Exhibit 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
dated as of
January 17, 1997
among
AMF Bowling Centers, Inc.,
Noah Acquisition Corp.
and
American Recreation Centers, Inc.
EXECUTION COPY
TABLE OF CONTENTS
Page
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SECTION 1.
ARTICLE I
THE MERGER
SECTION 1.1. The Merger.................................................................. 2
SECTION 1.2. Closing..................................................................... 2
SECTION 1.3. Effective Time of the Merger................................................ 3
SECTION 1.4. Effects of the Merger....................................................... 3
SECTION 2.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares........................................................ 3
SECTION 2.2. Surrender and Payment....................................................... 4
SECTION 2.3. Dissenting Shares........................................................... 6
SECTION 2.4. Stock Options and Stock Plans............................................... 6
SECTION 3.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Incorporation................................................... 8
SECTION 3.2. Bylaws...................................................................... 9
SECTION 3.3. Directors and Officers...................................................... 9
SECTION 4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties
of the Company........................................................... 9
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(a) Organization, Standing and
Corporate Power.......................................................... 9
(b) Subsidiaries and Joint Ventures............................................. 10
(c) Capital Structure........................................................... 11
(d) Authority; Noncontravention................................................. 12
(e) SEC Documents; Financial Statements;
No Undisclosed Liabilities............................................... 13
(f) Disclosure Documents........................................................ 14
(g) Licenses, Approvals, Etc.................................................... 15
(h) Real Properties............................................................. 16
(i) Tangible Personal Property; Sufficiency
of Assets................................................................ 18
(j) Intellectual Property....................................................... 19
(k) Environmental Compliance.................................................... 20
(l) Absence of Certain Changes or Events........................................ 21
(m) Litigation.................................................................. 23
(n) Compliance with Laws........................................................ 23
(o) Absence of Changes in Stock or
Benefit Plans............................................................ 24
(p) ERISA Compliance............................................................ 24
(q) Taxes....................................................................... 27
(r) Contracts; Debt Instruments................................................. 28
(s) Insurance................................................................... 31
(t) Interests of Officers and Directors......................................... 31
(u) State Takeover Statutes..................................................... 32
(v) Brokers..................................................................... 32
SECTION 4.2. Representations and Warranties of
Parent and Merger Subsidiary............................................. 32
(a) Organization, Standing and
Corporate Power.......................................................... 32
(b) Authority; Noncontravention................................................. 32
(c) Disclosure Documents........................................................ 34
(d) Brokers..................................................................... 34
(e) Financing................................................................... 34
SECTION 5.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Conduct of Business......................................................... 34
SECTION 5.2. Shareholder Meeting; Proxy Material......................................... 37
SECTION 5.3. Access to Information....................................................... 38
SECTION 5.4. No Solicitation............................................................. 39
SECTION 5.5. Fair Price Structure........................................................ 40
SECTION 5.6. Covenants Regarding Certain Benefit
Plans.................................................................... 40
SECTION 5.7. Cooperation in Arrangements with
Lenders.................................................................. 41
SECTION 5.8. Title Insurance ........................................................... 41
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SECTION 6.
ARTICLE VI
COVENANTS OF PARENT
SECTION 6.1. Confidentiality........................................... 41
SECTION 6.2. Obligations of Merger Subsidiary.......................... 42
SECTION 6.3. Voting of Shares.......................................... 42
SECTION 6.4. Director and Officer Liability............................ 42
SECTION 6.5. Employees................................................. 43
SECTION 7.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
SECTION 7.1. HSR Act Filings; Reasonable
Efforts; Notification.................................. 44
SECTION 7.2. Public Announcements...................................... 47
SECTION 8.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of
Each Party............................................. 47
SECTION 8.2. Conditions to the Obligations of
Parent and Merger Subsidiary........................... 47
SECTION 8.3. Conditions to the Obligations of
the Company............................................ 49
SECTION 9.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination............................................... 49
SECTION 9.2. Effect of Termination..................................... 51
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SECTION 10.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices .......................................... 51
SECTION 10.2. Survival of Representations
and Warranties................................. 52
SECTION 10.3. Amendments; No Waivers............................ 53
SECTION 10.4. Fees and Expenses................................. 53
SECTION 10.5. Successors and Assigns;
Parties in Interest............................ 54
SECTION 10.6. Governing Law .................................... 54
SECTION 10.7. Counterparts; Effectiveness;
Interpretation................................ 55
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of January 17,
1997, among American Recreation Centers, Inc. a California corporation (the
"Company"), AMF Bowling Centers, Inc., a Virginia corporation ("Parent"), and
Noah Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Subsidiary").
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger (as defined herein), are fair to and in the best interests
of the shareholders of the Company, (ii) determined that the consideration to be
paid in the Merger is fair to and in the best interests of the shareholders of
the Company, (iii) approved this Agreement and the transactions contemplated
hereby, including the Merger, and (iv) resolved to recommend approval and
adoption of this Agreement, the Merger and the other transactions contemplated
hereby by such shareholders;
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved the merger of Merger Subsidiary into the Company
as set forth below (the "Merger"), upon the terms and subject to the conditions
set forth in this Agreement, the General Corporation Law of the State of
Delaware (the "DGCL") and the General Corporation Law of the State of California
(the "CGCL"), whereby each issued and outstanding share of common stock, no par
value per share, of the Company (the "Shares") (excluding shares owned, directly
or indirectly, by the Company or any subsidiary of the Company or by Parent,
Merger Subsidiary or any other subsidiary of Parent and Dissenting Shares (as
defined herein)), shall be converted into the right to receive the Merger
Consideration (as defined herein);
WHEREAS, simultaneously with the execution hereof, ▇▇▇▇ ▇▇▇▇▇▇▇▇ has
agreed to sell his entire interest in Triangle Bowl Associates ("Triangle") to
the Company concurrent with the Effective Time (as defined herein) and, upon
such acquisition, the Company and its wholly-owned subsidiaries will own all of
the equity interests in Triangle;
WHEREAS, simultaneously with the execution hereof, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ has agreed to sell his entire interest in Mid-America Associates and
American Red Carpet ("America and Carpet") to a subsidiary of the Company
concurrent with the Effective Time, and upon such acquisition, the Company and
its wholly-owned subsidiaries will own all of the equity interests in America
and Carpet; and
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WHEREAS, Parent, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
1.
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions
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set forth in this Agreement, and in accordance with the DGCL and the CGCL,
Merger Subsidiary shall be merged with and into the Company at the Effective
Time (as defined herein). At the Effective Time, the separate corporate
existence of Merger Subsidiary shall cease, and the Company (i) shall continue
as the surviving corporation as a direct or indirect wholly-owned subsidiary of
Parent (Merger Subsidiary and the Company are sometimes hereinafter referred to
as "Constituent Corporations" and, as the context requires, the Company, after
giving effect to the Merger, is sometimes hereinafter referred to as the
"Surviving Corporation"), (ii) shall succeed to and assume all the rights and
obligations of Merger Subsidiary in accordance with the DGCL and CGCL, (iii)
shall continue under the name "American Recreation Centers, Inc." and (iv) shall
be governed by the laws of the State of California.
SECTION 1.2. Closing. The closing of the Merger (the "Closing") shall
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take place as soon as practicable, but in any case on or prior to the third
business day, after which all of the conditions set forth in Article VIII hereof
shall be fulfilled or waived in accordance with this Agreement. At the time of
the Closing, the Company and Merger Subsidiary will file a certificate of merger
with the Secretary of State of the State of Delaware and a copy of the merger
agreement with an officers' certificate of each Constituent Corporation, or a
certificate of ownership, as applicable, with the Secretary of State of the
State of California and make all other filings or recordings required by the
DGCL and the CGCL in connection with the Merger.
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SECTION 1.3. Effective Time of the Merger. The Merger shall, subject to
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the DGCL and the CGCL, become effective as of such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware and a
copy of the merger agreement with an officers' certificate of each Constituent
Corporation is duly filed with the Secretary of State of the State of California
or at such later time as is specified in the certificate of merger and the
merger agreement (the "Effective Time").
SECTION 1.4. Effects of the Merger. From and after the Effective Time,
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the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and Merger Subsidiary, all as provided under the DGCL and the CGCL.
The Surviving Corporation may be served with process in the State of Delaware in
any proceeding for enforcement of any obligation of Merger Subsidiary, as well
as for enforcement of any obligation of the Surviving Corporation arising from
the Merger, including any suit or other proceeding to enforce the right of any
shareholders as determined in appraisal proceedings pursuant to the provisions
of Section 262 of the DGCL or Chapter 13 of the CGCL, as applicable, and
irrevocably appoints the Secretary of State of the State of Delaware as its
agent to accept service of process in any such suit or proceedings. The address
to which a copy of such process shall be mailed by such Secretary of State is
▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: Corporate Secretary.
2.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares. At the Effective Time, by virtue of
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the Merger and without any action on the part of the holder of any Shares or any
shares of capital stock of Merger Subsidiary:
(a) each Share owned by the Company or owned by Parent, Merger
Subsidiary or any subsidiary of any of the Company, Parent or Merger
Subsidiary (which shall not include Shares owned by the Company's Employee
Stock Ownership Plan or Employee Stock Purchase Plan) immediately prior to
the Effective Time shall be canceled, and no payment shall be made with
respect thereto;
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(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one fully paid and nonassessable share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation; and
(c) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 2.1(a) or as provided in
Section 2.3 with respect to Dissenting Shares, be converted into the right
to receive $8.50 in cash without interest (the "Merger Consideration").
SECTION 2.2. Surrender and Payment. (a) Prior to the Effective Time,
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Parent shall appoint a bank or trust company (the "Exchange Agent") for the
purpose of exchanging certificates representing Shares for the Merger
Consideration. Parent will, or will cause Merger Subsidiary to, make available
to the Exchange Agent, as needed, the Merger Consideration to be paid in respect
of the Shares (the "Exchange Fund"). For purposes of determining the Merger
Consideration to be made available, Parent shall assume that no holder of Shares
will perfect his right to demand cash payment of the fair market value of his
Shares pursuant to Chapter 13 of the CGCL. Promptly after the Effective Time,
Parent will send, or will cause the Exchange Agent to send, to each holder of
Shares at the Effective Time a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the certificates representing
Shares to the Exchange Agent). The Exchange Agent shall, pursuant to irrevocable
instructions, make the payments provided in this Section 2.2. The Exchange Fund
shall not be used for any other purpose, except as provided in this Agreement.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates representing such Shares, together with a properly
completed letter of transmittal covering such Shares and other customary
documentation, will be entitled to receive the Merger Consideration payable in
respect of such Shares. As of the Effective Time, all such Shares shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate previously representing
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any such Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without interest, upon surrender of
the certificates representing such Shares, as contemplated hereby.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article II.
(e) Any portion of the Exchange Fund made available to the Exchange
Agent pursuant to this Agreement that remains unclaimed by the holders of Shares
six months after the Effective Time shall be returned to Parent, upon Parent's
demand, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 2.2 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of his Shares. Notwithstanding the foregoing, Parent shall not be liable
to any holder of Shares for any amount paid to a public official pursuant to and
in accordance with the requirements of applicable abandoned property, escheat or
similar laws.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.2(a) to pay for Shares for which the right
to a determination of fair market value, as contemplated by Section 2.3, have
been perfected shall be returned to Parent upon Parent's demand.
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SECTION 2.3. Dissenting Shares. Notwithstanding Section 2.1, Shares
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outstanding immediately prior to the Effective Time and held by a holder who is
entitled to and has demanded cash payment of the fair market value for such
Shares in accordance with Section 1301 of the CGCL and submitted certificates
representing such Shares for endorsement in accordance with Section 1302 of the
CGCL (the "Dissenting Shares") shall not be converted into the right to receive
the Merger Consideration as provided in Section 2.1(c) of this Agreement, unless
and until such holder fails to perfect or withdraws or otherwise loses his right
to a determination of the fair market value of the shares and payment under the
CGCL. If, after the Effective Time, any such holder fails to perfect or
withdraws or loses his right to a determination of the fair market value of the
Shares under the CGCL, such Dissenting Shares shall thereupon be treated as if
they had been converted as of the Effective Time into the right to receive the
Merger Consideration to which such holder is entitled, without interest thereon.
As soon as practicable after the approval of the Merger by the Company's
shareholders (including, without limitation, by written consent thereto), to the
extent required by the CGCL, and in any event not later than ten (10) days
following such approval, Parent shall mail to each shareholder of the Company
who is entitled to such notice pursuant to Chapter 13 of the CGCL, a notice of
such approval of the Merger, such notification to include the information and
materials required by Section 1301(a) of the CGCL (including, without
limitation, the price determined by Parent to represent the fair market value of
any Dissenting Shares).
SECTION 2.4. Stock Options and Stock Plans. (a) Parent and the Company
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shall take all actions necessary to provide that, as to those holders who so
agree, at the Effective Time, (i) each Company Option (defined below) so
surrendered for cash, shall be cancelled, and (ii) in consideration of such
cancellation, and except to the extent that Parent or Merger Subsidiary and the
holder of any such Company Option otherwise agree, the Company shall pay to each
such holder of Company Options an amount in cash in respect thereof equal to the
product of (1) the excess, if any, of the Merger Consideration over the per
share exercise price thereof and (2) the number of Shares subject thereto
immediately prior to the Effective Time. The Company represents that the Board
of Directors of the Company has determined pursuant to the Company's 1988 Key
Employee Incentive Stock Option Plan (the "Employee Option Plan"), in accordance
with the first sentence of Section 12.1 thereof,
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that holders of Company Options thereunder who do not elect to surrender their
Company Options for cancellation pursuant to the first sentence of this Section
2.4(a), upon exercise of such Company Options after the Effective Time, shall
receive upon such exercise and payment of the aggregate exercise price
contemplated thereby an amount in cash (subject to applicable withholding taxes)
equal to the product of (1) the Merger Consideration and (2) the number of
Shares subject thereto immediately prior to the Effective Time. "Company Option"
means any option granted, whether or not exercisable (it being understood that
all Company Options shall be deemed to be, and shall be treated under this
Article II as though, such Company Options were fully vested immediately prior
to the Effective Time), and not exercised or expired, to a current or former
employee, director or independent contractor of the Company or any of its
subsidiaries or any predecessor thereof to purchase Shares pursuant to the
Employee Option Plan, the 1988 Stock Option Plan for Non-Employee Directors (the
"Director Formula Plan") or the 1996 Director Plan (the "Director Plan" and
together with the Employee Option Plan and the Director Formula Plan,
collectively, the "Option Plans").
(b) The Company represents that each director of the Company who holds
Company Options has agreed for the benefit of Parent and Merger Subsidiary to
exercise all of his Company Options prior to the Effective Time or to surrender
such Company Options in the manner prescribed by Section 2.4(a) and each such
director has agreed that he shall provide notice to the Company of his decision
to exercise or surrender his Company Options prior to the Effective Time.
(c) Prior to the Effective Time, the Company shall use its best efforts
to (i) obtain any consents from holders of Company Options and (ii) make any
amendments to the terms of such stock option or compensation plans or
arrangements that, in the case of either clauses (i) or (ii), are necessary to
give effect to the transactions contemplated by this Section 2.4.
(d) Pursuant to Section 10 of the Director Formula Plan, the Company
represents that the Plan Administrator thereunder has accelerated the expiration
date of all Company Options thereunder to immediately prior to the Effective
Time and each of the holders of Company Options issued pursuant to the Director
Formula Plan has acknowledged and agreed to such acceleration. Prior to the
Effective Time, the Company shall
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terminate the Option Plans.
(e) Prior to the Effective Time, the Board of Directors of the Company
shall take all actions necessary to (i) amend the Company's Employee Stock
Purchase Plan ("ESPP") so that immediately prior to the Effective Time, all
Shares held thereunder become aged and vested, (ii) allow the holders of Shares
in trust under the ESPP, whether or not their rights are then vested, to vote
such Shares at the Company Shareholder Meeting (as defined herein) and (iii)
provide that at the Effective Time, the ESPP shall be terminated and any cash
thereunder will be distributed to the respective participants in the ESPP,
including any cash received in respect of any unvested shares.
(f) The Company represents that 83,000 options have been granted under
the Director Plan and prior to the Effective Time the Company agrees that it
shall not issue any additional options under the Director Plan and that pursuant
to Section 8.1 of the Director Plan the Board of Directors of the Company shall
terminate the Director Plan concurrent with the Effective Time. The Company also
represents that all Company Options issued pursuant to the Director Plan shall
expire by their terms upon consummation of the Merger.
(g) The Board of Directors of the Company shall take all actions
necessary to terminate the Company's Investor Stock Purchase Plan ("ISPP")
effective concurrent with the Effective Time.
3.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Incorporation. The articles of incorporation of
-------------------------
the Company in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that Article Fourth of the articles of incorporation of
the Surviving Corporation shall be amended and restated to read as follows:
FOURTH: The number of Directors of this Corporation shall be as
provided in the bylaws of the Corporation.
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SECTION 3.2. Bylaws. The bylaws of the Company in effect at the
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Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law, except that Section 2 of Article III of the
bylaws of the Surviving Corporation shall be amended and restated to read as
follows:
NUMBER OF DIRECTORS. The number of directors of the corporation shall be
one (1), which number may be changed from time to time, by a resolution duly
adopted by the shareholders.
SECTION 3.3. Directors and Officers. From and after the Effective Time,
----------------------
until successors are duly elected or appointed and qualified in accordance with
applicable law, the officers and directors of Merger Subsidiary at the Effective
Time shall be the officers and directors of the Surviving Corporation.
4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company. The Company
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represents and warrants to Parent and Merger Subsidiary, subject to the
exceptions and qualifications set forth in the Disclosure Schedule (as defined
herein), as follows (for purposes of this Section 4.1, references to the
"Knowledge of the Company" shall mean the actual knowledge of the following
individuals: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇):
(a) Organization, Standing and Corporate Power. Each of the Company and
------------------------------------------
each of its Significant Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of the
Company and, except as disclosed in Section 4.1(a) of the Disclosure Schedule,
each of its subsidiaries is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed
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(individually or in the aggregate) could not reasonably be expected to (i) have
a material adverse effect on the value, condition (financial or otherwise),
prospects, business, or results of operations of the Company and its
subsidiaries taken as a whole, (ii) impair the ability of any party hereto to
perform its obligations under this Agreement or (iii) prevent or materially
delay consummation of any of the transactions contemplated by this Agreement (a
"Material Adverse Effect"). The Company has delivered to Parent complete and
correct copies of its articles of incorporation and bylaws, the articles of
incorporation and bylaws of its Significant Subsidiaries, and the joint venture,
partnership and other governing agreements and documents ("Joint Venture
Documents") of any such partnership, joint venture or similar business or entity
in which the Company, directly or indirectly has any ownership interests (the
"Joint Ventures"), in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "subsidiary" of any person means another person in
which such first person, directly or indirectly, owns 50% or more of the equity
interests or has the right, through ownership of equity, contractually or
otherwise, to elect at least a majority of its Board of Directors or other
governing body; and a "Significant Subsidiary" means any subsidiary of a person
that constitutes a significant subsidiary of such person within the meaning of
Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the
"SEC").
(b) Subsidiaries and Joint Ventures. Section 4.1(b) of the disclosure
-------------------------------
schedule delivered by the Company to Parent and Merger Subsidiary prior to the
execution of this Agreement (the "Disclosure Schedule") lists each subsidiary of
the Company, its form of organization, its respective jurisdiction of
incorporation or formation, if applicable, and the holders of the outstanding
capital stock or other equity interests of such subsidiaries and indicates
whether such subsidiary is a Significant Subsidiary. Section 4.1(b) of the
Disclosure Schedule also lists all Joint Venture Documents to which the Company
or any of its subsidiaries is a party or otherwise governing any such
subsidiary. All the outstanding shares of capital stock or other ownership
interests of each such subsidiary of the Company have been validly issued and
are fully paid and nonassessable and, all such shares or ownership interests
indicated as being owned by the Company or any of its subsidiaries are owned by
the Company, by another subsidiary of the Company or by the Company and another
such subsidiary, free and clear of all Liens (as defined herein) and free of any
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other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or equity interests). Except for
the capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest, with a fair market
value in excess of $100,000, in any person. In addition, Section 4.1(b)(i) of
the Disclosure Schedule lists all of the bowling centers owned or leased by
Triangle; Section 4.1(b)(ii) of the Disclosure Schedule lists all of the bowling
centers owned or leased by America; and Section 4.1(b)(iii) lists all bowling
centers owned or leased by Carpet.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of 21,484,375 Shares and 5,000,000 shares of Preferred Stock, no par
value per share. As of December 31, 1996, (i) 4,606,199 Shares were issued and
outstanding, (ii) no Shares were held by the Company or by any of the Company's
subsidiaries, (iii) 633,450 Shares were reserved for issuance pursuant to the
outstanding Company Options, (iv) no Shares were reserved for issuance pursuant
to the ESPP and (v) no shares of Preferred Stock were issued, reserved for
issuance or outstanding. Except as set forth above, no shares of capital stock
or other equity or voting securities of the Company are issued, reserved for
issuance or outstanding, except for Shares referred to in clause (iii) above
which may be issued upon exercise of the outstanding Company Options. All
outstanding shares of capital stock of the Company are, and all Shares which may
be issued pursuant to the Option Plans will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are not any bonds, debentures, notes or other indebtedness or
securities of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of the Company may vote. Except as set forth above and in Section
4.1(c) of the Disclosure Schedule, there are not any securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of the Company or
of any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrange-
11
ment or undertaking. There are no outstanding rights, commitments, agreements,
arrangements or undertakings of any kind obligating the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire or dispose of any shares
of capital stock or other equity or voting securities of the Company or any of
its subsidiaries or any securities of the type described in the two immediately
preceding sentences.
(d) Authority; Noncontravention. The Company has the requisite corporate
---------------------------
power and authority to enter into this Agreement and, subject to the Company
Shareholder Approval (as defined below) required in connection with the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The Merger requires the approval by the affirmative vote of the
holders of a majority of the outstanding Shares (the "Company Shareholder
Approval"), which approval is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve the Merger and
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, except for the Company
Shareholder Approval in connection with the consummation of the Merger. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding agreement of Parent and Merger
Subsidiary, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation, modification or acceleration of any
obligation or to a loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the articles of incorporation or bylaws of the Company
or the comparable charter or organizational documents of any of its
subsidiaries, (ii) except for those consents listed in Section 4.1(d) of the
Disclosure Schedule, any loan or credit agreement, note, bond, mortgage,
indenture, lien, lease or any other contract, agreement, instrument, permit,
commitment, concession, franchise or license applicable to the Company or any of
its subsidiaries or their respective properties or assets or
12
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets other than, in the case of clauses (ii) and
(iii) above, any such conflicts, violations, defaults, rights, losses or Liens
that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. No consent, approval, franchise, order, license,
permit, waiver or authorization of, or registration, declaration or filing with
or exemption, notice, application, or certification by or to (collectively,
"Consents") any federal, state or local government or any arbitral panel or any
court, tribunal, administrative or regulatory agency or commission or other
governmental authority, department, bureau, commission or agency, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the Company
or any of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the required consents listed on
Section 4.1(d) of the Disclosure Schedule, (ii) the filing of the documents
referred to in Section 1.3 hereof in accordance with the DGCL and CGCL and
similar documents with the relevant authorities of other states in which the
Company is qualified to do business, (iii) the filing of a premerger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv) compliance
with any applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), and (v)
such other Consents as to which the failure to obtain or make could not
reasonably be expected to have a Material Adverse Effect.
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities. (i)
---------------------------------------------------------------
The Company has filed, and delivered to Parent true and complete copies of, all
required reports, schedules, forms, statements, exhibits and other documents
filed with the SEC since January 1, 1994 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), or the Exchange Act, as the case
may be, applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein
13
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with United States generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis throughout the periods
involved ("GAAP") (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(iii) Except as set forth in the SEC Documents or in Section 4.1(e) of
the Disclosure Schedule, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), except for liabilities and obligations which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(f) Disclosure Documents. (i) The proxy statement of the Company
--------------------
(the "Company Proxy Statement") to be filed with the SEC in connection with the
Merger, and any amendments or supplements thereto will, when filed, comply in
all material respects with the applicable requirements of the Exchange Act.
(ii) At the time of filing the Company Proxy Statement with the SEC,
at the time the Company Proxy Statement or any amendment or supplement thereto
is first mailed to shareholders of the Company, at the time such shareholders
vote on adoption of this Agreement, and at the Effective Time, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.1(f)(ii) will not apply to statements or omissions
included in the Company Proxy Statement based upon information furnished to the
14
Company in writing by Parent or Merger Subsidiary specifically for use therein.
(g) Licenses, Approvals, etc. (i) Each of the Company and its
------------------------
subsidiaries possesses or has been granted all registrations, filings,
applications, certifications, notices, consents, licenses, permits, approvals,
certificates, franchises, orders, qualifications, authorizations and waivers of
any Governmental Entity (federal, state and local) necessary to entitle it to
conduct its business in the manner in which it is presently being conducted (the
"Licenses"), except as set forth in Section 4.1(g)(i)(A) of the Disclosure
Schedule and except those Licenses whose failure to possess or have granted,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or give rise to any material fine or any criminal
liability or any other material civil penalties. Section 4.1(g)(i)(B) of the
Disclosure Schedule lists (i) all licenses to serve or sell alcoholic beverages
which have been granted to, or are used in the business of, the Company and its
subsidiaries (the "Company Liquor Licenses") and (ii) all gaming, lottery and
gambling licenses which have been granted to, or are used in the business of,
the Company and its subsidiaries ("Company Gaming Licenses"). Except as
described in Section 4.1(g)(i)(C) of the Disclosure Schedule, (A) all of the
Company Liquor Licenses and Company Gaming Licenses are in full force and effect
and (B) all of the Licenses (excluding the Company Liquor Licenses and Company
Gaming Licenses) are in full force and effect except for those covered by this
clause (B) whose failure to be in full force and effect, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
Except as described in Section 4.1(g)(i)(D) of the Disclosure Schedule, no
Action (as defined herein) is pending or, to the Knowledge of the Company,
threatened seeking the revocation or limitation of (A) any of the Company Liquor
Licenses or Company Gaming Licenses or (B) any License (excluding the Company
Liquor Licenses or Company Gaming Licenses) that, in the case of Licenses
covered by this clause (B), individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
(ii) Section 4.1(g)(ii) of the Disclosure Schedule lists all entities
("Concession Entities") other than the Company and its subsidiaries that hold
licenses to serve or sell alcoholic beverages in locations on the premises of or
associated with or contiguous to the facilities operated by the Company and its
subsidiaries in connection with the Business
15
(as defined herein). Section 4.1(g)(ii) of the Disclosure Schedule also
lists all management agreements, leases and other significant agreements or
arrangements relating to the relationships between the Company and its
subsidiaries, on the one hand, and the Concession Entities, on the other hand
(complete and correct copies of which (or descriptions of oral arrangements, to
the extent material) have been provided to Parent and Merger Subsidiary).
Except as disclosed on Section 4.1(g)(ii) of the Disclosure Schedule, all such
agreements are in full force and effect, legal, valid and binding and
enforceable against the Company and its subsidiaries and, to the Knowledge of
the Company, each other Concession Entity or other party thereto in accordance
with their terms, except where the failure to so be in full force and effect,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(h) Real Properties. (i) Section 4.1(h)(i) of the Disclosure
---------------
Schedule sets forth a list of all real property owned in fee by the Company or
any of the Company's subsidiaries (individually, an "Owned Property" and,
collectively, the "Owned Properties"). To the Knowledge of the Company, except
as set forth on Section 4.1(h)(i) of the Disclosure Schedule, the Company has
good and marketable fee title to each Owned Property, including the buildings,
structures and other improvements located thereon, in each case free and clear
of all mortgages, liens, claims, charges, security interests, easements,
restrictive covenants, rights-of-way, leases, purchase agreements, options and
other encumbrances and agreements ("Liens"), except (i) Liens which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect and (ii) Liens for taxes and other governmental charges,
assessments or fees which are not yet due and payable (the items described in
clauses (i) and (ii) are collectively referred to herein as "Permitted Liens").
Except as disclosed on Section 4.1(h)(i) of the Disclosure Schedule, to the
Knowledge of the Company, there are no condemnations or eminent domain (which
term, as used herein, shall include other compulsory acquisitions or takings by
Governmental Authorities) proceedings pending or, to the Knowledge of the
Company, threatened against any Owned Property or any material portion thereof.
To the Knowledge of the Company, except as disclosed in Section 4.1(h)(i) of the
Disclosure Schedule, the Company has not received any notice from any city,
village or other Governmental Entity of any zoning, ordinance, land use,
building, fire or health code or other legal violation in respect of any
16
Owned Property, other than violations which have been corrected or which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of the Company there are no structural
defects relating to the Owned Property, except for such structural defects
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(ii) Section 4.1(h)(ii) of the Disclosure Schedule lists all real
property (including all land and buildings) which is leased by the Company or
any of its subsidiaries as lessee or sublessee (the "Leased Real Estate"). The
Company has delivered or caused to be delivered to Parent and Merger Subsidiary
complete and accurate copies of the written leases and subleases which are
described in Section 4.1(h)(ii) of the Disclosure Schedule. Except as disclosed
in Section 4.1(h)(ii) of the Disclosure Schedule, to the Knowledge of the
Company, the Company has not received written notice of condemnation or eminent
domain proceedings pending or threatened against any Leased Real Estate
property. Except as disclosed in Section 4.1(h)(ii) of the Disclosure Schedule,
to the Knowledge of the Company, the Company has not received any notice from
any city, village or other Governmental Entity of any zoning, ordinance,
building, fire or health code or other legal violation in respect of any Leased
Real Estate, other than violations which have been corrected or which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of the Company, there are no
structural defects relating to any Leased Real Estate, except for such
structural defects which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. To the Knowledge of the Company,
other than for exceptions to the following which are set forth in Section
4.1(h)(ii) of the Disclosure Schedule or which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:
(A) the leases relating to the Leased Real Estate (the "Leases") are
in full force and effect and are valid, binding and enforceable in
accordance with their respective terms;
(B) no amount payable under any Lease is past due;
(C) the Company is in compliance in all material respects with all
commitments and obligations on its part
17
to be performed or observed under such Lease and is not aware of the
failure by any other party to such Leases to comply in all material
respects with all of its commitments and obligations;
(D) the Company has not received any written notice (1) of a default
(which has not been cured), offset or counterclaim under any Lease, or,
any other communication calling upon it to comply with any provision of
any Lease or asserting noncompliance, or asserting the Company has waived
or altered its rights thereunder, and no event or condition has happened
or presently exists which constitutes a default or, after notice or lapse
of time or both, would constitute a default under any Lease on the part of
the Company or any other party, or (2) of any complaint, claim,
prosecution, indictment, action, suit, arbitration, investigation or
proceeding by or before any Governmental Entity (an "Action") against any
party under any Lease which if adversely determined would result in such
Lease being terminated or cut off;
(E) the Company has not assigned, mortgaged, pledged or otherwise
encumbered its interest, if any, under any Lease; and
(F) the Company has exercised within the time prescribed in each
Lease any option provided therein to extend or renew the term thereof.
(iii) The Owned Properties and the Leased Real Estate constitute,
in the aggregate, all of the real property used to conduct the business of the
Company and its subsidiaries (collectively, the "Business") in the manner in
which such business was conducted during the fiscal year ending May 29, 1996 and
since such time.
(i) Tangible Personal Property; Sufficiency of Assets.
-------------------------------------------------
(i) Except as disclosed in Section 4.1(i)(i) of the Disclosure
Schedule, to the Knowledge of the Company, the Company and its subsidiaries (1)
have good and valid title to all the tangible personal property material to the
Business and reflected in the latest audited financial statements included in
the SEC Documents as being owned by the Company and its subsidiaries or acquired
after the date thereof (except properties
18
sold or otherwise disposed of in the ordinary course of business since the date
thereof), free and clear of all Liens except (A) statutory Liens securing
payments not yet due and (B) such imperfections or irregularities of title or
Liens as do not affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties, in either case in such a manner as to have a Material Adverse
Effect, and (2) are collectively the lessee of all tangible personal property
material to the Business and reflected as leased in the latest audited financial
statements included in the SEC Documents (or on the books and records of the
Company as of the date thereof) or acquired after the date thereof (except for
leases that have expired by their terms) and are in possession of the properties
purported to be leased thereunder, and each such lease is valid and in full
force and effect without default thereunder by the lessee or the lessor, other
than defaults that would not have a Material Adverse Effect. Each of the Company
and each of its subsidiaries, to the Knowledge of the Company, enjoys peaceful
and undisturbed possession under all such leases. Such owned and leased tangible
personal property is, to the Knowledge of the Company, in good working order,
reasonable wear and tear excepted, and is suitable for the use for which it is
intended, except that, which individually or in the aggregate, would not have a
Material Adverse Effect.
(ii) The tangible personal property of the Company which is
currently used or useful in the Business is, in the aggregate, to the Knowledge
of the Company, all of the tangible personal property used to conduct such
business in the manner in which such business was conducted during the fiscal
year ending May 29, 1996 and since such time, except for additions thereto and
deletions therefrom in the ordinary course of business which could not
reasonably be expected to have a Material Adverse Effect.
(j) Intellectual Property. The ownership, operation and conduct
---------------------
by the Company and its subsidiaries of the Business, as presently owned,
operated, and conducted, does not, to the Knowledge of the Company, infringe
upon or conflict in any respect with any patent, copyright, trademark, trade
name, service ▇▇▇▇, brand name, any related regulations or other intellectual
property rights of any other person, and to the Knowledge of the Company no
other person is infringing upon any such rights of the Company and its
subsidiaries, in each case, except as would not have a Material Adverse Effect.
19
(k) Environmental Compliance. (i) For purposes of this Section
------------------------
4.1(k), (A) "Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance or waste, solid waste, petroleum or any fraction thereof, or any
other chemical, substance or material listed or identified in or regulated by or
under any Environmental Law; (B) "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S)
1251 et seq., the Clean Air Act, 42 U.S.C. (S) 7401 et seq., the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Safe Drinking Water Act,
42 U.S.C. (S) 300f et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. (S) 11001 et seq., the Occupational Safety and Health Act, 29
U.S.C. (S) 651 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S)
651 et seq., the Oil Pollution Act, 33 U.S.C. (S) 2701 et seq., in each case as
amended from time to time and all regulations promulgated thereunder, and any
other statute, law, regulation, ordinance, bylaw, rule, judgment, order, decree
or directive of any Governmental Entity dealing with the pollution or protection
of natural resources or the indoor or ambient environment or with the protection
of human health or safety; and (C) "RCRA Hazardous Waste" means a solid waste
that is listed or classified as a hazardous waste, as that term is defined in or
pursuant to the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
(S) 6901 et seq.
(ii) Except as set forth on Section 4.1(k)(ii) of the Disclosure
Schedule, to the Knowledge of the Company, there are no claims pending against
the Company or any of its subsidiaries (the "Company Interests") relating to or
arising out of a Hazardous Substance nor are any such claims threatened against
Company Interests, nor have the Company or its subsidiaries received any notice,
alleging or warning that any Owned Property or Leased Real Estate or any real
property previously owned or operated by any Company Interests is, has been or
may be in violation of or in noncompliance with any Environmental Law.
(iii) Except as set forth in Section 4.1(k)(iii) of the Disclosure
Schedule, to the Knowledge of the Company, no Hazardous Substances are now
present in amounts, concentrations or conditions requiring removal, remediation
or any other response, action or corrective action under, or forming the basis
of a claim pursuant to, any Environmental Law, in, on, from or
20
under the Owned Property or Leased Real Estate or any real property previously
owned or operated by any Company Interests.
(iv) Except as set forth in Section 4.1(k)(iv) of the Disclosure
Schedule, to the Knowledge of the Company, the Owned Property and Leased Real
Estate are not being and have not been during the period of time they have been
owned or leased by any Company Interests used in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and, to the
Knowledge of the Company, no RCRA Hazardous Wastes are being or have been during
the period of time owned or operated by any Company Interests treated, stored or
disposed of there in violation of any Environmental Law.
(v) Except as set forth in Section 4.1(k)(v) of the Disclosure
Schedule, to the Knowledge of the Company, there neither are nor have been
during the period of time they have been owned or operated by any Company
Interests any underground storage tanks, lagoons or other containment facilities
of any kind which contain or contained any Hazardous Substances on the Owned
Property and Leased Real Estate.
(vi) The Company has made available to the Parent and Merger
Subsidiary, true and correct copies of, all environmental audits or assessments,
analyses of soil, groundwater, indoor and outdoor air, sediment, surface water
and asbestos containing materials conducted on or after January 1, 1993 relating
in whole or in part to the Company and/or its subsidiaries undertaken by or on
behalf of any of the Company Interests, and any written communications received
by the Company since January 1, 1993 from any Governmental Authorities relating
in whole or in part to the existence of Hazardous Substances at any Owned
Property and Leased Real Estate or any real property previously owned or
operated by any Company Interests or the compliance of the owners, operators or
lessees thereof with respect to any Environmental Law.
(l) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Section 4.1(l) of the Disclosure Schedule, since May 29, 1996, the Company and
its subsidiaries have conducted the Business only in the ordinary course
consistent with past practice, and there has not been (i) any event, occurrence
or development of a state of circumstances which has had or could reasonably be
expected to have a Material Adverse Effect, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with
21
respect to any of the Company's capital stock or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any outstanding
shares of capital stock or other securities of the Company or any of its
subsidiaries, (iii) any adjustment split, combination or reclassification of any
of its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by the Company or any of its subsidiaries
to any current or former director, officer or employee of the Company or any of
its subsidiaries of any material increase in compensation or benefits, except
for grants to employees who are not officers or directors in the ordinary course
of business consistent with past practice, (B) any granting by the Company or
any of its subsidiaries to any such director, officer or employee of any
increase in severance or termination pay (including the acceleration in the
vesting of Shares (or other property) or the provision of any tax gross-up), or
(C) any entry by the Company or any of its subsidiaries into any employment,
deferred compensation, severance or termination agreement or arrangement with or
for the benefit of any such current or former director, officer or employee, (v)
any damage, destruction or loss, whether or not covered by insurance, that has
had or could have a Material Adverse Effect, (vi) any change in accounting
methods, principles or practices by the Company or any of its subsidiaries,
(vii) any amendment, waiver or modification of any material term of any
outstanding security of the Company or any of its subsidiaries or any of the
Joint Venture Documents (or any material change in the operations or financial
arrangements relating to any of the Joint Ventures), (viii) any incurrence,
assumption or guarantee by the Company or any of its subsidiaries of any
material indebtedness for borrowed money or other material obligations, (ix) any
creation or assumption by the Company or any of its subsidiaries of any Lien on
any asset other than in the ordinary course of business consistent with past
practice, but in no event with respect to assets with a value of, or obligations
in an amount of, more than $100,000 for any one transaction or $250,000 in the
aggregate, (x) any making of any loan, advance or capital contributions to or
investment in any person other than in the ordinary course of business
consistent with past practice, but in no event in the amount of more than
$100,000 for any one transaction or $250,000 in the aggregate, and other than
investments in cash equivalents made in the ordinary course of business
consistent with past practice, (xi) any transaction or commitment made, or any
contract or agreement
22
entered into, by the Company or any of its subsidiaries relating to its assets
or business on behalf of the Company or any of its subsidiaries of more than
$100,000 for any transaction or $250,000 for any series of transactions, (xii)
any acquisition or disposition of any assets or any merger or consolidation with
any person on behalf of the Company or any of its subsidiaries of more than
$100,000 for any transaction or $250,000 for any series of transactions, (xiii)
any relinquishment by the Company or any of its subsidiaries of any contract or
other right, in either case, material to the Company and its subsidiaries taken
as a whole, other than transactions and commitments in the ordinary course of
business consistent with past practice and those contemplated by the Agreement,
or (xiv) any agreement, commitment, arrangement or undertaking by the Company or
any of its subsidiaries to perform any action described in clauses (i) through
(xiii).
(m) Litigation. Except as disclosed in Section 4.1(m) of the
----------
Disclosure Schedule, to the Knowledge of the Company, there is no Action or
proceeding pending or threatened against or affecting the Company or any of its
subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity outstanding against the
Company or any of its subsidiaries which could reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Laws. Except as disclosed in Section 4.1(n)
--------------------
of the Disclosure Schedule, to the Knowledge of the Company, the conduct by the
Company and its subsidiaries of the Business is and has been in compliance with
all statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees, applicable thereto, except for violations or failures so to comply, if
any, that, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect or give rise to material fines or other material
civil penalties or any criminal liabilities. To the Knowledge of the Company,
except as set forth on Section 4.1(n) of the Disclosure Schedule, the Company
has not received any notice or other communications relating to any alleged
violation of any statute, law, regulation, ordinance, rule, judgment, order or
decree from any Governmental Entity, or of any investigation with respect
thereto, applicable to the Company or its subsidiaries which has not been
satisfactorily addressed except for violations, if any, that, individually or in
the aggregate, could
23
not reasonably be expected to have a Material Adverse Effect and could not
reasonably be expected to give rise to material fines or other material civil
penalties or any criminal liabilities.
(o) Absence of Changes in Stock or Benefit Plans. Except as
--------------------------------------------
disclosed in Section 4.1(o) of the Disclosure Schedule or as required under this
Agreement, since May 29, 1996, there has not been (i) any acceleration,
amendment or change of the period of exercisability or vesting of any Company
Options under the Option Plans (including any discretionary acceleration of the
exercise periods or vesting by the Company's Board of Directors or any committee
thereof or any other persons administering an Option Plan) or authorization of
cash payments in exchange for any Company Options under any of such Option
Plans, (ii) any adoption or material amendment by the Company or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, stock appreciation right,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical, worker's compensation, disability, supplementary unemployment benefits,
or other plan, arrangement or understanding (whether or not legally binding) or
any employment agreement providing compensation or benefits to any current or
former employee, officer, director or independent contractor of the Company or
any of its subsidiaries or any beneficiary thereof or entered into, maintained
or contributed to, as the case may be, by the Company or any of its subsidiaries
(collectively, "Benefit Plans"), or (iii) any adoption of, or amendment to, or
change in employee participation or coverage under, any Benefit Plans which
would increase materially the expense of maintaining such Benefit Plans above
the level of the expense incurred in respect thereof for the fiscal year ended
on May 29, 1996.
(p) ERISA Compliance. (i) Section 4.1(p) of the Disclosure
----------------
Schedule contains a list of all "employee pension benefit plans" (defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), "employee welfare benefit plans" (defined in Section 3(l) of ERISA)
and all other Benefit Plans. With respect to each Benefit Plan, the Company has
delivered or made available to Parent a true, correct and complete copy of: (A)
each writing constituting a part of such Benefit Plan, including without
limitation all plan documents, benefit schedules, trust agree-
24
ments, and insurance contracts and other funding vehicles; (B) the most recent
Annual Report (Form 5500 Series) and accompanying schedule, if any; (C) the
current summary plan description, if any; (D) the most recent annual financial
report, if any; and (E) the most recent determination letter from the United
States Internal Revenue Service, if any.
(ii) Section 4.1(p) of the Disclosure Schedule identifies each
Benefit Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). The Internal Revenue Service has
issued a favorable determination letter with respect to each Qualified Plan that
has not been revoked, and there are no existing circumstances nor any events
that have occurred that could adversely affect the qualified status of any
Qualified Plan or the related trust.
(iii) The Company and its subsidiaries have complied, and are now
in compliance, in all material respects with all provisions of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and all laws and
regulations applicable to the Benefit Plans. Except as set forth in Section
4.1(p) of the Disclosure Schedule, no prohibited transaction has occurred with
respect to any Benefit Plan. All contributions required to be made to any
Benefit Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Benefit Plan, for any period through the date
hereof have been timely made or paid in full or, to the extent not required to
be made or paid on or before the date hereof, have been fully reflected in the
SEC Documents.
(iv) No Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. None of the Company, its subsidiaries
and their respective ERISA Affiliates (as defined below) has at any time since
September 2, 1974, contributed to or been obligated to contribute to any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA or any
plan with two or more contributing sponsors at least two of whom are not under
common control, within the meaning of Section 4063 of ERISA. There does not now
exist, nor do any circumstances exist that could result in, any Controlled Group
Liability (as defined below) that would be a liability of the Company or any of
its subsidiaries following the Closing. "ERISA Affiliate" means, with respect to
any entity, trade or business, any other entity, trade or business that is
25
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 first entity, trade or business,
or that is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA. "Controlled Group Liability"
means any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of
ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and
(v) corresponding or similar provisions of foreign laws or regulations, other
than such liabilities that arise solely out of, or relate solely to, the Benefit
Plans.
(v) Except as set forth in the SEC Documents or in Section
4.1(p)(v) of the Disclosure Schedule, neither the Company nor any of its
subsidiaries has any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof, except for
health continuation coverage as required by Section 4980B of the Code or Part 6
of Title I of ERISA and at no expense to the Company and its subsidiaries.
(vi) Except as set forth in Section 4.1(p) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company or any of its subsidiaries. Without limiting the
generality of the foregoing, no amount paid or payable by the Company or any of
its subsidiaries in connection with the transactions contemplated hereby (either
solely as a result thereof or as a result of such transactions in conjunction
with any other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(vii) No labor organization or group of employees of the Company or
any of its subsidiaries 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 threatened to
be brought or filed, with the National Labor Relations Board or any other labor
relations tribunal or authority. There are no organizing activities, strikes,
work stoppages, slowdowns, lockouts, material arbitrations or material
grievances, or other material labor disputes pending or threatened against or
26
involving the Company or any of its subsidiaries.
(viii) There are no pending or threatened claims (other than claims
for benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Benefit Plans, any fiduciaries thereof with
respect to their duties to the Benefit Plans or the assets of any of the trusts
under any of the Benefit Plans which could reasonably be expected to result in
any material liability of the Company or any of its subsidiaries to the Pension
Benefit Guaranty Corporation, the Department of Treasury, the Department of
Labor or any multiemployer Benefit Plan.
(q) Taxes. As used in this Agreement, "tax" or "taxes" shall
-----
include all federal, state and local income, property, sales, excise and other
taxes, tariffs or governmental charges or assessments of any nature whatsoever
as well as any interest, penalties and additions thereto. Except as disclosed in
Section 4.1(q) of the Disclosure Schedule:
(i) The Company and each of its subsidiaries have timely filed
all income tax returns, statements, reports and forms and all other
material tax returns (collectively, "Returns") required to be filed with
any tax authority and in accordance with all applicable laws. All such
Returns are correct and complete in all material respects. All material
taxes owed by the Company and any of its subsidiaries (whether or not shown
on any tax return) have been paid. There are no material Liens on any of
the assets of the Company or any of its subsidiaries that arose in
connection with any failure (or alleged failure) to pay any tax.
(ii) The Company and each of its subsidiaries has withheld and
timely paid all material taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party.
(iii) Neither the Company nor any of its subsidiaries expects any
authority to assess any additional material taxes against the Company or
any of its subsidiaries for any period for which tax returns have been
filed. No dispute or claim concerning any material tax liability of the
Company or any of its subsidiaries has been proposed or claimed in writing
by any authority.
27
(iv) Neither the Company nor any of its subsidiaries has waived
any statute of limitations in respect of material taxes or agreed to any
extension of time with respect to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries has filed a
consent pursuant to Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of its subsidiaries is a party
to any tax allocation or sharing agreement. Neither the Company nor any of
its subsidiaries has any material liability for the taxes of any person
(other than the Company and any of its subsidiaries that is currently a
member of the Company's affiliated group filing a consolidated federal
income tax return) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(vi) Neither the Company nor any of its subsidiaries is required
to include in income any adjustment pursuant to Section 481(a) of the Code
(or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method; nor
to the Knowledge of the Company or any of its subsidiaries has the Internal
Revenue Service (or other taxing authority) proposed or is considering
proposing, any such change in accounting method. Except as disclosed in
Section 4.1(q)(vi) of the Disclosure Schedule, neither the Company nor any
of its subsidiaries is a party to any agreement, contract, or arrangement
that, individually or collectively, could give rise to the payment of any
amount (whether in cash or property, including Shares or other equity
interests) that would not be deductible pursuant to the terms of Sections
162(a)(1), 162(m), 162(n) or 280G of the Code.
(r) Contracts; Debt Instruments. (i) Except as otherwise
---------------------------
disclosed in Section 4.1(r) of the Disclosure Schedule, neither the Company nor
any of its subsidiaries is a party to or subject to:
(A) any collective bargaining or other agreements with labor
unions, trade unions, employee representatives, work committees, guilds or
associations representing employees of the Company and its subsidiaries;
28
(B) any employment consulting, severance, termination, or
indemnification agreement, contract or arrangement, written or oral, with
any current or former officer, consultant, director or employee which (1)
provides for payments in excess of $75,000 per annum or (2) requires
aggregate payments over the life of such agreement, contract or arrangement
in excess of $150,000 or which in any case is not terminable by the Company
or its subsidiaries on 60 days' notice or less without penalty or
obligation to make payments related to or after such termination;
(C) any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of
revenues of $100,000 per annum or more with other persons;
(D) any lease for real or personal property in which the amount
of payments which the Company is required to make, or is expected to
receive, on an annual basis exceeds $50,000;
(E) any material agreement, contract, policy, License, document,
instrument, arrangement or commitment which has not been terminated or
performed in its entirety and not renewed which may be, by its terms,
terminated, impaired or adversely affected by reason of the execution of
this Agreement, the closing of the Merger, or the consummation of the other
transactions contemplated hereby;
(F) any agreement, contract, policy, License, document,
instrument, arrangement or commitment that materially limits the freedom of
the Company or any of its subsidiaries to compete in any line of business
or with any person or in any geographic area or which would so materially
limit the freedom of the Company or any of its subsidiaries or Parent,
Merger Subsidiary or any of their subsidiaries after the Effective Time;
(G) any agreement or contract relating to any outstanding
commitment for capital expenditures in excess of $50,000 individually or
$200,000 in the aggregate, or any partially or fully executory agreement or
contract relating to the acquisition or disposition of rights or assets
having a value of in excess of $50,000 individually or $200,000 in the
aggregate;
29
(H) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee or take-or-pay contract or agreement; or
(I) any other agreement, contract, policy, License, document,
instrument, arrangement or commitment not made in the ordinary course of
business which is material to the Company and its subsidiaries taken as a
whole.
(ii) None of the Company, its subsidiaries and, to the
Knowledge of the Company, none of the other parties to any of the contracts
and agreements identified in Section 4.1(r)(I) of the Disclosure Schedule
or otherwise disclosed in the SEC Documents is in default under or has
terminated any such contract or agreement, or in any way expressed an
intent to materially reduce or terminate the amount of, its business with
the Company or any of its subsidiaries in the future.
(iii) Set forth in Section 4.1(r)(iii) of the Disclosure Schedule
is (A) a list of all loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries is outstanding or may be
incurred and (B) the respective principal amounts currently outstanding
thereunder. Except as set forth in Section 4.1(r)(iii) of the Disclosure
Schedule, all such indebtedness is prepayable at any time without penalty,
subject to the notice provisions of the agreements governing such indebtedness
(which, except as set forth in Section 4.1(r)(iii) of the Disclosure Schedule,
shall not require a notice period of more than thirty days). For purposes of
this Section 4.1(r)(iii), "indebtedness" shall mean, with respect to any person,
without duplication, (A) all obligations of such person for borrowed money, or
with respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges are
customarily paid, (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such person,
(E) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to creditors
for raw materials, inventory, services and supplies incurred in the ordinary
course of such person's business), (F) all capitalized lease obligations of such
person, (G) all obligations of others
30
secured by any Lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency swap transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued for the benefit
of suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations of such person to purchase securities
(or other property) which arises out of or in connection with the sale of the
same or substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(s) Insurance. The Company and its subsidiaries are covered by
---------
valid and currently effective insurance policies issued in favor of the Company
that are customary for companies of similar size and financial condition. Except
as set forth on Section 4.1(s) of the Disclosure Schedule, to the Knowledge of
the Company, all such policies are in full force and effect, all premiums due
thereon have been paid and the Company has complied with the provisions of such
policies. Except as disclosed, the Company has not been advised of any defense
to coverage in connection with any claim to coverage asserted or noticed by the
Company under or in connection with any of its extant insurance policies. The
Company has not, to the Knowledge of the Company, received any written notice
from or on behalf of any insurance carrier issuing policies or binders relating
to or covering the Company and its subsidiaries that there will be a
cancellation or non-renewal of existing policies or binders, or that alteration
of any equipment or any improvements to real estate occupied by or leased to or
by the Company or its subsidiaries, purchase of additional equipment, or
material modification of any of the methods of doing business, will be required.
(t) Interests of Officers and Directors. None of the Company's
-----------------------------------
or any of its subsidiaries' officers or directors has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company or its subsidiaries, or any supplier, distributor or
customer of the Company or its subsidiaries, except for the normal rights of a
shareholder and rights under the Benefit Plans and the Option Plans.
31
(u) State Takeover Statutes. No "fair price," "moratorium,"
-----------------------
"control share acquisition," or other anti-takeover statute or similar statute
or regulation, applies or purports to apply to the Merger, this Agreement or any
of the transactions contemplated hereby.
(v) Brokers. L.H. Friend, Weinreiss, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.
-------
("L.H. Friend") has orally delivered to the Company's Board of Directors its
opinion that the consideration to be paid in the Merger is fair to the holders
of Shares from a financial point of view, and shall deliver such opinion in
writing to the Company's Board of Directors prior to the date the Company files
the Company Proxy Statement with the SEC. In addition, no broker, investment
banker, financial advisor or other person, other than L.H. Friend, the fees and
expenses of which will be paid by the Company (and copies of whose engagement
letters and a calculation of the fees that would be due thereunder has been
provided to Parent), is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any of its subsidiaries. No such engagement letters obligate the
Company to continue to use their services or pay fees or expenses in connection
with any future transaction.
4.2. Representations and Warranties of Parent and Merger
---------------------------------------------------
Subsidiary. Parent and Merger Subsidiary represent and warrant to the Company
----------
as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
------------------------------------------
and Merger Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its respective state of incorporation and has
the requisite corporate power and authority to carry on its business as now
being conducted.
(b) Authority; Noncontravention. Parent and Merger Subsidiary
---------------------------
have all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary. This Agreement has
been duly executed and delivered by Parent and Merger Subsidiary and, assuming
this Agreement
32
constitutes a valid and binding agreement of the Company, constitutes a valid
and binding obligation of such party, enforceable against such party in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or to a loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Parent or any of its subsidiaries under, (i) the certificate of
incorporation or bylaws of Parent or Merger Subsidiary, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or any other contract,
agreement, instrument, permit, concession, franchise or license applicable to
Parent or Merger Subsidiary or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent, Merger Subsidiary or any other subsidiary of
Parent or their respective properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, losses
or Liens that individually or in the aggregate would not impair the ability of
Parent and Merger Subsidiary to perform their respective obligations under this
Agreement or prevent the consummation of any of the transactions contemplated by
this Agreement (a "Parent Material Adverse Effect"). Other than those Consents
referred to in the Disclosure Schedule on the part of the Company, no Consent of
any Governmental Entity is required by or with respect to Parent, Merger
Subsidiary or any other subsidiary of Parent in connection with the execution
and delivery of this Agreement or the consummation by Parent or Merger
Subsidiary, as the case may be, of any of the transactions contemplated by this
Agreement, except for (i) the filing of the documents referred to in Section 1.3
hereof in accordance with the DGCL and the CGCL and similar documents with the
relevant authorities of other states in which the Company is qualified to do
business, (ii) the filing of a premerger notification and report form under the
HSR Act, (iii) compliance with any applicable requirements of the Exchange Act,
(iv) such Consents as may be required under relevant state and local alcohol,
lottery, gaming and gambling licensing laws and (v) such other Consents as to
which the failure to obtain or make could not reasonably be expected to have a
Parent Material Adverse Effect.
33
(c) Disclosure Documents. (i) The information with respect to
--------------------
Parent and its subsidiaries that Parent furnishes to the Company in writing,
specifically for use in the Company Proxy Statement will not contain, any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading at the time of filing the Company
Proxy Statement with the SEC, at the time the Company Proxy Statement or any
amendment or supplement thereto is first mailed to shareholders of the Company,
at the time the shareholders vote on adoption of this Agreement and at the
Effective Time.
(d) Brokers. No broker, investment banker, financial advisor or
-------
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission from the Company in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Merger Subsidiary.
(e) Financing. Parent will have available sufficient financing
---------
and provide or cause to be provided to Merger Subsidiary the funds necessary to
consummate the Merger in accordance with their terms and the terms of this
Agreement.
5.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. Conduct of Business. During the period from the
-------------------
date of this Agreement to the Effective Time, the Company shall, and shall cause
its subsidiaries to, carry on their business in the ordinary course of business
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees (as a group) and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time, except
as disclosed on Schedule 5.1 of the Disclosure Schedule, the Company shall not,
and shall not per-
34
mit any of its subsidiaries to, without the prior written approval of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
its capital stock, other than dividends and distributions by any direct or
indirect wholly-owned subsidiary of the Company to its parent; provided the
--------
Company may continue to declare and pay its regular quarterly cash dividends on
the Shares in an amount not to exceed $.065 (six and one-half cents) per share
per quarter, with its usual record and payment dates for such dividends, in
accordance with the Company's past practice, (ii) adjust, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities (other than in connection with the exercise of Company Options in
accordance with the terms thereof as in effect on the date hereof or as
contemplated by Section 2.4 hereof);
(b) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options, including Company Options, to acquire,
any such shares, voting securities or convertible securities (other than the
issuance of Shares upon the exercise of Company Options outstanding as of the
date hereof);
(c) amend its articles of incorporation, bylaws or other
comparable charter or organizational documents;
(d) amend, modify or waive any provision of any of the Joint
Venture Documents or make any material change to the operations or financial
arrangements relating to any of the Joint Ventures;
(e) mortgage or otherwise encumber or subject to any Lien or,
except in the ordinary course of business consistent with past practice and
pursuant to existing contracts or commitments, sell, lease, license, transfer or
otherwise dispose of any material properties or assets;
35
(f) amend, modify or waive any material term of any outstanding
security of the Company and its subsidiaries;
(g) incur, assume, guarantee or become obligated with respect to any
indebtedness (as defined in Section 4.1(r) hereof), other than drawings on
existing revolving credit facilities listed in Section 4.1(r) of the Disclosure
Schedule, in the ordinary course of business, consistent with past practice and
in accordance with the terms thereof, or incur, assume, guarantee or become
obligated with respect to any other material obligations other than in the
ordinary course of business and consistent with past practice;
(h) make or agree to make any new capital expenditures or
acquisitions of assets or property or other acquisitions or commitments in
excess of $50,000 individually or $200,000 in the aggregate or otherwise acquire
or agree to acquire any material assets or property;
(i) make any material tax election or take any material tax position
(unless required by law) or change its fiscal year or accounting methods,
policies or practices (except as required by changes in GAAP) or settle or
compromise any material income tax liability;
(j) make any loan, advance or capital contributions to or investment
in any person other than in the ordinary course of business consistent with past
practice, but in no event in the amount of more than $50,000 for any one
transaction or $250,000 in the aggregate, and other than investments in cash
equivalents made in the ordinary course of business consistent with past
practice;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction thereof, in the ordinary course of
business consistent with past practice and in accordance with their terms,
modify, amend or terminate any material contract or agreement to which it is a
party, or release or waive any material rights or claims, or subject to the
fiduciary duties of the Board of Directors of the Company under the CGCL as
determined by the Board of Directors in accordance with the written advice of
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, and upon prior
written notice to Parent, waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill
36
or similar agreement to which the Company or any of its subsidiaries is a party;
(l) (i) grant to any current or former director, officer or employee
of the Company or any of its subsidiaries any material increase in compensation
or benefits, except for employees who are not officers or directors in the
ordinary course of business consistent with past practice, (ii) grant to any
such director, officer, or employee any increase in severance or termination pay
(including the acceleration in the exercisability of Company Options or in the
vesting of Shares (or other property) except for automatic acceleration in
accordance with the terms of the Option Plans, ESOP, or ESPP or the provision of
any tax gross-up), or (iii) enter into any employment, deferred compensation,
severance or termination agreement or arrangement with or for the benefit of any
such current or former director, officer, or employee;
(m) (i) take or agree or commit to take any action that would make
any representation or warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or (ii) omit
or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time; or
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 5.2. Shareholder Meeting; Proxy Material. The Company shall
-----------------------------------
cause a meeting of its shareholders (the "Company Shareholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of this Agreement and the Merger. The Directors of
the Company shall, subject to their fiduciary duties under the CGCL as
determined by the Board of Directors in accordance with the written advice of
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, recommend approval
and adoption of this Agreement and the Merger by the Company's shareholders. In
connection with such meeting, the Company (i) will promptly prepare and file
with the SEC, will use its best efforts to have cleared by the SEC and will
thereafter mail to its shareholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for such meeting, (ii) subject to the
fiduciary duties of the Board of Directors of the Company under the CGCL as
determined by the Board of Direc-
37
tors in accordance with the written advice of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
counsel to the Company, will use its best efforts to obtain the necessary
approvals by its shareholders of this Agreement and the transactions
contemplated hereby and (iii) will otherwise comply with all legal requirements
applicable to such meeting. The Company has been advised that all of its
directors and executives currently intend to vote all shares owned by them in
favor of the Merger. The Company will provide Parent with a copy of the
preliminary proxy statement and all modifications thereto prior to filing or
delivery to the SEC and will consult with Parent in connection therewith. The
Company will notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Company Proxy Statement or for additional information and
will supply Parent with copies of all correspondence between the Company or any
of its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Company Proxy Statement or the Merger. If at any time
prior to the Company Shareholder Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Company Proxy Statement, the
Company will promptly prepare and mail to its shareholders such an amendment or
supplement. The Company will not mail any Company Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects.
SECTION 5.3. Access to Information. From the date hereof until the
---------------------
Effective Time, the Company will give Parent, its counsel, financial advisors,
auditors and other authorized representatives full access (during normal
business hours and upon reasonable notice) to the offices, properties, officers,
employees, accountants, auditors, counsel and other representatives, books and
records of the Company and its subsidiaries (including to perform any
environmental studies), will furnish to Parent, its counsel, financial advisors,
auditors and other authorized representatives such financial, operating and
property related data and other information as such persons may reasonably
request, and will instruct the Company's and its subsidiaries' employees,
counsel and financial advisors to cooperate with Parent in its investigation of
the business of the Company and the subsidiaries including without limitation,
in connection with Parent's obtaining title reports, surveys, environmental
reports and similar reports or studies with respect to the Owned Properties or
the Leased Real Estate, and will exercise all reasonable efforts to obtain from
landlords such
38
estoppel certificates as Parent may request; provided that no investigation
--------
pursuant to this Section 5.3 shall affect any representation or warranty given
by the Company hereunder.
SECTION 5.4. No Solicitation. The Company agrees that neither the
---------------
Company nor any of its subsidiaries nor any of the respective officers and
directors of the Company or its subsidiaries shall, and the Company shall direct
and use its best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) not to, initiate, continue,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to
shareholders of the Company) with respect to a merger, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or any of its subsidiaries (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, subject to the fiduciary duties of the Board of Directors of the
Company under the CGCL as determined by the Board of Directors in accordance
with the written advice of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the
Company, 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, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal or, enter into any agreement or understanding
with any other person or entity with the intent to effect any Acquisition
Proposal. The Company will take all necessary steps to inform the individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 5.4. The Company will notify Parent immediately,
orally and in writing (including the names of any party making and the principal
terms of any such proposal), if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with the Company. Immediately following
the execution of this Agreement, the Company will request each person which has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof (the
"Confidentiality Agreements") to return all confidential information heretofore
furnished to such person by or on behalf of the Company. The Company will keep
Parent fully informed of the status and details (including amendments or
proposed amendments)
39
of any such request, proposal or inquiry.
SECTION 5.5. Fair Price Structure. If any "fair price," "control
--------------------
share acquisition" or "moratorium" statute or other anti-takeover or similar
statute or regulation or any state "blue sky" statute shall become applicable to
the transactions contemplated hereby, the Company and the members of the Board
of Directors of the Company shall grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of such statute or regulation
on the transactions contemplated hereby or thereby.
5.6. Covenants Regarding Certain Benefit Plans. (a) The Company
-----------------------------------------
shall take all steps necessary and appropriate so that the Company's Employee
Stock Ownership Plan (the "ESOP") is amended as follows: (i) all participants
in the ESOP shall be fully vested in their account balances immediately prior to
the Effective Time, (ii) no further contributions shall be made to the ESOP
(except as set forth in Section 4.1(p) of the Disclosure Schedule), and (iii)
the ESOP shall be terminated as of the Effective Time and all participants
thereunder shall receive distributions of their account balances as promptly as
reasonably practicable thereafter.
(b) If the Effective Time occurs during fiscal year 1997, then as of
the Effective Time, the Company's Management Incentive Bonus Plan, previously
provided to Parent, for fiscal 1997 shall terminate, and the participants
therein shall be entitled to receive, as soon as practicable thereafter, bonuses
under such plan to the extent earned, based upon the Company's pretax earnings
from the beginning of fiscal 1997 through the Effective Time, but in any case
not to exceed $200,000 in the aggregate.
(c) If the Effective Time occurs during fiscal year 1997, then as of
the Effective Time, the Cash Flow Incentive Plans for America and Carpet,
previously provided to Parent, for fiscal 1997 shall terminate, and the
participants thereunder shall be entitled to receive bonuses under such plans to
the extent earned, based upon such joint ventures' cash flow from the beginning
of fiscal 1997 through the Effective Time, but in any case not to exceed
$200,000 in the aggregate.
(d) If the Effective Time occurs during fiscal year
40
1997, then as of the Effective Time, the Triangle Bowl Bonus Plan for fiscal
1997, previously provided to Parent, shall terminate, and the participants
thereunder shall be entitled to receive bonuses under such plan to the extent
earned, based upon such partnership's operating profit, cash flow, revenue and
otherwise from the beginning of fiscal 1997 through the Effective Time, but in
any case not to exceed $200,000 in the aggregate.
SECTION 5.7. Cooperation in Arrangements with Lenders. The Company
----------------------------------------
shall, and shall cause its subsidiaries to, cooperate with and assist Parent and
its professionals and advisors in arranging for the prepayment at the Effective
Time of all indebtedness (as defined in Section 4.1(r)) of the Company and its
subsidiaries (the "Prepayment Debt") and shall provide whatever other assistance
and cooperation Parent and its professionals and advisors might reasonably
request in connection therewith.
SECTION 5.8. Title Insurance. The Company shall provide to Parent at
---------------
or prior to the Effective Time such affidavits and other documents as may be
reasonably required by Parent in order to obtain customary title insurance
coverage with respect to the Owned Properties and the Leased Real Estate,
including, without limitation, non-imputation endorsements to the Company's
existing title insurance policies and the deletion of all standard exceptions
from any title insurance policies purchased at or prior to the Effective Time.
6.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1. Confidentiality. Prior to the Effective Time and after
---------------
any termination of this Agreement, Parent will hold, and will use its reasonable
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning the Company and its
subsidiaries furnished to Parent in connection with the transactions
contemplated by this Agreement except to the extent that such infor-
41
mation can be shown to have been (i) previously known on a nonconfidential basis
by Parent, (ii) in the public domain through no fault of Parent or (iii) later
lawfully acquired by Parent from sources other than the Company; provided that
--------
Parent may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement and to its (and its parent
entities') lenders and equity investors in connection with obtaining the
financing for the transactions contemplated by this Agreement so long as such
persons are informed by Parent of the confidential nature of such information
and are directed by Parent to treat such information confidentially. Parent's
obligation to hold any such information in confidence shall be satisfied if it
exercises the same care with respect to such information as it would take to
preserve the confidentiality of its own similar information. If this Agreement
is terminated, Parent will, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
deliver to the Company, upon request, or, at the election of Parent, destroy,
all documents and other materials and all copies thereof, obtained by Parent or
on its behalf from the Company in connection with this Agreement that are
subject to such confidentiality.
SECTION 6.2. Obligations of Merger Subsidiary. Parent will take all
--------------------------------
action, and provide all financing, necessary to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
SECTION 6.3. Voting of Shares. Parent agrees to vote all Shares
----------------
beneficially owned by it, if any, in favor of adoption of this Agreement at the
Company Shareholder Meeting.
SECTION 6.4. Director and Officer Liability. (a) For six years
------------------------------
after the Effective Time, Parent will cause the Surviving Corporation to
indemnify and hold harmless the present and former officers, directors,
employees and agents of the Company (the "Indemnified Parties") in respect of
acts or omissions occurring on or prior to the Effective Time or arising out of
or pertaining to the transactions contemplated by this Agreement to the extent
provided under the Company's articles of incorporation and bylaws in effect on
the date hereof; provided that such indemnification shall be subject to any
--------
limitation imposed from time to time under applicable law.
42
Parent and Surviving Corporation shall not amend the articles of incorporation
or bylaws of the Surviving Corporation to amend the indemnification provisions
therein in a manner inconsistent with this Section 6.4 for the six year period
referred to above. For three years after the Effective Time, Parent will cause
the Surviving Corporation to use its best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring on or
prior to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy on terms
substantially similar to those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section 6.4, Parent shall
--------
not be obligated to cause the Surviving Corporation to pay premiums in excess of
150% of the amount per annum the Company paid in its last full fiscal year,
which amount has been disclosed to Parent, and if the Surviving Corporation is
unable to obtain the insurance required by this Section 6.4, it shall obtain as
much comparable insurance as possible for an annual premium equal to such
maximum amount.
(b) After the Effective Time, Parent and the Surviving Corporation
will fulfill and honor in all respects the obligations of the Company pursuant
to the indemnification agreements with the Company's officers, directors and key
employees listed on Section 6.4 of the Disclosure Schedule as is in existence on
the date hereof. Such indemnification agreements have been provided to Parent.
(c) The Indemnified Parties are intended third party beneficiaries of
this Section 6.4 to the extent such provisions benefit any such Indemnified
Party.
SECTION 6.5. Employees. (a) Parent agrees to honor in accordance
---------
with their terms all Benefit Plans delivered to Parent prior to the date hereof
and all accrued benefits vested thereunder; it being understood and agreed that
nothing in this Section 6.5(a) shall prevent Parent from amending or terminating
any such Benefit Plan in any manner permitted in accordance with the terms
thereof.
(b) Parent agrees for a period of six months following the Effective
Time to provide employees of the Company and its subsidiaries retained by Parent
with employee benefits in the aggregate no less favorable than those benefits
provided to Parent's similarly situated employees; provided that Parent
--------
43
shall be under no obligation to retain any employee or group of employees of the
Company or its subsidiaries.
(c) Parent and the Surviving Corporation shall make severance payments
to any employee of the Company set forth on Section 6.5(C) of the Disclosure
Schedule hereto, who is terminated during the six month period following the
Effective Time for reasons other than cause or failure of performance. The
amount of such severance payments shall be in an amount equal to (i) if such
employee is listed on Section 6.5(c) of the Disclosure Schedule as an hourly
employee, one (1) week of such employee's current base pay for each year of
service of the employee with the Company or its affiliates ("Service"), or (ii)
if such employee is listed on Section 6.5(c) of the Disclosure Schedule as a
salaried employee, two (2) weeks of such employee's current base pay for each
year of Service, in either such case not to exceed an aggregate of (x) if such
employee is listed on Section 6.5(c) of the Disclosure Schedule as having less
than ten (10) years of Service, thirteen (13) weeks of such severance, or (y) if
such employee is listed on Section 6.5(c) of the Disclosure Schedule as having
more than ten (10) years of Service, twenty-six (26) weeks of such severance.
Each employee set forth in Section 6.5(c) of the Disclosure Schedule hereto
shall be entitled to enforce the provisions hereof to the extent such employee
becomes entitled to severeance as described in this Section 6.5.
7.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. HSR Act Filings; Reasonable Efforts; Notification. (a)
-------------------------------------------------
Each of Parent and the Company shall (i) promptly make or cause to be made the
filings required of such party or any of its subsidiaries under the HSR Act with
respect to the transactions contemplated by this Agreement, (ii) comply at the
earliest practicable date with any request under the HSR Act for additional
information, documents, or other material received by such party or any of its
subsidiaries from the Federal Trade Commission or the Department of Justice or
any other Governmental Entity in respect of such filings or such transactions,
and (iii) cooperate with the other party in connection with any such filing, and
in connection
44
with resolving any investigation or other inquiry of any such agency or other
Governmental Entity under the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal or state statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade with respect to any such filing or any
such transaction. Each party shall promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or agreement
with, any Governmental Entity regarding any such filings or any such
transaction. Neither party shall participate in any meeting, with any
Governmental Entity in respect of any such filings, investigation, or other
inquiry without giving the other party notice of the meeting and, to the extent
permitted by such Governmental Entity, the opportunity to attend and
participate.
(b) Each of Parent and the Company shall use all reasonable efforts
to take such action as may be required to cause the expiration of the notice
periods under the HSR Act or any state statutes, rules, regulations, orders or
decrees that are designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade with respect to the
transactions contemplated hereby as promptly as possible after the execution of
this Agreement.
(c) Subject to the fiduciary duties of the Board of Directors of the
Company, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all other necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all other necessary registrations and filings (including other filings
with Governmental Entities, if any), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the preparation of the
Company Proxy Statement, (iv) the repayment of all of the Company's indebtedness
as contemplated by Section 5.7 hereof at the Effective Time, and (v) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
45
(d) Notwithstanding anything to the contrary in Section 7.1(a), (b)
or (c), (i) neither Parent nor any of its subsidiaries shall be required to
divest, or cause or permit the Company or its subsidiaries or affiliates to
divest, any of their respective businesses, product lines or assets, or to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a material adverse effect on the value, condition
(financial or otherwise), prospects, business or results of operations or
prospects of Parent and its subsidiaries taken as a whole or of the Company and
its subsidiaries taken as a whole, or all such entities taken together, and (ii)
neither Parent nor Merger Subsidiary shall be required to waive any of the
conditions to the Merger set forth in Article VIII.
(e) The Company shall give prompt notice to Parent of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any respect or (ii) the failure by it to comply with or
satisfy in any respect any covenant, condition or agreement to be compiled with
or satisfied by it under this Agreement; provided, however, that no such
-------- -------
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(f) The Company shall give prompt notice to Parent, and Parent or
Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with
the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting it or any of its subsidiaries which, if
pending on the date of this Agreement would have been required to have been
disclosed pursuant to Section 4.1(l), 4.1(m), 4.1(n), 4.1(p) or 4.1(q) or
which relate to the consummation of the transactions contemplated by this
Agreement.
46
SECTION 7.2. Public Announcements. Parent and Merger Subsidiary, on
--------------------
the one hand, and the Company, on the other hand, will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or with NASDAQ. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement will be
in the form previously agreed to by the parties.
8.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted by the
outstanding Shares of the Company within the meaning and in accordance with
the CGCL;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired; and
(c) no provision of any applicable law or regulation and no
judgment, injunction, order, decree or other legal restraint shall prohibit
the consummation of the Merger.
SECTION 8.2. Conditions to the Obligations of Parent and Merger
--------------------------------------------------
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
----------
Merger are further subject to the satisfaction of the following conditions:
(a) there shall not be instituted or pending any action by any
Governmental Entity (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation by Parent or Merger Subsidiary of the Merger, seeking to obtain
material
47
damages or imposing any material adverse conditions in connection therewith or
otherwise directly or indirectly relating to the transactions contemplated by
this Agreement or the Merger, (ii) seeking to restrain or prohibit Parent's or
Merger Subsidiary's ownership or operation (or that of their respective
subsidiaries or affiliates) of all or any portion of the business or assets of
the Company and its subsidiaries, or of Parent and its subsidiaries or
affiliates, or to compel Parent or any of its subsidiaries or affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company and its subsidiaries, or of Parent and its subsidiaries
and affiliates, (iii) seeking to impose limitations on the ability of Parent or
any of its subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote any
Shares acquired or owned by Parent or any of its subsidiaries or affiliates on
all matters properly presented to the Company's shareholders, (iv) seeking to
require divestiture by Parent or any of its subsidiaries or affiliates of any
Shares, or (v) that otherwise, in the reasonable judgment of Parent, is likely
to materially adversely affect the value, condition (financial or otherwise),
prospects, business, or results of operations of the Company and its
subsidiaries, or Parent and its subsidiaries;
(b) the Company shall have performed in all material respects its
covenants and agreements under this Agreement, and the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true when made and at and as of the Effective Time as if
made at and as of such time, and the representations and warranties set forth in
this Agreement that are not so qualified shall be true in all material respects
when made and at and as of the Effective Time as if made at and as of such time;
and Parent and Merger Subsidiary shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to that effect;
(c) no change shall have occurred or been threatened (and no development
shall have occurred or been threatened involving a prospective change) that, in
the reasonable judgment of Parent, is or is likely to have a Material Adverse
Effect;
(d) other than the filing of the certificate of merger in accordance
with DGCL and a copy of the merger agreement
48
with an officers' certificate of each Constituent Corporation in accordance with
the CGCL, after making reasonable efforts, Parent and its subsidiaries
(including Merger Subsidiary) shall not have obtained, all regulatory approvals,
licenses and other Consents including all such Consents and licenses, relating
to the sale and service of alcoholic beverages and any gaming or gambling
activities required to be obtained prior to the consummation of the Merger and
the transactions contemplated by this Agreement; and
(e) Parent shall be reasonably satisfied that at or prior to the
Effective Time (x) all Prepayment Debt will be prepaid in full and (y) the
Company will be consummating the acquisitions of all remaining interests in
Triangle, America and Carpet in accordance with the joint venture acquisition
agreements referred to in the third and fourth WHEREAS clauses of this
Agreement.
SECTION 8.3. Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to consummate the Merger are subject to the further
satisfaction of the following conditions:
Parent and Merger Subsidiary shall have performed in all material
respects their covenants and agreements under this Agreement, and the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement that are qualified as to materiality shall be true when made at and as
of the Effective Time as if made and at and as of such time, and the
representations and warranties set forth in this Agreement that are not so
qualified shall be true in all material respects when made and at and as of the
Effective Time as if made at and as of such time; and the Company shall have
received certificates of the Chief Executive Officer or a Vice President of
Parent and Merger Subsidiary to that effect.
9.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the shareholders of the Company):
49
(i) by mutual written consent of the Company and Parent;
(ii) by either Parent or the Company, if at the Company Shareholder
Meeting or any adjournment thereof at which the Company Shareholder
Approval is voted upon, the Company Shareholder Approval shall not have
been obtained;
(iii) by either the Company or Parent, if the Merger has not been
consummated by July 31, 1997, (provided that the party seeking to terminate
the Agreement shall not have breached its obligations under this Agreement
in any material respect);
(iv) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Parent
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and applicable;
(v) by Parent, at any time prior to the Effective Time, by action of
the Board of Directors of Parent, if (x) the Company shall have failed to
comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by the Company
at or prior to such date of termination or (y) the Board of Directors of
the Company shall have withdrawn or modified in a manner adverse to Parent
or Merger Subsidiary its approval or recommendation of this Agreement or
the Merger, or shall have resolved to do any of the foregoing; or
(vi) by the Company, at any time prior to the Effective Time, by
action of the Board of Directors of the Company, (A) if Parent or Merger
Subsidiary shall have failed to comply in any material respect with any of
the covenants or agreements contained in this Agreement to be complied with
or performed by Parent or Merger Subsidiary at or prior to such date of
termination, or (B) the Company receives an Acquisition Proposal on terms
the Company's Board of Directors (after consultation with its financial
advisors) determines to be more favorable to the Company's shareholders
than the terms of the Merger, and the Company's Board of Directors
determines in accordance
50
with the written advice of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to
the Company, (x) that to continue to recommend that holders of Shares vote
in favor of the Merger, notwithstanding the receipt of such offer with
respect to an Acquisition Proposal, would violate the fiduciary duties of
the Company's Board of Directors to the Company's shareholders and (y) to
accept such Acquisition Proposal; provided, however, that the Company shall
-------- -------
not be permitted to terminate this Agreement pursuant to this Section
9.1(vi)(B) unless it has provided Parent and Merger Subsidiary with two
business days prior written notice of its intent to so terminate this
Agreement together with a detailed summary of the terms and conditions
(including proposed financing, if any) of such Acquisition Proposal;
provided, further, that Parent shall receive the fees set forth in Section
-------- -------
10.4(b) immediately prior to any termination pursuant to this Section
9.1(vi)(B) by wire transfer in same day funds.
SECTION 9.2. Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto or their respective officers and
directors, except that the agreements contained in Sections 6.1, 10.4 and 10.6
shall survive the termination hereof. Specifically, and without limiting the
generality of the foregoing, Parent and Merger Subsidiary agree that, except as
expressly provided in Section 10.4(b), termination of this Agreement shall be
their sole and exclusive remedy for any nonwillful breach by the Company of its
representations, warranties and covenants under this Agreement and the Company
agrees that termination of this Agreement shall be its sole and exclusive remedy
for any nonwillful breach by Parent or Merger Subsidiary of their
representations, warranties and covenants under this Agreement.
10.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other
-------
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given,
51
if to Parent or Merger Subsidiary, to:
AMF Bowling Centers, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company, to:
American Recreation Centers, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered at the address specified
in this Section.
SECTION 10.2. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement except for the
representations, warranties and agreements set forth in Sections 6.1, 10.4 and
10.6.
52
SECTION 10.3. Amendments; No Waivers. (a) Any provision of this
----------------------
Agreement may be amended or waived prior to the Effective Time if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Parent and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
--------
adoption of this Agreement by the shareholders of the Company, no such amendment
or waiver shall, without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of capital stock of the Company, or (ii) any of the principal terms
of the Merger.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.4. Fees and Expenses. (a) Except as otherwise provided
-----------------
in this Section, all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
(b) If (w)(i) after the date hereof any person or group (as
contemplated by Section 13(d)(3) of the Exchange Act) other than Parent or
Merger Subsidiary or any of their respective subsidiaries or affiliates
(collectively, an "Acquiring Person") shall have become the beneficial owner of
10% or more of the outstanding Shares (or any person or group already
beneficially owning 10% or more of the outstanding Shares increases such
ownership by more than 5% of the Shares such person or group theretofore owned),
or any Acquiring Person shall have commenced, or shall have publicly announced
an intention to commence, a tender offer or exchange offer for or an intention
to acquire (by merger, consolidation, recapitalization or otherwise) 10% or more
of the outstanding Shares or all or substantially all of the assets of the
Company, and (ii) any Acquiring Person shall have become the beneficial owner of
a majority of the outstanding Shares, or (x) Parent shall have terminated this
Agreement pursuant to Section 9.1(v)(y), or (y) the Company shall have
terminated this Agreement pursuant to Section 9.1(vi)(B), then the Company shall
promptly, but in no event later than two days after the date of any request
there-
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for, reimburse Parent up to $650,000 for the documented fees and expenses
of Parent and Merger Subsidiary related to this Agreement, the transactions
contemplated hereby and any related financing and an additional fee of
$2,000,000 which amounts shall be payable in same day funds; provided, however,
-------- -------
that if the Company shall have terminated this Agreement pursuant to Section
9.1(vi)(B), such amounts shall be paid in accordance with the provisions of such
Section. The Company acknowledges that the agreements contained in this Section
10.4(b) are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Parent and Merger Subsidiary would not enter
into this Agreement; accordingly, if the Company fails to pay promptly the
amounts due pursuant to this Section 10.4(b), and, in order to obtain such
payments, Parent or Merger Subsidiary commences a suit against the Company for
the fees set forth in this paragraph (b), the prevailing party shall pay to the
other party or parties their costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount
thereof at the prime rate of the Citibank, N.A. on the date such payment was
required to be made.
SECTION 10.5. Successors and Assigns; Parties in Interest. The
-------------------------------------------
provisions of this Agreement shall be binding, upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties hereto
except that Merger Subsidiary may transfer or assign, in whole or from time to
time in part, to one or more of Parent or any of its wholly-owned subsidiaries,
any or all of its rights or obligations, but any such transfer or assignment
will not relieve Merger Subsidiary of its obligations under this Agreement.
Except as expressly set forth herein nothing in this Agreement, express or
implied, is intended to or shall confer upon any person not a party hereto any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including to confer third party beneficiary rights.
SECTION 10.6. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the law of the State of Delaware, except that
the consummation and effectiveness of the Merger shall be governed by, and
construed in accordance with, the DGCL and the CGCL, as applicable.
54
SECTION 10.7. Counterparts; Effectiveness; Interpretation. This
-------------------------------------------
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
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The parties hereto have caused this Agreement to be duly executed by
their respective authorized officers as of the day and year first above written.
AMERICAN RECREATION CENTERS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Title: Chief Executive Officer and
President
AMF BOWLING CENTERS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: President
NOAH ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: President
56