Exhibit 5
Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
by and between
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
and
VITAMIN SHOPPE INDUSTRIES INC.
Dated as of January 12, 2001
TABLE OF CONTENTS
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ARTICLE I
THE MERGER.................................................................2
Section 1.1. THE MERGER..........................................2
Section 1.2. EFFECTIVE TIME......................................2
Section 1.3. EFFECTS OF THE MERGER...............................2
Section 1.4. CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION.............................2
Section 1.5. DIRECTORS...........................................2
Section 1.6. OFFICERS............................................3
Section 1.7. CONVERSION OF CLASS A SHARES........................3
Section 1.8. CANCELLATION OF PARENT SHARES.......................3
Section 1.9. OPTIONS; STOCK PLANS................................3
Section 1.10. STOCKHOLDERS' MEETING..............................3
ARTICLE II
DISSENTING SHARES; PAYMENT FOR CLASS A SHARES..............................5
Section 2.1. DISSENTING SHARES...................................5
Section 2.2. PAYMENT FOR CLASS A SHARES..........................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................................7
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......7
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION...7
(b) CAPITAL STRUCTURE...............................8
(c) CORPORATE AUTHORITY; APPROVAL AND FAIRNESS......9
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS.............9
(e) COMPANY REPORTS; FINANCIAL STATEMENTS;
UNDISCLOSED LIABILITIES......................10
(f) ABSENCE OF CERTAIN CHANGES......................11
TABLE OF CONTENTS
(continued)
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(g) PROXY STATEMENT.................................11
(h) LITIGATION AND LIABILITIES; NO DEFAULT..........11
(i) EMPLOYEE BENEFITS...............................12
(j) LABOR MATTERS...................................13
(k) COMPLIANCE WITH APPLICABLE LAWS; PERMITS........13
(l) TAKEOVER STATUTES...............................14
(m) TAXES...........................................14
(n) INTELLECTUAL PROPERTY...........................15
(o) BROKERS AND FINDERS.............................16
(p) MATERIAL CONTRACTS..............................16
(q) AFFILIATE TRANSACTIONS..........................16
(r) INSURANCE.......................................16
Section 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT............17
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION...17
(b) CORPORATE AUTHORITY; APPROVAL...................17
(c) GOVERNMENTAL FILINGS; NO VIOLATIONS.............17
(d) PROXY STATEMENT.................................18
(e) BROKERS AND FINDERS.............................18
(f) MERGER CONSIDERATION............................18
ARTICLE IV
COVENANTS..................................................................18
Section 4.1. COMPANY INTERIM OPERATIONS..........................18
Section 4.2. PARENT INTERIM OPERATIONS...........................20
Section 4.3. ACQUISITION PROPOSALS...............................20
Section 4.4. FILINGS; OTHER ACTIONS; NOTIFICATION................21
Section 4.5. ACCESS..............................................22
Section 4.6. PUBLICITY; COMMUNICATIONS...........................22
Section 4.7. BENEFITS............................................23
(a) OPTIONS.........................................23
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TABLE OF CONTENTS
(continued)
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(b) EMPLOYEE BENEFITS...............................23
Section 4.8. EXPENSES............................................23
Section 4.9. INDEMNIFICATION; DIRECTORS' AND
OFFICERS' INSURANCE......................................24
Section 4.10. TAKEOVER STATUTE...................................24
Section 4.11. EXEMPTION FROM LIABILITY UNDER SECTION 16(B).......24
Section 4.12. TRANSFER TAXES.....................................25
ARTICLE V
CONDITIONS.................................................................25
Section 5.1. CONDITIONS TO EACH PARTY'S OBLIGATION
TO EFFECT THE MERGER.....................................25
(a) STOCKHOLDER APPROVAL............................25
(b) INJUNCTION OR RESTRAINT.........................25
Section 5.2. FRUSTRATION OF CLOSING CONDITIONS...................25
Section 5.3. CONDITIONS TO PARENT'S PERFORMANCE..................25
(a) TERMINATION MATERIAL ADVERSE EFFECT.............25
(b) CONSENTS AND APPROVALS..........................26
ARTICLE VI
TERMINATION................................................................26
Section 6.1. TERMINATION BY MUTUAL CONSENT.......................26
Section 6.2. TERMINATION BY EITHER PARENT OR THE COMPANY.........26
Section 6.3. EFFECT OF TERMINATION AND ABANDONMENT...............27
Section 6.4. TERMINATION DECISIONS BY THE COMPANY................27
ARTICLE VII
MISCELLANEOUS..............................................................28
Section 7.1. SURVIVAL............................................28
Section 7.2. MODIFICATION OR AMENDMENT...........................28
Section 7.3. WAIVER OF CONDITIONS................................28
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TABLE OF CONTENTS
(continued)
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Section 7.4. COUNTERPARTS........................................28
Section 7.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.......28
Section 7.6. NOTICES.............................................29
Section 7.7. ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS..........30
Section 7.8. NO THIRD PARTY BENEFICIARIES........................30
Section 7.9. INTERPRETATION......................................30
Section 7.10. ASSIGNMENT.........................................31
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INDEX OF DEFINED TERMS
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Acquisition Proposal.......................................................20
Agreement...................................................................1
Applicable Laws............................................................14
Bankruptcy and Equity Exception.............................................9
Certificate of Merger.......................................................2
Certificates................................................................5
Class A Shares..............................................................1
Class B Shares..............................................................1
Code........................................................................2
Common Shares...............................................................8
Company.....................................................................1
Company Board...............................................................1
Company Disclosure Letter...................................................7
Company Employees..........................................................23
Company Intellectual Property Rights.......................................16
Company Material Adverse Effect.............................................8
Company Option..............................................................8
Company Reports............................................................10
Company Requisite Vote......................................................9
Compensation and Benefit Plans.............................................12
Contract...................................................................16
Contracts..................................................................16
Current Premium............................................................24
D&O Insurance..............................................................24
DGCL........................................................................1
Dissenting Shares...........................................................5
Effective Time..............................................................2
ERISA......................................................................12
ERISA Affiliate............................................................12
Exchange Act...............................................................10
Fairness Opinion............................................................1
Financial Advisor...........................................................1
GAAP.......................................................................10
Governmental Entity.........................................................9
Indemnified Parties........................................................24
Insurance Policies.........................................................16
Intellectual Property......................................................15
Material Contracts.........................................................16
Merger......................................................................1
Merger Consideration........................................................1
Multiemployer Plan.........................................................12
NASD........................................................................9
INDEX OF DEFINED TERMS
(continued)
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New Plans..................................................................23
NYBCL.......................................................................1
Old Plans..................................................................23
Option Plans................................................................8
Order......................................................................25
Parent......................................................................1
Parent Disclosure Letter...................................................17
Parent Intellectual Property Rights........................................16
Paying Agent................................................................5
Person......................................................................6
Proxy Statement.............................................................4
Representatives............................................................20
Schedule 13E-3..............................................................4
SEC.........................................................................4
Securities Act.............................................................10
Special Committee...........................................................1
Special Meeting.............................................................3
Stand-Alone Options.........................................................8
Stock Plans.................................................................8
Superior Acquisition Proposal..............................................21
Surviving Corporation.......................................................2
Takeover Statute...........................................................14
Tax........................................................................15
Tax Return.................................................................15
Taxable....................................................................15
Taxes......................................................................15
Termination Date...........................................................26
Termination Material Adverse Effect........................................26
Third-Party Intellectual Property Rights...................................15
Transfer Taxes.............................................................25
Voting Debt.................................................................9
WARN.......................................................................13
Warrants....................................................................8
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
January 12, 2001, by and between ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
(the "Company"), and Vitamin Shoppe Industries Inc., a New York corporation
("Parent").
RECITALS
WHEREAS, Parent owns all of the issued and outstanding shares
of Class B Common Stock, par value $0.01 per share, of the Company (the "Class B
Shares");
WHEREAS, Parent desires to acquire all of the issued and
outstanding shares of Class A Common Stock, par value $0.01 per share, of the
Company (the "Class A Shares"), pursuant to a merger (the "Merger") of the
Company with and into Parent, with Parent being the surviving corporation, in
accordance with the Delaware General Corporation Law ("DGCL") and the New York
Business Corporation Law ("NYBCL");
WHEREAS, pursuant to the Merger each issued and outstanding
Class A Share will be converted into the right to receive $1.00 per Class A
Share (the "Merger Consideration"), upon the terms and subject to the conditions
provided herein;
WHEREAS, the Company and Parent desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
WHEREAS, the Board of Directors of the Company (the "Company
Board") has received the opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital (the
"Financial Advisor"), to the effect that, based on, and subject to, the various
assumptions and qualifications set forth in such opinion, as of the date of such
opinion, the Merger Consideration to be received by the holders of the Class A
Shares in the Merger is fair from a financial point of view to such holders (the
"Fairness Opinion"); and
WHEREAS, the Company Board, after receiving the recommendation
of the special committee of the Company Board comprised of directors that are
not affiliated with the Parent (the "Special Committee"), has approved this
Agreement and the Merger, determined that this Agreement, the Merger and the
other transactions contemplated hereby are fair to, advisable and in the best
interests of the Company's stockholders (other than Parent) and adopted the plan
of merger set forth herein;
WHEREAS, the Board of Directors of Parent has approved this
Agreement and the Merger, determined that this Agreement, the Merger and the
other transactions contemplated hereby are advisable and in the best interests
of Parent and adopted the plan of merger set forth herein;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the DGCL and the NYBCL, at the
Effective Time (as defined below) the Company shall be merged with and into
Parent. Following the Merger, the separate corporate existence of the Company
shall cease, and Parent shall continue as the surviving corporation (the
"Surviving Corporation"). For federal income tax purposes, the Merger shall be
treated as a reorganization described in Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended, and any successor thereto (the "Code").
Section 1.2. EFFECTIVE TIME. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article V, the Company and
Parent shall cause a certificate of merger (the "Certificate of Merger") to be
executed, verified and filed with, and delivered to the Secretary of State of
the State of New York and the Secretary of State of the State of Delaware, and
the parties shall take such other and further actions as may be required by
Applicable Law to make the Merger effective. The Merger shall become effective
at the later of the time the Certificate of Merger is duly filed with the
Secretary of State of the State of New York and the time the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is agreed to by the parties hereto and as specified in the
Certificate of Merger (the "Effective Time"). Prior to the filing referred to in
this Section 1.2, the closing will be held at the offices of Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other
place as the parties may agree) for the purpose of confirming all of the
foregoing.
Section 1.3. EFFECTS OF THE MERGER. From and after the
Effective Time, the Merger shall have the effects set forth in the NYBCL and the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the properties, rights, privileges, powers and
franchises of the Company and Parent shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Parent shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.4. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION.
(a) The certificate of incorporation of Parent as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and Applicable Law.
(b) The by-laws of Parent in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until amended in accordance
with the provisions thereof, the certificate of incorporation and Applicable
Law.
Section 1.5. DIRECTORS. The directors of Parent immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office
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until their respective successors are duly elected or appointed and qualified,
or their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
Section 1.6. OFFICERS. The officers of Parent immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected or appointed and qualified, or their earlier death, resignation or
removal in accordance with the certificate of incorporation and the by-laws of
the Surviving Corporation.
Section 1.7. CONVERSION OF CLASS A SHARES. At the Effective
Time, by virtue of the Merger and without any action on the part of the holders
thereof, each Class A Share issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares (as defined herein)), shall by
virtue of the Merger be canceled and retired and shall be converted into the
right to receive, pursuant to Section 2.2, the Merger Consideration, payable to
the holder thereof, without interest thereon, upon surrender of the certificate
formerly representing such Class A Share or any replacement certificates
representing such Class A Shares as may be obtained from the transfer agent of
the Company.
Section 1.8. CANCELLATION OF PARENT SHARES. At the Effective
Time all of the Common Shares (as defined herein) held by Parent shall be
cancelled and retired.
Section 1.9. OPTIONS; STOCK PLANS.
(a) Prior to the Merger, the Company Board (or, if appropriate
any committee thereof) shall adopt appropriate resolutions and take all other
actions necessary to accelerate the vesting of all Company Options (as defined
below) and to provide for the cancellation, effective at the Effective Time, of
all the outstanding Company Options. Such cancellation shall occur without any
payment therefor.
(b) The Company shall take all actions necessary to provide
that, effective as of the Effective Time, (i) the Option Plans and the
Stand-Alone Options shall be terminated, and (ii) no holder of Company Options
or Warrants (as defined below) will have any right to receive any shares of
capital stock of the Company or, if applicable, the Surviving Corporation, upon
the exercise of any Company Option or Warrant.
Section 1.10. STOCKHOLDERS' MEETING.
(a) As required by Applicable Law in order to consummate the
Merger, the Company, acting through the Company Board, shall, in accordance with
Applicable Law, and provided that this Agreement shall not have been terminated:
(i) as soon as practicable after the SEC (as defined
below) notifies the company that it does not have any other comments to the
Company's Proxy Statement (as defined below), duly call, give notice of, convene
and hold a special meeting of the Company stockholders (the "Special Meeting")
to be held twenty (20) days after notice thereof is given to the Company's
stockholders for the purpose of considering and taking action upon this
Agreement;
3
(ii) together with Parent, prepare and file with the
Securities and Exchange Commission ("SEC") a preliminary proxy statement on
Schedule 14A (together with any amendments or supplements thereto, the "Proxy
Statement") soliciting Company stockholder approval of the Merger and this
Agreement, and use reasonable best efforts to obtain and furnish the information
required to be included by the SEC in the Proxy Statement and, after
consultation with each other, to respond as soon as practicable to any comments
made by the SEC with respect to the preliminary Proxy Statement and cause a
definitive Proxy Statement, which the parties agree shall comply as to form in
all material respects with all Applicable Law, to be mailed to its stockholders
at the earliest practicable date following the date hereof;
(iii) together with Parent, prepare and file with the
SEC a Schedule 13E-3 (together with all amendments thereto, the "Schedule
13E-3"), and use reasonable best efforts to obtain and furnish the information
and exhibits required to be included by the SEC in the Schedule 13E-3 and, after
consultation with each other, to make any amendment reporting material changes
in the information set forth in the Schedule 13E-3 previously filed and to make
a final amendment to the Schedule 13E-3 reporting promptly the results of the
Merger, which the parties agree shall comply as to form in all material respects
with all Applicable Law, to be mailed to the SEC at the earliest practicable
date following the date hereof; and
(iv) include in the Proxy Statement (x) the
recommendation of the Special Committee to the Company Board that the Merger is
fair to, advisable and in the best interests of the Company's stockholders
(other than Parent) and that the Company Board recommend that the stockholders
of the Company vote in favor of the approval of the Merger and of this Agreement
(y) subject to Section 4.3, the recommendation of the Company Board that the
Merger is fair to, advisable and in the best interests of the Company's
stockholders (other than Parent) and that the stockholders of the Company vote
in favor of the approval of the Merger and of this Agreement; and (z) the
Fairness Opinion. The Company represents that, prior to the execution hereof,
the Financial Advisor has delivered to the Company Board the Fairness Opinion.
The Company further represents and warrants that it has been authorized by the
Financial Advisor to reproduce the written Fairness Opinion in full (and only in
full), and may also include references to the Fairness Opinion and to the
Financial Advisor and its relationship with the Company (in each case in form
and substance as the Financial Advisor shall reasonably approve in advance), in
any Proxy Statement relating to the transactions contemplated hereby that the
Company is required to file or distribute to its stockholders under the Exchange
Act or other Applicable Law. Each of the Company and Parent further represents
and warrants that it will file such other documentation and take such other
actions as are required by Applicable Law to effect the purposes of this
Agreement.
(b) Parent agrees that it (i) will attend the Special Meeting,
in person or by proxy, (ii) will vote, or cause to be voted, all Common Shares
then owned by it in favor of the approval of the Merger and of this Agreement,
(iii) will not sell or transfer, or enter into any agreement to sell or
transfer, directly or indirectly, prior to the Effective Time, the Common Shares
owned by it as of the date hereof.
(c) Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement or Schedule 13E-3,
Parent or the Company, as the case may be, shall promptly inform the other of
each such occurrence and cooperate in the filing with
4
the SEC and/or mailing to the Company stockholders of such amendment or
supplement. Each of the parties agrees that the information provided by it for
inclusion in the Proxy Statement or Schedule 13E-3, and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Special Meeting, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the Effective Time, any information
pertaining to one of the parties or, to such party's knowledge, any of its
affiliates or its officers or directors, contained in or omitted from the Proxy
Statement or Schedule 13E-3 makes statements contained therein materially false
or misleading, such party shall promptly so advise the other parties and provide
such other parties with the information necessary to make the statements
contained therein not false or misleading. In the event of such advice being
given pursuant to the preceding sentence, the Company and Parent shall cooperate
to file promptly with the SEC (after reasonable opportunity for Parent and the
Company to review and comment thereon) any required amendments or supplements to
the Proxy Statement or Schedule 13E-3 and, to the extent required by Applicable
Law, disseminate such amendments or supplements to the Company stockholders.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR CLASS A SHARES
Section 2.1. DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, Class A Shares outstanding immediately prior to
the Effective Time that are held by stockholders (i) who shall have neither
voted for approval and adoption of this Agreement and the Merger and (ii) who
shall be entitled to and who shall have demanded properly in writing appraisal
for such Class A Shares in accordance with Section 262 of the DGCL ("Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration at or after the Effective Time unless and until the holder of such
Class A Shares fails to perfect, withdraws or otherwise loses such holder's
right to appraisal. If a holder of Dissenting Shares shall withdraw (in
accordance with Section 262(k) of the DGCL) his or her demand for such appraisal
or shall become ineligible for such appraisal, then, as of the Effective Time or
the occurrence of such event, whichever last occurs, such holder's Class A
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Consideration, without interest
thereon. The Company shall give Parent prompt notice of any written demands for
appraisal received by the Company and the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to, or offer to settle or settle, or otherwise negotiate, any such
demands.
Section 2.2. PAYMENT FOR CLASS A SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank
or trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Consideration in
respect of certificates that, immediately prior to the Effective Time, represent
Class A Shares (the "Certificates") entitled to payment of the Merger
Consideration pursuant to Section 1.7. At the Effective Time, Parent shall
deposit, or cause to be deposited, in trust with the Paying Agent, upon terms
(including as to the release of such funds to
5
holders of Class A Shares) reasonably acceptable to the Company, the aggregate
Merger Consideration to which holders of Class A Shares shall be entitled at the
Effective Time pursuant to Section 1.7.
(b) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of Certificates a form of letter of transmittal,
acceptable to Parent in its sole discretion, which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent and
instructions for use in surrendering such Certificates and receiving the Merger
Consideration in respect thereof. Upon the surrender of each such Certificate,
together with a duly executed letter of transmittal and any other required
documents, including without limitation, a Form W-9, the Paying Agent shall, as
soon as practicable, pay the holder of such Certificate an amount equal to the
product of (x) the Merger Consideration multiplied by (y) the number of Class A
Shares formerly represented by such Certificate, in consideration therefor, and
such Certificate shall forthwith be canceled. Until so surrendered, each such
Certificate (other than Certificates representing Class A Shares held by Parent,
in the treasury of the Company or Dissenting Shares) shall represent solely the
right to receive the aggregate Merger Consideration relating thereto. No
interest or dividends shall be paid or accrued on the Merger Consideration. If
the Merger Consideration (or any portion thereof) is to be delivered to any
individual, corporation, trust, association, unincorporated association, estate,
partnership, joint venture, limited liability company, Governmental Entity (as
defined in Section 3.1(d)) or other legal entity (each, a "Person"), other than
the Person in whose name the Certificate surrendered is registered, it shall be
a condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer, that the signatures on the Certificate shall be properly
guaranteed, and that the Person surrendering such Class A Shares shall pay to
the Paying Agent any transfer or other Taxes (as defined herein) required by
reason of the payment of the Merger Consideration to a Person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such Taxes have been paid or are not
applicable. In the event any Certificate shall have been lost, stolen or
destroyed, the Paying Agent shall be required to pay the full Merger
Consideration in respect of any Class A Shares represented by such Certificate;
however, Parent may require the owner of such lost, stolen or destroyed
Certificate to execute and deliver to the Paying Agent a form of affidavit
claiming such Certificate to be lost, stolen or destroyed in form and substance
reasonably satisfactory to Parent, and the posting by such owner of a bond in
such amount as Parent may determine is reasonably necessary as indemnity against
any claim that may be made against Parent or the Paying Agent.
(c) Promptly following the date which is 120 days after the
Effective Time, the Paying Agent shall deliver to the Surviving Corporation all
cash, Certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar Applicable Law) receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon,
except as required under Applicable Law. Notwithstanding the foregoing, none of
Parent, the Company or the Paying Agent shall be liable to any Person in respect
of any cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Applicable Law. If any
6
Certificates shall not have been surrendered immediately prior to such date on
which any payment pursuant to this Article II would otherwise escheat to or
become the property of any Governmental Entity, the cash payment in respect of
such Certificate shall, to the extent permitted by Applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any Person previously entitled thereto.
(d) Immediately prior to the Effective Time, the stock
transfer books of the Company shall be closed, and, after the Effective Time,
there shall be no transfers on the stock transfer books of the Surviving
Corporation of any Class A Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Paying Agent, they shall be surrendered and
canceled in return for the payment of the aggregate Merger Consideration
relating thereto, as provided in this Article II.
(e) From and after the Effective Time, the holders of
Certificates evidencing ownership of Class A Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Class A Shares except as otherwise provided herein or by Applicable Law. Such
holders shall have no rights, after the Effective Time, with respect to such
Class A Shares except to surrender such Certificates in exchange for the Merger
Consideration pursuant to this Agreement or to perfect any rights of appraisal
as a holder of Dissenting Shares that such holders may have pursuant to Section
262 of the DGCL.
(f) Each of Parent, the Paying Agent and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Class A Shares
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign Tax law. To the extent
that amounts are so withheld by Parent, Surviving Corporation or Paying Agent,
as the case may be, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Class A Shares in
respect of which such deduction and withholding was made by Parent, Surviving
Corporation or Paying Agent, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure letter delivered to Parent by the Company
on or prior to entering into this Agreement (the "Company Disclosure Letter") or
the Company Reports (as defined below), the Company hereby represents and
warrants to Parent that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite corporate or similar power and authority
to own and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification,
7
except where the failure to be so qualified or in good standing, when taken
together with all other such failures, is not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect (as defined below).
The Company has made available to Parent complete and correct copies of the
Company's charter and bylaws, each as amended to date. The Company's charter and
bylaws made available are in full force and effect. The Company does not own
equity securities of any other entity.
As used in this Agreement, the term "Company Material Adverse
Effect" means any change, effect, event, occurrence, state of facts or
development that is materially adverse to the business, financial condition or
results of operations of the Company; PROVIDED, HOWEVER, that none of the
following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Company Material Adverse Effect: (a) any
change in the market price or trading volume of Company's stock after the date
hereof, or (b) any adverse change, effect, event, occurrence, state of facts or
development attributable to the announcement or pendency of the Merger.
(b) CAPITAL STRUCTURE. (i) The authorized stock of the Company
consists of (A) 5,000,000 shares of Series A Preferred Stock, $.01 par value,
none of which were outstanding as of the date hereof, (B) 30,000,000 shares of
Class A Common Stock, $.01 par value, 7,277,574 of which were outstanding as of
the date hereof and (C) 15,000,000 shares of Class B Common Stock, $.01 par
value (the Class A Common Stock and the Class B Common Stock are collectively
referred to herein as the "Common Shares"), 13,081,500 of which were outstanding
as of the date hereof. All of the outstanding Common Shares have been duly
authorized and are validly issued, fully paid and nonassessable. The Company has
no commitments to issue or deliver Common Shares except that, as of December 31,
2000, there were 1,840,000 shares of Class A Common Stock reserved for issuance
pursuant to the Amended and Restated Stock Option Plan for Employees of the
Company effective as of July 1, 1999 and amended and restated as of March 16,
2000 and the Amended and Restated Stock Option Plan for Non-Employee Directors
of the Company effective as of August 1, 1999 and amended and restated as of
March 16, 2000 (jointly, the "Option Plans"), and the Stand-Alone Option Plans
(the "Stand-Alone Options") identified in Section 3.1(b) of the Company
Disclosure Letter (the Stand-Alone Options, together with the Option Plans, the
"Stock Plans"), and except for shares issuable pursuant to outstanding warrants
(the "Warrants"). Section 3.1(b) of the Company Disclosure Letter contains a
correct and complete list of the Warrants, each outstanding option to purchase
Common Shares under the Stock Plans (each a "Company Option"), including the
holder, date of grant, exercise price and number of Common Shares subject
thereto. Except as set forth above, there are no Common Shares authorized,
reserved, issued or outstanding and there are no preemptive or other outstanding
rights, subscriptions, options, warrants, stock appreciation rights, redemption
rights, repurchase rights, registration rights, convertible securities or other
agreements, arrangements or commitments of any character relating to the issued
or unissued share capital or other ownership interest of the Company or any
other securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Company, and no securities evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or
8
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter ("Voting Debt").
(ii) The Company does not own, hold or control
securities or other interests of any corporation, limited liability company or
other entity, which would permit the Company to elect a majority of such
entity's board of directors or similar governing body, or otherwise direct the
business and policies of such entity.
(c) CORPORATE AUTHORITY; APPROVAL AND FAIRNESS.
(i) The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate,
subject only, if required by Applicable Law, to approval of the Merger by the
holders of a majority of the outstanding Common Shares entitled to vote on the
Merger (the "Company Requisite Vote"). This Agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(ii) The Company Board (A) has duly adopted the plan of
merger set forth herein and approved this Agreement and the other transactions
contemplated hereby, (B) has declared that the Merger and this Agreement and the
other transactions contemplated hereby are fair to, advisable and in the best
interests of the Company's stockholders (other than Parent), and (C) has
received the Fairness Opinion.
(iii) The Company Requisite Vote is the only vote of the
holders of any class or series of capital stock of the Company necessary to
adopt this Agreement and approve the transactions contemplated hereby, including
the Merger. No other vote or consent of the stockholders of the Company is
required by law, the certificate of incorporation or bylaws of the Company or
otherwise in order for the Company to adopt this Agreement or to approve the
transactions contemplated hereby, including the Merger.
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS.
(i) Other than the filings and/or notices (A) pursuant
to Section 1.2 or as set forth in Section 3.1(d) of the Company Disclosure
Letter, (B) the Exchange Act (C) to comply with state securities or "blue-sky"
laws, and (D) required to be made with the National Association of Securities
Dealers, Inc. ("NASD") and other applicable self-regulatory organizations, no
material filings, reports or notices are required to be made by the Company
with, nor are any material consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authority, agency, commission, body or other governmental entity
("Governmental Entity"), for the valid execution and delivery of this Agreement
by the Company and the consummation by the Company of the Merger and the other
transactions contemplated hereby.
9
(ii) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation by the Company of the
Merger and the other transactions contemplated hereby will not, constitute or
result in (A) a breach or violation of, or a default under, the charter or
bylaws of the Company, (B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company (with or without
notice, lapse of time or both) pursuant to, any Material Contract binding upon
the Company (provided, as to consummation, the filings, reports and notices are
made, and approvals are obtained, as referred to in Section 3.1(d)(i)) or any
Applicable Law or governmental or non-governmental permit, registration,
authorization or license to which the Company is subject, or (C) any material
change in the rights or obligations of any party under any Material Contract,
except, in the case of clause (B) or (C) above, for any breach, violation,
default, acceleration, creation or change that is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect. Section
3.1(d) of the Company Disclosure Letter sets forth a correct and complete list
of all Material Contracts (as defined below) of the Company pursuant to which
consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement (whether or not subject to the
exception set forth with respect to clauses (B) and (C) above).
(e) COMPANY REPORTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES.
(i) The Company has filed all required forms, reports
and documents with the SEC under the Securities Act of 1933, as amended (the
"Securities Act") and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company has delivered or made available to Parent each
registration statement, report, proxy statement or information statement
prepared by it since December 31, 1999, including the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000, in the forms (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed with
the SEC subsequent to the date hereof, the "Company Reports"). As of their
respective dates, the Company Reports did not, and any Company Reports filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the balance
sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the financial position of the Company as of its date and each of the
consolidated statements of income and of cash flows included in or incorporated
by reference into the Company Reports (including any related notes and
schedules) fairly presents, or will fairly present, the results of operations,
retained earnings and changes in financial position, as the case may be, of the
Company for the periods set forth therein (subject, in the case of unaudited
statements, to notes and normal year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with accounting
principles generally accepted in the United States ("GAAP") consistently applied
during the periods involved, except as may be noted therein.
10
(ii) As of the date hereof, the Company does not have
any liability in excess of $50,000 of the type required to be disclosed on a
financial statement prepared in accordance with GAAP without regard to
materiality.
(f) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company Reports filed prior to the date hereof, since September 30, 2000 the
Company has conducted its business only in, and has not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses consistent with past practice and there has not been (i) any change
in the financial condition, operations, properties, business or results of
operations of the Company or any development or combination of developments,
that, individually or in the aggregate, has had or is reasonably likely to have
a Company Material Adverse Effect; (ii) any damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by the Company, whether or not covered by insurance, except for
such damage, destruction or other casualty loss which, individually or in the
aggregate, has not had and is not reasonably likely to have a Company Material
Adverse Effect; (iii) any material change by the Company in Tax or accounting
principles, practices or methods other than as required by GAAP or Applicable
Law or as disclosed in the Company Reports filed prior to the date hereof; or
(iv) any declaration, setting aside or payment of any dividend or other
distribution in respect of the stock of the Company. Since September 30, 2000,
except as provided for herein or as disclosed in the Company Reports filed prior
to the date hereof, there has not been any increase in the compensation payable
or that would become payable by the Company to officers or key employees of the
Company or any amendment of any of the Compensation and Benefit Plans (as
defined in Section 3.1(i)) other than increases or amendments in the ordinary
course consistent with past practice.
(g) PROXY STATEMENT. None of the information supplied by the
Company in writing for inclusion in the Proxy Statement, Schedule 13E-3 or other
filings with the SEC required to effectuate the transactions contemplated by
this Agreement will, at the respective times that the Proxy Statement, Schedule
13E-3 or such other filings are filed with the SEC and are first published or
sent or given to holders of Common Shares, and in the case of the Proxy
Statement, at the time that it or any amendment or supplement thereto is mailed
to the Company's stockholders, at the time of the Special Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(h) LITIGATION AND LIABILITIES; NO DEFAULT. Except as
disclosed in the Company Reports filed prior to the date hereof, there are no
civil, criminal or administrative actions, suits, claims, hearings,
investigations, inquiries or proceedings pending or, to the knowledge of the
Company, threatened in writing against the Company, except for those that are
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. Except as disclosed in Section 3.1(h) of the Company
Disclosure Letter, the Company is not in default or violation (and no event has
occurred which with or without due notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of its
Certificate of Incorporation or By-laws or any order, decree, law, statute or
regulation applicable to the Company except for violations, breaches which would
not reasonably be expected to have a Company Material Adverse Effect.
11
(i) EMPLOYEE BENEFITS. Except in each case, as is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect:
(i) A copy of each material bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health, welfare,
fringe benefits or other plan, or agreement that covers employees, directors,
former employees or former directors of the Company with respect to service for
the Company (the "Compensation and Benefit Plans") and any trust agreement or
insurance contract forming a part of any such Compensation and Benefit Plan has
been made available to Parent prior to the date hereof. The Compensation and
Benefit Plans are listed in Section 3.1(i) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans are in
substantial compliance with all Applicable Laws, including the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
regulations and rules promulgated thereunder. There is no pending or, to the
knowledge of the Company, threatened legal action, suit, claim or governmental
investigation relating to any of the Compensation and Benefit Plans, other than
claims for benefits in the ordinary course. The Company has not engaged in a
transaction with respect to any Compensation and Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would be
reasonably likely to subject the Company to a material Tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA.
(iii) None of the Compensation and Benefit Plans is
subject to Title IV or Section 302 of ERISA or Sections 412 or 4971 of the Code.
None of the Company nor any of its respective ERISA Affiliates (as defined
below) has, at any time during the last six years, (i) contributed to or been
obligated to contribute to any "Multiemployer Plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Plan"), or (ii) incurred any
liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as those terms are defined in Part I of
Subtitle E of Title IV of ERISA, that has not been satisfied in full. "ERISA
Affiliate" means, with respect to the Company, any entity, trade or business,
that is a member of a group described in Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b)(1) of ERISA that includes the Company, or that is a
member of the same "Controlled Group" as the Company pursuant to Section
4001(a)(14) of ERISA.
(iv) All material contributions required to be made
under the terms of any Compensation and Benefit Plan as of the date hereof have
been made or have been reflected on the Company's most recent financial
statements.
(v) The Company does not have any obligations for
retiree health and life benefits under any Compensation and Benefit Plan, other
than benefits mandated under Section 4980B of the Code or by other Applicable
Law, or pursuant to individual agreements.
(vi) The consummation of the Merger and the other
transactions contemplated by this Agreement (including as a result of any
termination of employment in connection therewith) will not (A) entitle any
employee, consultant or director of the Company to any payment (including
severance pay or similar compensation) or any increase in
12
compensation, (B) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Compensation and
Benefit Plans, or (C) result in any payment becoming due by Parent or the
Company that would be subject to Sections 162(m), 280G or 4999 of the Code.
(j) LABOR MATTERS. Except, in each case, as is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect:
(i) The Company is not a party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company nor are any such employees
represented by any labor organization. No labor organization or group of
employees of the Company has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities involving the Company pending with
any labor organization or group of employees of the Company.
(ii) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material labor
disputes pending or, to the Company's knowledge, threatened in writing against
or involving the Company. There are no unfair labor practice charges, grievances
or complaints pending or, to the Company's knowledge, threatened in writing by
or on behalf of any employee or group of employees of the Company.
(iii) There are no complaints, charges or claims against
the Company pending with any public or governmental authority, arbitrator or
court based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by the Company, of any individual.
(iv) The Company is in compliance with all laws,
regulations and orders relating to the employment of labor, including all such
laws, regulations and orders relating to wages, hours, Worker Adjustment and
Retraining Notification Act of 1988, as amended ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar tax except for immaterial non-compliance.
(v) There has been no "mass layoff" or "plant closing"
as defined by WARN with respect to the Company within the six (6) months prior
to this Agreement.
(k) COMPLIANCE WITH APPLICABLE LAWS; PERMITS. Except in each
case as is not, individually or in the aggregate, likely to have a Company
Material Adverse Effect:
(i) the business of the Company has been and is being
conducted in compliance in all material respects with all applicable federal,
state, local and foreign laws, statutes, ordinances, rules, regulations,
judgments, orders, injunctions, decrees, arbitration
13
awards, agency requirements, licenses and permits of any Governmental Entity
("Applicable Laws");
(ii) all of the material permits, licenses, certificates
of authority, orders and approvals of the Company required to permit the Company
to conduct its business as presently conducted are in full force and effect and
are current and, to the Company's knowledge, no suspension or cancellation of
any of them is threatened or is reasonably likely;
(iii) the Company has not received, since December,
1999, any notification or communication in writing, from any Governmental Entity
(A) threatening to revoke or condition the continuation of any material license,
franchise, permit, or governmental authorization or (B) restricting or
disqualifying their activities (except for restrictions generally imposed by
rule, regulation or administrative policy on similarly regulated persons and
entities generally); and
(iv) to the Company's knowledge, no material change is
required in the Company's processes, properties or procedures in connection with
any Applicable Laws, and the Company has not received any written notice or
communication of any material noncompliance with any such Applicable Law that
has not been cured as of the date hereof.
(l) TAKEOVER STATUTES. No restrictive provision of any "fair
price," "moratorium," "control share acquisition," "interested shareholder" or
other similar anti-takeover statute or regulation (each, a "Takeover Statute")
(including Section 203 of the DGCL) or any restrictive provision of any
applicable anti-takeover provision in the Company's charter and bylaws is, or at
the Effective Time will be, applicable to the Company, the Common Shares, the
Merger, or the other transactions contemplated by this Agreement.
(m) TAXES. (i) The Company (A) has or will have filed (taking
into account any extension of time within which to file) all material Tax
Returns (as defined below), except for any consolidated Tax Returns filed by
Parent, and all Tax Returns filed by the Company are or will be complete and
accurate in all material respects except for Taxes properly and adequately
reserved for on its financial statements in accordance with GAAP; (B) has timely
paid all Taxes due and payable by it; (C) has withheld from amounts owing to any
employee, creditor or other person all Taxes required by Applicable Law to be
withheld and has paid over to the proper governmental authority all such
withheld amounts to the extent due and payable, except where the failure to file
such Tax Returns or pay or withhold such Taxes or the failure of such Tax
Returns to be complete and accurate in all material respects would not be
reasonably likely to have a Company Material Adverse Effect and (D) has provided
Parent with true and correct information with respect to any consolidated Tax
Returns filed by Parent;
(ii) as of the date hereof, there are not pending or
threatened in writing any audits, examinations, investigations, litigation, or
other proceedings in respect of income Taxes of the Company;
(iii) as of the date hereof, no deficiencies for any
income Taxes have been proposed, asserted or assessed against the Company, which
have not been fully paid or adequately provided for in the appropriate financial
statements of the Company;
14
(iv) as of the date hereof, no waivers or comparable
consents of the time to assess any income Taxes are outstanding, and no power of
attorney granted by the Company with respect to any income Taxes is currently in
force;
(v) as of the date hereof, the Company has not agreed to
and is not required to make any adjustments under, Section 481(a) of the Code,
and is not a party to any Tax allocation, Tax sharing agreement, any closing
agreement or similar agreement with any Taxing authority in respect of income
Taxes; and
(vi) as used in this Agreement, (i) the term "Tax"
(including, with correlative meaning, the terms "Taxes", and "Taxable") includes
all federal, state, local and foreign income, profits, premium, franchise, gross
receipts, environmental, customs duty, capital stock, severance, stamp, payroll,
sales, employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or governmental
levies of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts and any interest in respect of
such penalties and additions, and (ii) the term "Tax Return" includes all
returns and reports (including elections, declarations, disclosures, schedules,
estimates and information returns) required to be supplied to a Tax authority
relating to Taxes.
(n) INTELLECTUAL PROPERTY.
(i) Except (A) as disclosed in Company Reports filed
prior to the date hereof, (B) with respect to the Parent Intellectual Property
Rights (as defined herein) or (C) as is not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect, to the knowledge of
the Company, there are no valid grounds for any bona fide claims (1) to the
effect that the distribution, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by the Company, infringes
on any copyright, patent, trademark, trade name, service ▇▇▇▇ or trade secret;
(2) against the use by the Company of any Intellectual Property used in the
business of the Company as currently conducted or as proposed to be conducted;
(3) challenging the ownership, validity or enforceability of any of the Company
Intellectual Property Rights or other trade secret material to the Company; or
(4) challenging the license or legally enforceable right to use of Third-Party
Intellectual Property Rights (as defined herein) by the Company.
(ii) Except as disclosed in Company Reports filed prior
to the date hereof, the Company has not received any written claims (A) to the
effect that the distribution, sale, licensing or use of any product using the
Parent Intellectual Property Rights as now used, sold or licensed or proposed
for use, sale or license by the Company, infringes on any copyright, patent,
trademark, trade name, service ▇▇▇▇ or trade secret, (B) challenging the
ownership, validity or enforceability of any of the Parent Intellectual Property
Rights; or (C) challenging the license or legally enforceable right to use of
Parent Intellectual Property Rights by the Company.
(iii) As used in this Agreement, the term (v)
"Intellectual Property" means all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or materials; (x) "Third-Party Intellectual Property Rights"
15
means any third-party patents, trademarks, trade names, service marks and
copyrights; (y) "Company Intellectual Property Rights" means the patents,
registered and material unregistered trademarks, trade names and service marks,
registered copyrights, and any applications therefor owned by the Company, all
of which are identified in Section 3.1(n) of the Company Disclosure Letter; and
(z) "Parent Intellectual Property Rights" means the patents, registered and
material unregistered trademarks, trade names and service marks, registered
copyrights, and any applications therefor owned by Parent.
(o) BROKERS AND FINDERS. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated in this Agreement, except
for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Advisors, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇
Incorporated.
(p) MATERIAL CONTRACTS. All agreements, leases, contracts,
notes, mortgages, indentures, arrangements or other obligations, whether written
or oral ("Contracts" and individually, a "Contract") of the Company (other than
intercompany agreements) that are required to be described in the Company
Reports or to be filed as exhibits thereto are described in the Company Reports
or filed as exhibits thereto, respectively, and are in full force and effect.
The Company has previously made available to Parent true and correct copies of
all agreements evidencing material indebtedness (other than intercompany
indebtedness) of the Company, in each case including all amendments thereto
(together with the Contracts referred to in the first sentence of this paragraph
(p), all other Contracts (other than intercompany agreements) of the Company
which would be required to be described in Company Reports entered into after
the filing of the most recent Company Report and all other Contracts (other than
intercompany agreements) of the Company which have an aggregate consideration of
at least $50,000 or a term in excess of 6 months, the "Material Contracts").
Neither the Company nor, to the knowledge of the Company, any other party is in
breach of or in default under any Material Contract except for such breaches and
defaults as are not, individually or in the aggregate, reasonably likely to
create a liability in excess of $50,000.
(q) AFFILIATE TRANSACTIONS. Except as disclosed in Section
3.1(q) of the Company Disclosure Letter or as described in the Company Reports
filed prior to the date of this Agreement, (i) there are no material obligations
or other liabilities (whether absolute, accrued, contingent, fixed or otherwise,
or whether due or to become due) between the Company, on the one hand, and any
of its officers or directors or affiliates (other than Parent and any of its
officers or directors or affiliates), on the other, (ii) no such officer,
director or affiliate (other than Parent and any of its officers or directors or
affiliates) provides or causes to be provided any material assets, services or
facilities to the Company, (iii) the Company neither provides nor causes to be
provided any material assets, services or facilities to any officer, director or
affiliate (other than Parent and any of its officers or directors or affiliates)
of the Company and (iv) the Company does not have any severance or similar
arrangements with any of its officers, directors or employees.
(r) INSURANCE. Section 3.1(r) of the Company Disclosure
Letter sets forth all insurance policies ("Insurance Policies") maintained by
the Company. To the Company's knowledge, all Insurance Policies are in full
force and effect.
16
Section 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT. Except
as set forth in the disclosure letter delivered to the Company by Parent on or
prior to entering into this Agreement (the "Parent Disclosure Letter"), Parent
hereby represents and warrants to the Company that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Parent is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has all requisite corporate or similar power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership or
operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in such good
standing, when taken together with all other such failures, is not, individually
or in the aggregate, reasonably likely to have a material adverse effect on
Parent.
(b) CORPORATE AUTHORITY; APPROVAL.
(i) Parent has all requisite corporate power and
authority and has taken all corporate action necessary (including the approval
of its shareholders) in order to execute, deliver and perform its obligations
under this Agreement and to consummate the Merger. This Agreement is a valid and
binding agreement of Parent and enforceable against Parent in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
(ii) The Board of Directors of Parent has duly adopted
the plan of merger set forth herein and approved this Agreement and the other
transactions contemplated hereby.
(c) GOVERNMENTAL FILINGS; NO VIOLATIONS.
(i) Other than the filings and/or notices (A) pursuant
to Section 1.2, (B) under the Exchange Act, (C) to comply with state securities
or "blue sky" laws, and (D) required to be made with the NASD, and other
applicable self-regulatory organizations, no material filings, reports or
notices are required to be made by Parent with, nor are any material consents,
registrations, approvals, permits or authorizations required to be obtained by
Parent from, any Governmental Entity, for the valid execution and delivery of
this Agreement by Parent and the consummation by Parent of the Merger and the
other transactions contemplated hereby.
(ii) The execution, delivery and performance of this
Agreement by Parent do not, and the consummation by Parent of the Merger and the
other transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the Certificate of Incorporation or
bylaws of Parent, (B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets of Parent (with or without notice,
lapse of time or both) pursuant to, any Material Contract binding upon Parent
(provided, as to consummation, the filings, reports and notices are made, and
approvals are obtained, as referred to in Section 3.2(e)(i)) or any Applicable
Law or governmental or non-governmental permit, registration, authorization or
license to which Parent is subject, or (C) any change in the rights or
obligations of any party under any Material Contract, except, in the case of
clause (B) or (C) above, for breach, violation,
17
default, acceleration, creation or change that is not, individually or in the
aggregate, reasonably likely to have a material adverse effect on Parent .
(d) PROXY STATEMENT. None of the information supplied or to
be supplied by Parent in writing for inclusion in the Proxy Statement, Schedule
13E-3 or other filings with the SEC required to effectuate the transactions
contemplated by this Agreement will, at the respective times that the Proxy
Statement, Schedule 13E-3 or such other filings are filed with the SEC and are
first published or sent or given to holders of Common Shares, and in the case of
the Proxy Statement, at the time that it or any amendment or supplement thereto
is mailed to the Company's stockholders, at the time of the Special Meeting or
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) BROKERS AND FINDERS. Neither Parent nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated in this Agreement.
(f) MERGER CONSIDERATION. Parent has received a written
commitment from VS Investors LLC to contribute capital to Parent prior to the
Effective Time in an aggregate amount sufficient to permit Parent to pay the
Merger Consideration and the transaction costs related thereto up to a maximum
contribution of $10 million, and Parent has or will have sufficient funds
available as of the Effective Time to pay the Merger Consideration.
ARTICLE IV
COVENANTS
Section 4.1. COMPANY INTERIM OPERATIONS. Unless otherwise
directed, requested or approved in writing by Parent and except as otherwise
expressly contemplated by this Agreement or as disclosed in Section 4.1 of the
Company Disclosure Letter, the Company covenants and agrees that, after the date
hereof and prior to the Effective Time:
(a) it shall use its commercially reasonable efforts to
conduct its business in the ordinary and usual course; PROVIDED, HOWEVER, it
shall pay or settle (i) on or before the Effective Time all of its "outstanding
obligations" as of the date hereof, and (ii) all of its "outstanding
obligations" incurred from the date hereof through the Effective Time as they
come due in accordance with their terms. For purposes of this Section 4.1(a),
"outstanding obligations" shall exclude (1) any indirect expenses and upcharges
to Parent under the intercompany agreements for calendar year 2001, (2) any
salary payments accrued for calendar year 2001 to the President of the Company,
(3) any transaction costs related to the Merger, (4) any moving costs related to
the relocation of the Company's operations to New Jersey, and (5) in the event
that the Company has not received a net amount of $400,000 as reimbursement in
connection with the cancellation of the New York City lease prior to the
Effective Time,
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outstanding obligations as of the Effective Time equal to the difference between
the amount of the reimbursement actually received by the Company and $400,000;
(b) it shall not (i) amend its charter or bylaws; (ii) split,
combine or reclassify its outstanding shares of stock; (iii) authorize, declare,
set aside or pay any dividend payable in cash, stock or property in respect of
any capital stock; or (iv) repurchase, redeem or otherwise acquire shares of its
capital stock, except in connection with cashless exercise of Company Options;
(c) it shall not (i) issue, sell, pledge, dispose of or
encumber any shares of, or securities convertible into or exchangeable or
exercisable for, or options, warrants, calls, commitments or rights or
agreements of any kind to acquire, any shares of its capital stock of any class
or any Voting Debt or any other material property or assets (other than Common
Shares issuable pursuant to options outstanding on the date hereof under the
Stock Plans and as contemplated by Section 4.7); or (ii) other than in the
ordinary and usual course of business, transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any material property or assets
or incur or modify any material indebtedness or other liability; or (iii) incur
any long-term indebtedness; or (iv) make any acquisition of, or investment in,
assets or stock of any other Person or entity;
(d) it shall not establish, adopt or enter into, Compensation
and Benefit Plans except as may be required by law, or contractual obligations
in effect as of the date of this Agreement, or as contemplated by this
Agreement;
(e) it shall not terminate or make any new, or accelerate the
vesting or payment of any existing, grants or awards under, or amend or
otherwise modify, any Compensation and Benefit Plans except in the ordinary
course of business to persons other than officers and directors of the Company
consistent with past practice or as may be required by law, or contractual
obligations in effect as of the date of this Agreement, or as contemplated by
this Agreement;
(f) it shall not increase the salary, wage, bonus or other
compensation of any employees other than normal base wage and base salary
increases (but not as to officers and directors of the Company) in the ordinary
and usual course of business or increases in connection with promotions in the
normal course of business and it shall not enter into any new severance
arrangements with its employees;
(g) it shall not (i) settle or compromise any material claims
or litigation; (ii) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
claims, liabilities or obligations in the ordinary and usual course of business;
or (iii) make or change a Tax or accounting principle, practice or method unless
required by GAAP or other Applicable Law, make or revoke any Tax election unless
required by Applicable Law, or resolve any Tax audit or other similar
proceeding;
(h) it shall not permit any insurance policy naming it as a
beneficiary or loss-payable payee to be canceled or terminated except in the
ordinary and usual course of business;
19
(i) it shall not enter into any agreement containing any
provision or covenant limiting in any material respect the ability of the
Company or affiliate to (i) sell any products or services of or to any other
person, (ii) engage in any line of business, or (iii) compete with any person;
and
(j) it shall not authorize or enter into an agreement to do
any of the foregoing.
Section 4.2. PARENT INTERIM OPERATIONS. Parent covenants and
agrees that, after the date hereof and prior to the Effective Time (unless the
Company shall otherwise approve in writing), it shall not take any action that
would cause any representation or warranty of Parent herein to become untrue in
any material respect, and it shall not authorize or enter into an agreement that
would reasonably be expected to have such an effect.
Section 4.3. ACQUISITION PROPOSALS.
(a) The Company will not, and shall direct its directors,
officers, employees, agents and representatives (including any advisor,
investment banker, attorney or accountant retained by it) ("Representatives")
not to, directly or indirectly, initiate, solicit, encourage (including by way
of furnishing non-public information or assistance) or take any other action
intended to facilitate any inquiries or the making of any proposal or offer with
respect to an Acquisition Proposal (as defined below), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal,
whether made before or after the date of this Agreement, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal; PROVIDED,
HOWEVER, that the Company may, and may authorize and permit its employees,
agents and Representatives to, furnish or cause to be furnished confidential
information and may participate in such negotiations and discussions or take any
other action otherwise prohibited by this Section 4.3(a) with any Person (unless
such other action is subject to the restrictions of Section 4.3(b), in which
case such other action shall only be permitted in accordance with such
restrictions) that, after the date hereof, makes an unsolicited written
Acquisition Proposal if and only to the extent that (A) the Company Board
determines in good faith (after having consulted with outside legal counsel and
the Special Committee) that such action is necessary in order for its directors
to comply with their fiduciary duties under Applicable Law; (B) prior to taking
such action, the Company (x) provides notice to Parent to the effect that it
intends to take such action and (y) receives from such Person an executed
confidentiality agreement containing terms reasonably acceptable to the Special
Committee and (C) such action is taken prior to receipt of the Company Requisite
Vote. The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company shall not terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement
related to an Acquisition Proposal to which it is a party. Notwithstanding the
foregoing, nothing contained herein shall prevent the Company from complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal.
"Acquisition Proposal" means any bona fide inquiry, offer or
proposal regarding any of the following (other than the transactions
contemplated by this Agreement): (i) any merger, consolidation, share exchange,
recapitalization, liquidation, dissolution, business
20
combination or other similar transaction involving the Company; (ii) any sale,
lease exchange, mortgage, pledge, transfer or other disposition of the stock or
all or substantially all of the assets of the Company; (iii) any tender offer
(including a self tender offer) or exchange offer that, if consummated, would
result in any Person or group beneficially owning more than 20% of the
outstanding Common Shares or the filing of a registration statement under the
Securities Act of 1933 in connection with any such proposed exchange offer; (iv)
any acquisition of 20% or more of the outstanding Common Shares; or (v) any
public announcement by the Company or any third party of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(b) Except as expressly permitted by this Section 4.3(b), the
Company Board shall not approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Acquisition Proposal.
The Company may, however, terminate this Agreement pursuant to Section 6.2(g) if
(i) the Company Board has received a Superior Acquisition Proposal (as defined
herein), (ii) in light of such Superior Acquisition Proposal the Company Board
has determined in good faith (after having consulted with outside legal counsel
and the Special Committee) that it is necessary for the Company Board to
terminate this Agreement in order to comply with its fiduciary obligations under
Applicable Law, (iii) the Company is in compliance with Sections 4.3(a) and
4.3(b), and (iv) the Company Board concurrently approves, and the Company
concurrently enters into, a definitive agreement providing for the
implementation of such Superior Acquisition Proposal. "Superior Acquisition
Proposal" means any bona fide unsolicited written Acquisition Proposal to
acquire all or substantially all of the Common Shares or assets of the Company
which the Company Board determines in its good faith judgment (after
consultation with the Company's independent financial advisor and the Special
Committee) to be on terms superior from a financial point of view to the holders
of Common Shares than the transactions contemplated by this Agreement, taking
into account all the terms and conditions of such proposal and this Agreement.
Section 4.4. FILINGS; OTHER ACTIONS; NOTIFICATION.
(a) The Company and Parent shall cooperate with each other
and use all reasonable best efforts to, take or cause to be taken all actions,
and do or cause to be done all things, necessary, proper or advisable on their
part under this Agreement and Applicable Laws to consummate and make effective
the Merger and the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports, applications and other
filings and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate the Merger
or any of the other transactions contemplated by this Agreement, including (i)
contesting any legal proceeding challenging the Merger; and (ii) the execution
of any additional instruments necessary to consummate the transactions
contemplated hereby. Subject to Applicable Laws relating to the exchange of
information, Parent and the Company shall have the right to review in advance,
and to the extent practicable each will consult the other with respect to all
the information relating to Parent or the Company, as the case may be, that
appear in any filing made with, or written materials submitted to, any third
party and/or any Governmental Entity in connection with the Merger and the other
transactions
21
contemplated by this Agreement. In exercising the foregoing right, each of the
Company and Parent shall act reasonably and as promptly as practicable.
(b) The Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement or any other statement,
filing, notice or application made by or on behalf of Parent or the Company to
any third party and/or any Governmental Entity in connection with the Merger and
the transactions contemplated by this Agreement.
(c) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by Parent or the Company, as the case may be, from any
third party and/or any Governmental Entity with respect to the Merger and the
other transactions contemplated by this Agreement.
Section 4.5. ACCESS. Upon reasonable notice, and except as
may otherwise be required by Applicable Law, the Company shall afford Parent's
officers, directors or Representatives access, during normal business hours
throughout the period prior to the Effective Time, to the Company's personnel,
properties, books, contracts and records (including any Tax Returns and work
papers of independent auditors) and, during such period, shall furnish promptly
to the other all information concerning the Company's business, properties,
personnel, and such other information as may reasonably be requested. No
investigation pursuant to this Section 4.5 shall affect or be deemed to modify
any representation or warranty made by the Company; PROVIDED, HOWEVER, that the
foregoing shall not require the Company to permit any inspection, or to disclose
any information, that in the reasonable judgment of the Company would result in
the disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company shall have used all
reasonable efforts to obtain the consent of such third party to such inspection
or disclosure.
Section 4.6. PUBLICITY; COMMUNICATIONS. Between the date of
this Agreement and the Effective Time, except to the extent required by
Applicable Laws, (a) neither Parent nor the Company shall issue any press
release or public announcement of any kind concerning the Merger or the other
transactions contemplated by this Agreement without the prior written consent of
the other; and, in the event any such public announcement, release or disclosure
is required by Applicable Laws, the parties will consult prior to the making
thereof and use their best efforts to agree upon a mutually satisfactory text;
(b) Parent shall not, and shall not permit its Representatives to, communicate
with customers, suppliers or employees of the Company or any other Person with
whom the Company maintains a similar business or commercial relationship, with
respect to the Merger or the other transactions contemplated by this Agreement
or with respect to the business or operations of the Company, without the prior
written consent of the Company; and (c) Parent shall not communicate with any
government official with respect to the Company or the Merger or the other
transactions contemplated hereby without the prior written consent of the
Company.
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Section 4.7. BENEFITS.
(a) OPTIONS. Prior to the consummation of the Merger, the
Company Board (or, if appropriate, any committee thereof) shall use its
reasonable best efforts (including by adopting appropriate resolutions and
seeking all consents from optionees) so that immediately prior to the Effective
Time, except as may be otherwise agreed by Parent and the holder of any Company
Options, the vesting of all Company Options shall be accelerated and all Company
Options which are not exercised and are outstanding as of the Effective Time
shall be canceled. The Company Board shall use its reasonable best efforts to
terminate the Option Plans, the Stand-Alone Options and 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 in each case effective immediately
prior to the Effective Time.
(b) EMPLOYEE BENEFITS. For all purposes under the employee
benefit plans of Parent and its affiliates providing benefits after the
Effective Time, each of the individuals who are, as of the Effective Time,
employees of the Company (the "Company Employees") shall be credited with his or
her years of service with the Company before the Effective Time, to the same
extent as such Company Employee was entitled, before the Effective Time, to
credit for such service under any similar Compensation and Benefit Plans, except
to the extent such credit would result in a duplication of benefits. In
addition, and without limiting the generality of the foregoing: (i) each Company
Employee shall be immediately eligible to participate, without any waiting time,
in any and all employee benefit plans sponsored by Parent and its affiliates for
the benefit of Company Employees (such plans, collectively, the "New Plans") to
the extent coverage under such New Plan replaces coverage under a comparable
Compensation and Benefit Plan in which such Company Employee participated
immediately before the Effective Time (such plans, collectively, the "Old
Plans"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Company Employee, Parent shall
cause all pre-existing condition exclusions and actively-at-work requirements of
such New Plan to be waived for such employee and his or her covered dependents,
and Parent shall cause any eligible expenses incurred by such employee and his
or her covered dependents during the portion of the plan year of the Old Plan
ending on the date such employee's participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan.
Section 4.8. EXPENSES. Parent shall pay all costs and
expenses, including those of the Paying Agent, in connection with the
transactions contemplated in Article II. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the Merger and the other transactions contemplated by this Agreement shall
be paid by the party incurring such expense. In furtherance of the foregoing, if
the Merger is consummated, the Surviving Corporation shall pay all such costs
and expenses incurred by the Company.
23
Section 4.9. INDEMNIFICATION; DIRECTORS' AND OFFICERS'
INSURANCE.
(a) From and after the Effective Time, Parent agrees that it
will, and will cause the Surviving Corporation to indemnify and hold harmless
each present and former director (including each member of the Special
Committee) and officer of the Company (when acting in such capacity or in any
other capacity at the request of or in the course of the performance of his or
her duties to the Company, including, without limitation, as a fiduciary of any
employee benefit plan in which any employee of the Company participates)
determined as of the Effective Time (the "Indemnified Parties") against any and
all costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under Delaware law and its charter or bylaws in effect on the date
hereof to indemnify such Person (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law). In addition, the
Surviving Corporation shall, as of the Effective Time, assume all of the
Company's obligations under the indemnification agreements executed by the
Company and each of the members of the Special Committee and agree to be bound
by the terms of such agreements.
(b) The Surviving Corporation shall maintain a policy of
officers' and directors' liability insurance for acts and omissions occurring
prior to the Effective Time with coverage in amount and scope at least as
favorable as the Company's existing directors' and officers' liability insurance
coverage ("D&O Insurance") for a period of at least six years after the
Effective Time so long as the annual premium therefor is not in excess of 300%
of the last annual premium paid prior to the date hereof (the "Current
Premium"); PROVIDED, HOWEVER, if the existing D&O Insurance expires, is
terminated or canceled during such six-year period, the Surviving Corporation
will use all reasonable efforts to obtain D&O Insurance with coverage in amount
and scope at least as favorable as the Company's existing directors' and
officers' liability insurance coverage for the remainder of such period for a
premium not in excess (on an annualized basis) of 300% of the Current Premium
or, if the cost of such coverage exceeds 300% of the Current Premium, the
maximum amount of coverage that can purchased for 300% of the Current Premium.
(c) The provisions of this Section 4.9 are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives.
Section 4.10. TAKEOVER STATUTE. If any Takeover Statute is or
may become applicable to the Merger or the other transactions contemplated by
this Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement, and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
Section 4.11. EXEMPTION FROM LIABILITY UNDER SECTION 16(B).
Parent and the Company shall take all such steps as may be required or
reasonably requested to
24
cause the transactions contemplated by this Agreement and any other dispositions
of Company equity securities (including derivative securities) in connection
with this Agreement by each individual who is a director or officer of the
Company to be exempt under Rule 16b-3 promulgated under the Exchange Act and the
rules and regulations promulgated thereunder, such steps to be taken in
accordance with the No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, or as may otherwise be reasonably
requested by the Company.
Section 4.12. TRANSFER TAXES. All stock transfer, real estate
transfer, documentary, stamp, recording, sales, use and other similar Taxes
(including interest, penalties and additions to any such Taxes) ("Transfer
Taxes") incurred in connection with the transactions contemplated hereby shall
be paid by either Parent or the Surviving Corporation, and the Company shall
cooperate with Parent in preparing, executing and filing any Tax Returns with
respect to, or qualifying for any exemptions from, such Transfer Taxes.
ARTICLE V
CONDITIONS
Section 5.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) STOCKHOLDER APPROVAL. If required by Applicable Law, this
Agreement shall have been adopted and the Merger shall have been duly approved
by the holders of Common Shares constituting the Company Requisite Vote.
(b) INJUNCTION OR RESTRAINT. No court or Governmental Entity
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, statute, ordinance, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent) that is
in effect and restrains, enjoins or otherwise prohibits consummation of the
Merger (collectively, an "Order").
Section 5.2. FRUSTRATION OF CLOSING CONDITIONS. Neither
Parent nor the Company may rely on the failure of any condition set forth in
Section 5.1 to be satisfied if such failure was caused by such party's failure
to use reasonable best efforts to consummate the transactions contemplated
hereby.
Section 5.3. CONDITIONS TO PARENT'S PERFORMANCE. The
obligations of Parent to effectuate the Merger hereunder are subject to the
satisfaction of the following conditions precedent.
(a) TERMINATION MATERIAL ADVERSE EFFECT. There shall not have
occurred any changes, events, effects, occurrences, states of fact or
developments that, individually or in the aggregate, constituted, or that would
reasonably be expected to constitute, a Company Material Adverse Effect, except
for continuing losses from operations of the
25
Company, loss of employees or customers, any change affecting the Company's
industry in general or a general downturn of the U.S. economy (a "Termination
Material Adverse Effect").
(b) CONSENTS AND APPROVALS. Parent shall have received all
necessary approvals, consents and waivers, satisfactory to Parent in its sole
discretion, required under its material contracts (including, without
limitation, its Credit Agreement dated May 15, 1997 and Note and Warrant
Purchase Agreement dated May 15, 1997) to permit the Merger and the transactions
contemplated hereby.
ARTICLE VI
TERMINATION
Section 6.1. TERMINATION BY MUTUAL CONSENT. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval by stockholders of the
Company referred to in Section 5.1(a), by mutual written consent of the Company
and Parent by action of their respective Boards of Directors.
Section 6.2. TERMINATION BY EITHER PARENT OR THE COMPANY.
This Agreement may be terminated and the Merger may be abandoned:
(a) by action of the Board of Directors of either Parent or
the Company if the Merger has not occurred on or prior to April 12, 2001 (the
"Termination Date"); PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this clause (a) shall not be available to any party that
has breached its obligations under this Agreement in any manner that shall have
contributed to the occurrence of the failure of the Merger to be consummated
prior to the Termination Date;
(b) by action of the Board of Directors of either Parent or
the Company if any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable;
(c) by action of the Board of Directors of Parent if the
Company Board shall have withdrawn, changed or modified (including by amendment
of its Schedule 14A), in any such case in a manner adverse to Parent, its
approval or recommendation contemplated by Section 4.3(a); PROVIDED, HOWEVER,
that any public statement by the Company that (A) it has received an Acquisition
Proposal or otherwise taken any action permitted by Section 4.3(a) or (B)
otherwise describing the operation of the provisions of this Agreement relating
to an Acquisition Proposal, termination, the Company Board's approval or
recommendation of this Agreement or the transactions contemplated hereby, shall
not, in and of themselves, be deemed to be a public proposal to withdraw, change
or modify the Company Board's approval or recommendation for the purposes of
this clause (c);
(d) by action of the Board of Directors of Parent, in the
event of either:
(i) a breach by the Company of any representation or
warranty made herein by the Company as of the date hereof (determined without
giving effect to any
26
qualifications as to "Company Material Adverse Effect" contained in such
representation or warranty) which breach, individually or together with all
other breaches of representations and warranties made by the Company as of the
date hereof, involves a liability or liabilities, or results in or could
reasonably be expected to result in losses, damages, liabilities or diminution
in value of the Company, in excess of $350,000.
(ii) a breach by the Company of any representation or
warranty made herein by the Company as of the Effective Time (determined without
giving effect to any qualifications as to "Company Material Adverse Effect,"
"material adverse effect," "material" or similar qualifications contained in
such representation or warranty), which breach would, individually or together
with all other breaches of representations and warranties made by the Company as
of the Effective Date, be reasonably likely to have a Termination Material
Adverse Effect;
(iii) a breach by the Company of any of its covenants or
agreements contained in Sections 4.1 through 4.5 or Sections 4.7 through 4.12,
which breach cannot be or has not been cured within 20 days after the giving of
written notice to the Company; or
(iv) a material breach by the Company of any of its
covenants or agreements contained herein (other than Sections 4.1 through 4.5
and Sections 4.7 through 4.12), which breach cannot be or has not been cured
within 20 days after the giving of written notice to the Company;
(e) by action of the Board of Directors of Parent, if the
number of Dissenting Shares equals or exceeds five percent (5%) of the issued
and outstanding stock of the Company;
(f) by action of the Company Board, in the event of either
(x) a breach by Parent of any representation or warranty made herein by Parent
(determined without giving effect to any qualifications as to "material adverse
effect," "material" or similar qualifications contained in such representation
or warranty) which breach would, individually or in the aggregate, be reasonably
likely to have a material adverse effect on Parent; or (y) a breach by Parent of
any of its covenants or agreements contained herein, which breach cannot be or
has not been cured within 20 days after the giving of written notice to Parent;
or
(g) by action of the Company Board, in accordance with all
the requirements of Section 4.3(b).
Section 6.3. EFFECT OF TERMINATION AND ABANDONMENT. In the
event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VI, this Agreement (other than as set forth in Section
7.1) shall become void and of no effect with no liability on the part of any
party hereto (or of any of its directors, officers, employees, agents, legal and
financial advisors or other representatives); PROVIDED, HOWEVER, except as
otherwise provided herein, no such termination shall relieve any party hereto of
any liability or damages resulting from any willful breach of this Agreement.
Section 6.4. TERMINATION DECISIONS BY THE COMPANY. Any
determination or action by the Company Board to terminate this Agreement
pursuant to this Article VI shall be made only upon the recommendation of the
Special Committee.
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ARTICLE VII
MISCELLANEOUS
Section 7.1. SURVIVAL. This Article VII and the agreements of
the Company and Parent contained in Section 4.9 (Indemnification; Directors' and
Officers' Insurance) shall survive the consummation of the Merger. This Article
VII, the agreements of the Company and Parent contained in Section 4.8
(Expenses) and Section 6.3 (Effect of Termination and Abandonment) shall survive
the termination of this Agreement. All other representations, warranties,
covenants and agreements in this Agreement shall not survive the consummation of
the Merger or the termination of this Agreement.
Section 7.2. MODIFICATION OR AMENDMENT. Subject to the
provisions of Applicable Law, at any time prior to the Effective Time, the
parties hereto may modify or amend this Agreement, by written agreement executed
and delivered by duly authorized officers of the respective parties; PROVIDED,
HOWEVER, that any modification or amendment hereto shall have been approved by
the Special Committee.
Section 7.3. WAIVER OF CONDITIONS. The conditions to each of
the parties' obligations to consummate the Merger are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by Applicable Law; PROVIDED, HOWEVER, that any waiver by the Company
shall have been approved by the Special Committee.
Section 7.4. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
Section 7.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably submit to the jurisdiction of
the courts of the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State court. The parties hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of such dispute and agree that mailing of process or other papers in
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connection with any such action or proceeding in the manner provided in Section
7.6 or in such other manner as may be permitted by law shall be valid and
sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.5.
Section 7.6. NOTICES. Any notice, request, instruction or
other document to be given hereunder by any party to the others shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, or by facsimile:
if to Parent:
Vitamin Shoppe Industries Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
FdG Associates
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
29
if to the Company:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
Special Committee
c/o Whitney & Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
Section 7.7. ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS. This
Agreement (including any exhibits hereto), the Company Disclosure Letter, the
Parent Disclosure Letter constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter hereof.
Section 7.8. NO THIRD PARTY BENEFICIARIES. Except as provided
in Section 4.9 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any Person, other than the parties
hereto, any rights or remedies hereunder.
Section 7.9. INTERPRETATION. The table of contents and
headings herein are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this
30
Agreement is made to a Section, Article or Exhibit, such reference shall be to a
Section or Article of or Exhibit to 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."
Section 7.10. ASSIGNMENT. This Agreement shall not be
assignable by operation of law or otherwise; PROVIDED, HOWEVER, that Parent may
assign this Agreement to any wholly owned, direct or indirect subsidiary of
Parent which agrees in writing to be bound by all of the terms and conditions
hereof and to assume all of Parent's obligations hereunder; PROVIDED, FURTHER,
that no such permitted assignment shall relieve the assigning party of its
obligations hereunder, and PROVIDED, FURTHER, that no assignment shall be
permissible if it would adversely affect or cause any delay in the consummation
of the transactions contemplated hereby.
(Signature Page Follows)
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
VITAMIN SHOPPE INDUSTRIES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman
[Signature Page for Agreement and Plan of Merger]