Company Disclosure Schedule, the Company and its Subsidiaries and, to the
knowledge of the Company, each person acting as an agent or franchisee of the
Company, is in compliance with all laws, rules and regulations having the
purpose or effect of prohibiting unlawful discrimination against customers,
potential customers, franchisees, potential franchisees, present and former
employees, applicants for employment or others and, to the knowledge of the
Company, the Company has received no com plaints from any person that the
Company or any agent or franchisee has engaged in any unlawful discrimination.
Section 14 Contracts. (a) Each material Company
Agreement is legally valid and binding and in full force and effect. The Company
has previously made available for inspection by Parent or the Purchaser or their
representatives all material Company Agreements.
(b) Each contract, agreement or arrangement between the
Company and any bank or financial institution with respect to Bank Products (the
"Bank Product Agreements") is legally valid and binding and in full force and
effect. The Company is not in default, nor to the Company's knowledge is any
third party in default, under any Bank Product Agreement. The Company has
previously made available for inspection by Parent or the Purchaser or their
represen tatives complete and accurate copies of all Bank Product Agreements.
Section 15 Relationships with Franchisees. Except as set forth
in Section 3.15 of the Company Disclosure Schedule, since April 30, 1997, no
franchisee of the Company or any of its Subsidiaries has cancelled or otherwise
modified its relationship with the Company or its subsidiaries and (i) to the
Company's knowledge, no such person has threatened or has any intention to do
so, and (ii) to the Company's knowledge, the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships. Section
3.15 of the Company Disclosure Schedule sets forth a complete list of all
franchisees of the Company as of the date hereof. No more than 25% of such
franchise agreements with the Company differ from the form of Franchise
Agreement attached to the Company's Franchise Offering Circular dated July 1,
1997 (the "Form"), and none of such differences from the Form are material.
Section 16 Potential Conflicts of Interest. Except as set
forth in Section 3.16 of the Company Disclosure Schedule or in the Company SEC
Reports, no officer of the Company or any of its Subsidiaries owns, directly or
indirectly, any interest in (excepting not more than 1% stock holdings for
investment purposes in securities of publicly held and traded companies) or is
an officer, director, employee or consultant of any person which is a
competitor, lessor, lessee, franchisee, customer or supplier of the Company or
any of its Subsidiaries; and no officer or director of the Company or any of its
Subsidiaries (i) owns, directly or indirectly, in whole or in part, any
Intellectual Property which the Company or any of its Subsidiaries is using or
the use of which is necessary for the business of the Company or any of its
Subsidiaries; (ii) has any claim, charge, action or cause of action against the
Company or any of its Subsidiaries, except for claims for ac crued vacation pay,
accrued benefits under the Benefit Plans and similar matters and agreements
existing on the date hereof; (iii) has made, on behalf of the Company or any of
its Subsidiaries, any payment or commitment to pay any commission, fee or other
amount to, or to purchase or obtain or otherwise contract to purchase or obtain
any goods or services from, any other person of which any officer or director of
the Company, or, to the Company's knowledge, a relative of any of the fore
going, is a partner or stockholder (except stock holdings solely for investment
purposes in securities of publicly held and traded companies); (iv) owes any
money to the Company or any of its Subsidiaries; (v) is owed any money by the
Company or any of its Subsidiaries; or (vi) is a party to any transaction,
agreement, arrangement or understanding with the Company or any of its
Subsidiaries other than items arising out of the ordinary course of employment
with the Company.
Section 17 Information in Proxy Statement. The Proxy
Statement, if any (or any amendment thereof or supplement thereto), will, at the
date mailed to Company shareholders and at the time of the meeting of Company
shareholders to be held in connection with the Merger, not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.
Section 18 Opinion of Financial Advisor. The Company has
received the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. dated the date hereof, to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger by the Company's shareholders is fair to the Company's
shareholders from a financial point of view, a copy of which opinion has been
delivered to Parent and the Purchaser, it being understood and agreed by Parent
and the Purchaser that such opinion is for the benefit of the Board of Directors
of the Company and may not be relied upon by the Parent or Purchaser or their
affiliates or stockholders.
Section 19 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement except for ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., whose engagement letter has previously been provided to
Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company
that the statements contained in this Article IV are true and correct as of the
date of this Agreement and, subject to modification as appropriate to effect the
anticipated merger of Parent with and into CUC pursuant to the Agreement and
Plan of Merger, dated as of May 27, 1997, between CUC and Parent, will be true
and correct as of the Closing Date as though made on the Closing Date.
Section 1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a material adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent and the
Purchaser of this Agreement, and the consummation of the Merger and of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Parent and the Purchaser and by Parent as the sole stockholder of
the Purchaser and no other corporate action on the part of Parent and the
Purchaser is necessary to authorize the execution and delivery by Parent and the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and the Pur chaser, as the case may be, and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its terms, except that (i)
such en forcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 3 Consents and Approvals; No Violations. Except as set
forth in Section 4.3 of the schedule attached to this Agreement setting forth
exceptions to Parent's representations and warranties set forth herein and
except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act, the HSR
Act, state securities or blue sky laws, and the VSCA and the DGCL, none of the
execution, delivery or performance of this Agreement by Parent or the Purchaser,
the consum mation by Parent or the Purchaser of the transactions contemplated
hereby or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or by-laws of Parent or the Purchaser,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent, or any of
its Subsidiaries or the Purchaser is a party or by which any of them or any of
their respective properties or assets may be bound, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Parent, any
of its Subsidiaries or any of their properties or assets.
Section 4 Information in Proxy Statement. None of the
information supplied by Parent or the Purchaser specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date mailed to
shareholders and at the time of the meeting of shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
Section 5 SEC Reports and Financial Statements. Parent has
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since April 30, 1995 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Parent SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, the Parent SEC
Documents, includ ing, without limitation, any financial statements or schedules
included therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regula tions of the SEC thereunder.
The financial statements of Parent included in the Parent SEC Documents (the
"Parent Financial Statements") have been prepared from, and are in accordance
with, the books and records of Parent and its consolidated subsidiaries, comply
in all material re spects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") (except in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of Parent
and its consolidated subsidiaries as of the times and for the periods referred
to therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
ARTICLE V
COVENANTS
Section 1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure Schedule,
or (iii) as consented to in writing by Parent, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, and prior to the time the directors of the
Purchaser have been elected to, and shall constitute two-thirds of, the Board of
Directors of the Company pursuant to Section 1.3 (the "Ap pointment Date"):
(a) the business of the Company and its
Subsidiaries shall be conducted only in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, and each of the
Company and its Subsidiaries shall use its best efforts to preserve its business
organization intact, keep available the services of its current officers and
employees and maintain its existing relations with franchisees, customers,
suppliers, creditors, business partners and others having business dealings with
it, to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time of the Merger in any material respect;
(b) the Company will not, directly or
indirectly, (i) sell, transfer or pledge or agree to sell, transfer or pledge
any of the shares, preferred stock or capital stock of any of its Subsidiaries
beneficially owned by it, (ii) amend its Articles of Incorporation or Bylaws or
similar organizational documents; or (iii) split, combine or reclassify the
outstanding Shares or Preferred Stock or any outstanding capital stock of any of
the Subsidiaries of the Company;
(c) neither the Company nor any of its
Subsidiaries shall: (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock; (ii) except pursuant to the Stock Option Agreement, issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of Company Options outstanding on the date hereof;
(iii) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber
any material assets other than in the ordinary and usual course of business and
consistent with past practice, or incur or modify any material indebtedness or
other liability, other than in the ordinary and usual course of business and
consistent with past practice; or (iv) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock;
(d) neither the Company nor any of its
Subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by the Company or any
of its Subsidiaries to any of its executive officers or key employees or (ii)(A)
adopt any new, or (B) amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under any existing, bonus,
incentive compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee benefit
plan agreement or arrangement; or (iii) enter into any employment or severance
agreement with or, except in accordance with the existing written policies of
the Company, grant any severance or termination pay to any officer, director or
employee of the Company or any of its Subsidiaries;
(e) neither the Company nor any of its
Subsidiaries shall modify, amend or terminate any of its material contracts or
waive, release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;
(f) neither the Company nor any of its
Subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated without notice
to Parent, except in the ordinary course of business and consistent with past
practice;
(g) neither the Company nor any of its
Subsidiaries shall: (i) incur or assume any long-term debt, or except in the
ordinary course of business, incur or assume any short-term indebtedness in
amounts not consistent with past practice; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obliga tions of any other person, except in the ordinary
course of business and consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries of the Company); or (iv) enter into any
material commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of assets or real
estate);
(h) neither the Company nor any of its
Subsidiaries shall change any of the accounting methods used by it unless
required by GAAP;
(i) neither the Company nor any of its
Subsidiaries shall pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice, of claims, liabilities or
obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
consolidated Subsidiaries;
(j) neither the Company nor any of its
Subsidiaries will adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than the Merger);
(k) neither the Company nor any of its
Subsidiaries will take, or agree
to commit to take, any action that would or is reasonably likely to result in
any of the conditions to the Merger set forth in Article VI not being satisfied,
or that would make any representation or warranty of the Company contained
herein inaccurate in any respect at, or as of any time prior to, the Effective
Time, or that would impair the ability of the Company to consummate the Merger
in accordance with the terms hereof or delay such consummation; and
(l) neither the Company nor any of its
Subsidiaries will enter into an agreement, contract, commitment or arrangement
to do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Section 2 Access; Confidentiality. Upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, full access to all its properties, books, contracts,
commitments and records and the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. Unless otherwise required by law and until the
Appointment Date, Parent will hold any such information which is nonpublic in
confidence in accordance with the provisions of a letter agreement dated
September 22, 1997, between the Company and the Parent (the "Confidentiality
Agreement").
Section 3 Consents and Approvals. (a) Each of the Company,
Parent and the Purchaser will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
this Agreement and the transactions contemplated hereby (which actions shall
include, without limitation, furnishing all information required under the HSR
Act and in connection with approvals of or filings with any other Governmental
Entity) and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon any of them or any of
their Subsidiaries in connection with this Agree ment and the transactions
contemplated hereby. Each of the Company, Parent and the Purchaser will, and
will cause its Subsidiaries to, take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, the
Purchaser, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters.
Section 4 No Solicitation. (a) Neither the Company nor any of
its Subsidiaries or affiliates shall (and the Company shall cause its officers,
directors, employees, representatives and agents, including, but not limited to,
investment bankers, attorneys and accoun tants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or nego tiations
with, or provide any information to, any corporation, partnership, person or
other entity or group (other than Parent, any of its affiliates or
representatives) concerning any merger, tender offer, exchange offer, sale of
assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary (an "Acquisition
Proposal"). The Company will immedi ately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Notwithstanding the foregoing, the Company may furnish
information concerning its business, properties or assets to any corporation,
partnership, person or other entity or group pursuant to appropriate
confidentiality agreements, and may negotiate and participate in discussions and
negotiations with such entity or group concerning an Acquisition Proposal if (x)
such entity or group has on an unsolicited basis submitted a bona fide written
propos al to the Board of Directors of the Company relating to any such
transaction which the Board deter mines in good faith, represents a superior
transaction to the Offer and the Merger and which is not subject to the receipt
of any necessary financing and (y) in the opinion of the Board of Directors of
the Company, only after receipt of (i) a written opinion from the Company's
investment banking firm that the Acquisition Proposal is superior, from a
financial point of view, to the Offer and the Merger, and (ii) advice from
independent legal counsel to the Company to the effect that the failure to
provide such information or access or to engage in such discussions or
negotiations would be likely to cause the Board of Directors to violate its
fiduciary duties to the Company's shareholders under applicable law (an
Acquisition Proposal which satisfies clauses (x) and (y) being referred to
herein as a "Superior Proposal"). The Company will promptly communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by the Company in connection with such
proposal, discussion negotiation, or inquiry) and the identity of the party
making such proposal or inquiry which it may receive in respect of any such
transaction.
(b) Except as set forth herein, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
the Purchaser, the approval or recommendation by such Board of Directors or any
such committee of the Offer, this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, prior to the time of acceptance for payment of
Shares in the Offer, the Board of Directors of the Company may (subject to the
terms of this and the following sentence) withdraw or modify its approval or
recommendation of the Offer, this Agreement or the Merger, approve or recommend
a Superior Proposal, or enter into an agreement with respect to a Superior
Proposal, provided, that the Company shall promptly advise Parent orally and in
writing of any Superior Proposal or any inquiry which could lead to a Superior
Proposal, shall specify the material terms and conditions of such Superior
Proposal and identify the person making such Superior Proposal; provided,
further, that the Company shall not enter into an agreement with respect to a
Superior Proposal unless the Company
shall have furnished Parent with written notice not later than 12:00 noon 2 days
in advance of any date that it intends to enter into such agreement. In
addition, if the Company enters into an agree ment with respect to any
Acquisition Proposal, it shall concurrently with entering into such agree ment
pay, or cause to be paid, to Parent the Termination Fee (as defined in Section
8.1(b)).
Section 5 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. 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 the Company and
Parent shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
Section 6 Publicity. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 7 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 8 Directors' and Officers' Insurance and
Indemnification. (a) For five years after the Effective Time, the Surviving
Corporation (or any successor to the Surviving Corpo ration) shall indemnify,
defend and hold harmless the present and former officers and directors of the
Company and its Subsidiaries (each an "Indemnified Party") against all losses,
claims, damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the written consent of the Parent or the Surviving Corporation)) arising out of
actions or omissions occurring at or prior to the Effective Time to the full
extent permitted under Virginia law (provided that such actions or omissions
were in compliance with the standards set forth under Virginia law, the Articles
of Incorporation or the Bylaws), subject to the terms of the Articles of
Incorporation and the Bylaws, all as in effect at the date hereof; provided
that, in the
35
event any claim or claims are asserted or made within such five year period, all
rights to indemni fication in respect of any such claim or claims shall continue
until disposition of any and all such claims; provided, further, that nothing
herein shall impair any rights or obligations of any present or former directors
or officers of the Company.
(b) Parent or the Surviving Corporation shall
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of not less than five years after the Effective
Date; provided, that the Parent may substitute therefor policies of
substantially similar coverage and amounts containing terms no less favorable to
such former direc tors or officers; provided, further, that in no event shall
the Company be required to pay aggregate premiums for insurance under this
Section in excess of 200% of the aggregate premiums paid by the Company in 1997
on an annualized basis for such purpose.
ARTICLE VI
CONDITIONS
Section 1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) Stockholder Approval. This Agreement shall
have been approved and adopted by the requisite vote of the holders of the
Shares, if required by applicable law, in order to consummate the Merger;
(b) Statutes; Consents. No law, statute, rule,
order, decree or regulation shall have been enacted or promulgated by any
Governmental Entity of competent jurisdiction which declares this Agreement
invalid or unenforceable in any material respect or which prohibits consum
mation of the Merger and all governmental consents, orders and approvals
required for the consummation of the Merger and the other transactions
contemplated hereby shall have been obtained and shall be in effect at the
Effective Time;
(c) Purchase of Shares in Offer. Parent, the
Purchaser or their affiliates shall have purchased Shares pursuant to the Offer;
and
(d) HSR Approval. The applicable waiting period
under the HSR Act shall have expired or been terminated.
Section 2 Conditions to Parent's and the Purchaser's
Obligations to Effect the Merger. The obligations of Parent and the Purchaser to
consummate the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the Parent
and the Purchaser, to the extent permitted by applicable law.
(a) Compliance with Obligations. All actions contemplated
by Section 2.4 hereof shall have been taken;
(b) Representations and Warranties. The representations
and warranties of the Company set forth in Article III hereof shall be true in
all material respects; and
(c) Covenants. The Company shall have complied in all
material respects with its obligations under the terms of this Agreement.
ARTICLE VII
TERMINATION
Section 1 Termination. This Agreement may be terminated and
the transaction contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) By the mutual written consent of the Board
of Directors of Parent or the Purchaser and the Board of Directors of the
Company.
(b) By either of the Board of Directors of the
Company or the Board of Directors of Parent or the Purchaser:
(i) if the Offer shall have expired without any
Shares being purchased therein; provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
Parent or the Purchaser, as the case may be, to purchase the Shares
pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their best efforts
to lift), which permanently restrains, enjoins or otherwise prohibits
the acceptance for payment of, or payment for, Shares pursuant to the
Offer or the Merger and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) By the Board of Directors of the Company:
(i) if Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(i) if the Company is in material breach
of its obligations under this Agreement;
(ii) in connection with entering into a definitive
agreement in accordance with Section 5.4(b), provided it has complied
with all provisions thereof, including the notice provisions therein,
and that it makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have breached
in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach cannot be or has not been cured within 30 days after the
giving of written notice to Parent or the Purchaser, as applicable,
except, in any case, for such breaches which are not, in Parent's
opinion, reasonably likely to affect adversely Parent's or the
Purchaser's ability to complete the Offer or the Merger.
(d) By the Board of Directors of Parent or the
Purchaser:
(i) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to satisfy any
of the conditions set forth in Annex A hereto, Parent, the Purchaser,
or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the date of the initial public
announcement of the Offer;
(ii) if prior to the purchase of Shares pursuant to
the Offer, the Company shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which
(A) would give rise to the failure of a condition set forth in
paragraph (f) or (g) of Annex A hereto and (B) cannot be or has not
been cured within 30 days after the giving of written notice to the
Company; or
(iii) if either Parent or the Purchaser is entitled
to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (e) of Annex A hereto.
Section 2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
the Parent or the Company except (A) for fraud or for breach of this Agreement
and (B) as set forth in Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 1 Fees and Expenses. (a) Except as contemplated by
this Agreement, including Section 8.1(b) hereof, all costs and expenses incurred
in connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) If (x) the Board of Directors of the Company
shall terminate this Agreement pursuant to Section 7.1(c)(ii), (y) the Board of
Directors of Parent or the Purchaser shall terminate this Agreement pursuant to
Section 7.1(d)(iii) hereof, or (z) prior to the termination of this Agreement
(other than by the Board of Directors of the Company pursuant to Section
7.1(c)(i) or 7.1(c)(iii)), an Acquisition Proposal shall have been made and
within 12 months of such termination, the same or another Acquisition Proposal
from the same or another party shall be accepted and the related transaction
consummated pursuant to a definitive agreement or otherwise, the Company shall
pay to Parent (concurrently with such termination, in the case of clauses (x) or
(y) above, and not later than two business days after the Company takes any such
action with respect to an Acquisition Proposal, in the case of clause (z) above)
an amount equal to $13,650,000 plus an amount equal to the fees and expenses
incurred by Parent and the Purchaser in connection with the Offer, the Merger,
this Agreement and the consummation of the transactions contemplated hereby (the
portion of such fees and expenses payable hereunder not to exceed $750,000) (the
"Termination Fee").
Section 2 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto (by action taken
by their respective Boards of Directors), at any time prior to the Closing Date
with respect to any of the terms contained herein; provided, however, that after
the approval of this Agreement by the shareholders of the Company, no such
amendment, modification or supplement shall reduce the amount or change the form
of the Merger Consideration.
Section 3 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
HFS Incorporated
▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.:
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) if to the Company, to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Paris, Jr., Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". As used in this Agreement, (a) the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Exchange
Act, and (b) the term
"Company's knowledge" means the knowledge that the directors and officers of the
Company and its Subsidiaries and the employees of the Company and its
Subsidiaries having responsibility for the particular subject matter at issue
would possess after reasonable investigation and inquiry.
Section 6 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be considered one and the same
agreement and shall become effec tive when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 7 Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein): (a) constitutes the entire
agreement and supersedes all prior agreements and under standings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Section 5.8 is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the princi ples of conflicts of law thereof; provided, however,
that the laws of the respective jurisdictions of incorporation of each of the
parties shall govern the relative rights, obligations, powers, duties and other
internal affairs of such party and its board of directors.
Section 10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent provided, however, that nothing herein shall limit the right of Parent to
effect the consummation of its merger with and into CUC pursuant to the
Agreement and Plan of Merger, dated as of May 27, 1997, between CUC and Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 11 Company's Knowledge. For purposes of Article III of
this Agreement, the term "knowledge of the Company" shall mean the actual
knowledge of the directors and executive officers of the Company identified on
Schedule B of the Company Disclosure Schedule, without independent
investigation.
42
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HFS INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice Chairman and Chief Financial Officer
HJ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice Chairman and Chief Financial Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, President and
Chief Financial Officer
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of) the
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of the Merger Agreement), the 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 the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to above,
the payment for, any tendered Shares, and may terminate or amend the Offer as to
any Shares not then paid for, if (i) any applicable waiting period under the HSR
Act has not expired or terminated, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of the Merger Agreement and
before the time of payment for any such Shares, any of the following events
shall occur or shall be determined by the Purchaser to have occurred:
(a) there shall be threatened or pending any
suit, action or proceeding by any Governmental Entity (i) seeking to prohibit or
impose any material limitations on Parent's or the Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or affiliates) of all
or a material portion of their or the Company's businesses or assets, or to
compel Parent or the Purchaser or their respec tive Subsidiaries and affiliates
to dispose of or hold separate any material portion of the business or assets of
the Company or Parent and their respective Subsidiaries, in each case taken as a
whole, (ii) challenging the acquisition by Parent or the purchaser of any Shares
under the Offer or pursuant to the Stock Option Agreement or the Shareholders
Agreement, seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by this Agree ment, the Stock Option Agreement or the Shareholders
Agreement, or seeking to obtain from the Company, Parent or the Purchaser any
damages that are material in relation to the Company and its Subsidiaries taken
as a whole, (iii) seeking to impose material limitations on the ability of the
Purchaser, or rendering the Pur chaser unable, to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer and the Merger, (iv)
seeking to impose material limitations on the ability of the Purchaser or Parent
effec tively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders, or (v) which other wise is
reasonably likely to have a material adverse affect on the consolidated
financial condition, business es or results of operations of the Company and its
Subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange or in the NASDAQ National Market
System, for a period in excess of two days (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges not
related to market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or not
mandatory), (iii) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (iv) any limitation (whether or not mandatory) by any United States or
foreign governmental authority on the extension of credit by banks or other
▇▇▇▇▇ cial institutions, (v) any decline in either the Dow ▇▇▇▇▇ Industrial
Average or the Standard & Poor's Index of 500 Industrial Companies by an amount
in excess of 20% measured from the close of business on the date of this
Agreement for a period of at least five consecutive trading days; provided,
however, in the event that there shall have occurred a decline in either the Dow
▇▇▇▇▇ Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business on
the date of this Agreement and which remains in effect on the scheduled
expiration date of the Offer but which decline shall not have existed for a
period of at least five consecutive trading days, the Purchaser shall extend the
Offer for up to five business days in order to enable the Purchaser to determine
whether such decline continues for a period of at least five consecutive trading
days; provided, further, that the Pur chaser shall be required to notify the
Company of its determination to terminate the Offer as a result of the
occurrence of a decline contemplated in this paragraph (c)(v) within three days
following the occurrence thereof, unless the scheduled expiration date of the
Offer (as it may be extended pursuant to the Merger Agreement or the immediately
preceding proviso) is to occur within such three day period, in which event the
Purchaser shall be required to notify the Company of such determination by 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date, or (vi) a change in general financial bank or capital
market conditions which materially or adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans;
(d) there shall have occurred any material
adverse change (or any development that, insofar as reasonably can be foreseen,
is reasonably likely to result in any material adverse change) in the
consolidated financial condition, businesses, results of operations or prospects
of the Company and its Subsidiaries, taken as a whole;
(e)(i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
or the Purchaser its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Acquisition Proposal or (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.4(b) of this Agreement;
(f) any of the representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall not be true and correct and any such representations and warranties that
are not so qualified shall not be true and correct in any material respect, in
each case as of the date of this Agreement and as of the scheduled expiration of
the Offer;
(g) 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 covenant of the Company to be performed
or complied with by it under this Agreement;
(h) this Agreement shall have been terminated in
accordance with its terms;
(i) all of the Warrants shall have been
exercised in full and the Shares issuable upon the exercise thereof shall have
been issued; or
(j) the Company shall have received written
resignations, conditioned upon and to be effective only upon the purchase of and
payment for by Parent or any of its subsidiaries of Shares which represent at
least a majority of the outstanding Shares (on a fully diluted basis), of that
number of directors of the Company as Parent is entitled to designate pursuant
to Section 1.3 of this Agreement, such that Parent may exercise its rights
pursuant to the first sentence of such Section;
which in the reasonable judgment of Parent or the Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent
and the Purchaser, may be waived by Parent or the Purchaser, in whole or in
part, at any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.