AGREEMENT AND PLAN OF RECAPITALIZATION
AND MERGER
BETWEEN
HB ACQUISITION CORPORATION
AND
▇▇▇▇ SPORTS CORP.
DATED AS OF FEBRUARY 17, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER...................................................... 1
SECTION 1.1 The Merger................................................. 1
SECTION 1.2 Closing; Time and Place.................................... 1
SECTION 1.3 Effective Time............................................. 1
SECTION 1.4 Effects of the Merger...................................... 2
SECTION 1.5 Certificate of Incorporation and By-Laws; Officers and
Directors.............................................................. 2
ARTICLE II CONVERSION OF SHARES........................................... 2
SECTION 2.1 Conversion of Capital Stock................................ 2
SECTION 2.2 Surrender of Certificates.................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 5
SECTION 3.1 Organization............................................... 5
SECTION 3.2 Subsidiaries............................................... 5
SECTION 3.3 Capital Structure.......................................... 6
SECTION 3.4 Authority.................................................. 6
SECTION 3.5 Consent and Approvals; No Violations....................... 7
SECTION 3.6 SEC Documents and Other Reports............................ 7
SECTION 3.7 Absence of Material Adverse Change......................... 8
SECTION 3.8 Information Supplied in Proxy Statement.................... 8
SECTION 3.9 Compliance with Laws; Permits.............................. 9
SECTION 3.10 Tax Matters................................................ 9
SECTION 3.11 Liabilities................................................ 10
SECTION 3.12 Benefit Plans; Employees and Employment Practices.......... 10
SECTION 3.13 Litigation................................................. 12
SECTION 3.14 Environmental Matters...................................... 12
SECTION 3.15 State Takeover Statutes; Charter Provisions; Rights
Agreement.............................................................. 13
SECTION 3.16 Brokers.................................................... 13
SECTION 3.17 Title to Assets............................................ 13
SECTION 3.18 Intellectual Property...................................... 13
SECTION 3.19 Opinion of Financial Adviser............................... 14
SECTION 3.20 Insurance.................................................. 14
SECTION 3.21 Interested Party Transactions.............................. 14
SECTION 3.22 Restrictions on Business Activities........................ 14
SECTION 3.23 Labor Matters.............................................. 14
SECTION 3.24 Customers.................................................. 15
SECTION 3.25 Consents................................................... 15
SECTION 3.26 Change in Control Payments................................. 15
SECTION 3.27 Contractual Obligations.................................... 15
SECTION 3.28 Disclosure................................................. 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWCO........................ 15
SECTION 4.1 Organization............................................... 15
SECTION 4.2 Authority.................................................. 15
SECTION 4.3 Consents and Approvals; No Violations...................... 16
SECTION 4.4 Information Supplied in Proxy Statement.................... 16
SECTION 4.5 Interim Operations of Newco................................ 17
SECTION 4.6 Brokers.................................................... 17
SECTION 4.7 Financing.................................................. 17
SECTION 4.8 Disclosure................................................. 17
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TABLE OF CONTENTS--(CONTINUED)
PAGE
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ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS....................... 17
SECTION 5.1 Conduct of Business by the Company Pending the Merger...... 17
SECTION 5.2 No Solicitation............................................ 19
SECTION 5.3 Disclosure to Newco; Delivery of Certain Filings........... 20
SECTION 5.4 Employee Benefit Plans..................................... 20
ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 20
SECTION 6.1 Stockholder Approval; Preparation of Proxy Statement....... 20
SECTION 6.2 Access to Information...................................... 21
SECTION 6.3 Fees and Expenses.......................................... 21
SECTION 6.4 Public Announcement........................................ 22
SECTION 6.5 Real Estate Transfer Tax................................... 22
SECTION 6.6 State Takeover Laws........................................ 22
SECTION 6.7 Indemnification; Directors and Officers Insurance.......... 23
SECTION 6.8 Notification of Certain Matters............................ 23
SECTION 6.9 Recapitalization........................................... 24
SECTION 6.10 Reasonable Efforts......................................... 24
SECTION 6.11 Certain Litigation......................................... 24
SECTION 6.12 Employee Benefits.......................................... 24
SECTION 6.13 Severance Policy and Other Agreements...................... 25
SECTION 6.14 1998 Bonus Plan............................................ 25
SECTION 6.15 Welfare Plans.............................................. 25
SECTION 6.16 Retirement Plan............................................ 25
SECTION 6.17 Certain Tax Matters........................................ 26
SECTION 6.18 Actions Respecting Commitment Letters...................... 26
ARTICLE VII CONDITIONS PRECEDENT.......................................... 27
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger. 27
SECTION 7.2 Conditions to the Obligation of the Company to Effect the
Merger................................................................. 27
SECTION 7.3 Conditions to Obligation of Newco to Effect the Merger..... 28
ARTICLE VIII TERMINATION AND AMENDMENT.................................... 28
SECTION 8.1 Termination................................................ 28
SECTION 8.2 Effect of Termination...................................... 29
SECTION 8.3 Amendment.................................................. 29
SECTION 8.4 Extension; Waiver.......................................... 29
ARTICLE IX GENERAL PROVISIONS............................................. 30
SECTION 9.1 Non-Survival of Representations and Warranties and
Agreements............................................................. 30
SECTION 9.2 Notices.................................................... 30
SECTION 9.3 Interpretation............................................. 31
SECTION 9.4 Definitions................................................ 31
SECTION 9.5 Counterparts............................................... 35
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries............. 35
SECTION 9.7 Governing Law.............................................. 35
SECTION 9.8 Assignment................................................. 35
SECTION 9.9 Severability............................................... 35
SECTION 9.10 Enforcement of This Agreement.............................. 35
SECTION 9.11 Obligations of Subsidiaries................................ 36
SECTION 9.12 Negotiation of Agreement................................... 36
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AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
This AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER is dated as of
February 17, 1998 (this "Agreement") between HB Acquisition Corporation, a
Delaware corporation ("Newco"), and ▇▇▇▇ Sports Corp., a Delaware corporation
(the "Company") (Newco and the Company being hereinafter collectively referred
to as the "Constituent Corporations").
WHEREAS, the Board of Directors of Newco has approved and deems it advisable
and in the best interest of the stockholders of Newco to participate in the
recapitalization of the Company, upon the terms and subject to the conditions
set forth herein (the "Recapitalization");
WHEREAS, the Board of Directors of the Company, based upon the
recommendation of a special committee of its independent directors (the
"Special Committee"), has approved and deems it advisable and in the best
interest of the Company, to consummate the Recapitalization upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such Recapitalization, the Board of Directors of
Newco and the Board of Directors of the Company (based upon the recommendation
of the Special Committee) have each unanimously approved this Agreement and
the merger of Newco with and into the Company in accordance with the terms of
this Agreement and the DGCL (the "Merger"); and
WHEREAS, the Board of Directors of the Company, based upon the
recommendation of the Special Committee, deems it advisable and in the best
interests of the Company and the stockholders of the Company to effect the
Merger; and
WHEREAS, pursuant to an exchange agreement (the "Exchange Agreement"), to be
entered into prior to the Effective Time, certain shares of Company Common
Stock or Options held by certain existing stockholders of the Company shall be
exchanged, to the extent provided in the Exchange Agreement, for validly
issued, fully paid and nonassessable shares of Newco Common Stock and Series A
Preferred Stock of Newco.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the DGCL, Newco shall be merged with and
into the Company at the Effective Time. Following the Merger, the separate
corporate existence of Newco shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights, privileges, immunities, powers, franchises,
restrictions, duties, debts, liabilities and obligations of the Constituent
Corporations in accordance with the DGCL.
SECTION 1.2 Closing; Time and Place. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1, the consummation and closing of the Merger will take
place at 10:00 a.m. Boston time on a date to be specified by Newco, which date
shall be no later than the third business day after satisfaction or waiver of
the conditions set forth in Article VII (the "Closing Date"), at the offices
of Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. The Merger shall become effective when a
Certificate of Merger or, if applicable, a Certificate of Ownership and Merger
(each, the "Certificate of Merger"), executed in accordance
1
with the relevant provisions of the DGCL, is duly filed with the Secretary of
State of the State of Delaware, or at such other time as Newco and the Company
shall agree upon and specify in the Certificate of Merger. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
at which the Certificate of Merger is duly filed with the Secretary of State
of Delaware or such later time established by the Certificate of Merger. Newco
and the Company shall cause the Certificate of Merger to be executed and filed
no later than the third business day after the satisfaction or waiver of the
conditions to the Merger set forth herein.
SECTION 1.4 Effects of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of DGCL.
SECTION 1.5 Certificate of Incorporation and By-Laws; Officers and
Directors.
(a) Pursuant to the Merger, the Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter changed or
amended in accordance with the DGCL and such Certificate of Incorporation.
(b) Pursuant to the Merger, the By-Laws of Newco, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter changed or amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
(c) Pursuant to the Merger, the directors of Newco immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation.
(d) Pursuant to the Merger, the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation each to
hold office in accordance with the Certificate of Incorporation and By-laws of
the Surviving Corporation.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Newco or the Company or the
holders of any shares of common stock, par value $.01 per share, of the
Company (referred to herein, together with the Rights associated therewith
pursuant to the Rights Agreement, the "Shares" or the "Company Common Stock")
or the common stock, par value $.01 per share, of Newco (the "Newco Common
Stock") or any other securities of the Company or Newco:
(a) Conversion. At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (excluding (i) any Shares to be
canceled pursuant to Section 2.1(b) and (ii) any Dissenting Shares shall be
converted into the right to receive $10.50 (the "Merger Consideration"), upon
surrender of the certificate representing such Shares in the manner provided
in and otherwise in accordance with Section 2.2. All such Shares so converted,
and the Rights associated therewith, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and such
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except for the right to receive the Merger
Consideration therefor upon surrender of such certificate in the manner
provided in and in accordance with Section 2.2.
(b) Cancellation. Each Share held in the treasury of the Company or any
direct or indirect wholly-owned Subsidiary of the Company and each Share held
by Newco immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
outstanding, and shall automatically be canceled and retired without payment
of any consideration therefor and shall cease to exist.
2
(c) Stock Options, Restricted Stock and Phantom Stock Units. The Board of
Directors of the Company shall take all actions necessary or appropriate to
cause all options to purchase Company Common Stock, including the Company
Benefit Plan Stock Options, the Company Representative Stock Options, the
Brunswick Stock Option and the Company Acquisition Stock Options (the
foregoing are collectively referred to herein as the "Options"), that are
outstanding immediately prior to the Effective Time to be fully vested and
exercisable immediately prior to the Effective Time in accordance with their
terms and the individual agreements and plans governing such options or
rights. The holder of any Option (each an "Option Holder") that is not
exercised prior to the Effective Time will be entitled to receive, in
consideration thereof, for each Share subject to the Options held by such
Option Holder, an amount equal to the excess, if any, of the Merger
Consideration over the exercise price per Share for the purchase of the
Company Common Stock in respect of such Option. Each Company Restricted Stock
Award which is outstanding immediately prior to the Effective Time shall
become fully vested and the holder thereof shall be entitled to receive, in
respect of each share of Company Common Stock subject thereto, the Merger
Consideration. Each Company Phantom Stock Unit Award which is outstanding
immediately prior to the Effective Time shall become fully vested and
exercisable and the holder thereof shall be entitled to receive a cash payment
in an amount determined in accordance with the terms thereof. The amounts
payable pursuant to this Section 2.1(c) shall be paid as soon as reasonably
practicable following the Closing Date and shall be subject to and made net of
all applicable withholding taxes; provided, however, that with respect to any
Option Holder or holder of a Company Restricted Stock Award or holder of a
Company Phantom Stock Unit Award subject to Section 16(a) of the Exchange Act,
any such payment shall be made as soon as reasonably practicable after the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act. Upon receipt of such payment in respect of any
Option, Company Restricted Stock Award or Company Phantom Stock Unit Award,
the related Option, Company Restricted Stock Award or Company Phantom Stock
Unit Award shall be cancelled. The surrender of any Option, Company Restricted
Stock Award or Company Phantom Stock Unit Award in exchange for the applicable
consideration contemplated by this Section 2.1(c) shall be deemed a release of
any and all rights the holder thereof had or may have had in respect thereof.
Prior to the Effective Time, the Company shall use its reasonable best efforts
to obtain all necessary consents or releases from Option Holders and to take
all such other lawful action as may be necessary to give effect to this
Section 2.1(c) (except for such action as may require the approval of the
Company's stockholders). The Company shall take all action necessary to ensure
that following the Effective Time no Option Holder shall have any right, in
respect of any Option held by such Option Holder, to acquire equity securities
of the Company or the Surviving Corporation.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person
(a "Dissenting Stockholder") who has not voted in favor of or consented to the
Merger and complies with the applicable provisions of the DGCL concerning the
rights of holders of Shares to require appraisal of their Shares ("Dissenting
Shares"), as appropriate, shall not be converted as described in Section
2.1(a), but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the DGCL. If,
after the Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of appraisal, in
any case pursuant to the DGCL, his Shares shall be deemed to be cancelled as
of the Effective Time and be converted into the right to receive the Merger
Consideration allocated as provided in Section 2.1(a). The Company shall give
Newco prompt notice of any demands for appraisal of Shares received by the
Company. The Company shall not, without the prior written consent of Newco,
make any payment with respect to, or settle or offer to settle, any such
demands.
(e) Capital Stock of Newco. Each share of Newco Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Common Stock, $1.00 par value per share (the "Surviving Corporation Shares" or
"Surviving Corporation Common Stock"), of the Surviving Corporation and each
share of Series A Preferred Stock of Newco issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Series A Preferred
Stock, $1.00 par value per share (the "Series A Preferred Stock"), of the
Surviving Corporation.
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SECTION 2.2 Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Newco shall designate a bank,
trust company or other entity who shall be reasonably satisfactory to the
Company to act as paying agent in the Merger (the "Paying Agent") to receive
the funds to which holders of Shares shall become entitled pursuant to Section
2.1(a). At the Effective Time, the Surviving Corporation will make available
to the Paying Agent funds necessary to complete the payments contemplated by
Sections 2.1(a) on a timely basis. In addition, Newco shall take all necessary
action to ensure that at the Effective Time, the Surviving Corporation will
have the funds necessary to complete the payments contemplated by Section
2.1(c) on a timely basis. Funds made available to the Paying Agent shall be
invested by the Paying Agent as directed by Newco or, after the Effective
Time, the Surviving Corporation, provided that such investments shall only be
in obligations of or guaranteed by the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by ▇▇▇▇▇'▇ Investors Service,
Inc. or Standard & Poor's Corporation, respectively, or in certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $1 billion (it being understood that any and all
interest or income earned on funds made available to the Paying Agent pursuant
to this Agreement shall be turned over to the Surviving Corporation).
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall instruct the Paying Agent to
promptly, but in no event later than three business days following the
Effective Time, mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented Shares (the
"Certificates") whose Shares were converted pursuant to Section 2.1(a) into
the right to receive the Merger Consideration (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates
to the Paying Agent and shall be in a form and have such other provisions as
Newco may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration as
provided in Section 2.1(a). Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be appointed by
Newco, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly represented by
such Certificate, and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate (other than Certificates representing Dissenting Shares) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which
the shares of Company Common Stock theretofore represented by such Certificate
shall have been converted pursuant to Section 2.1. No interest will be paid or
will accrue on the cash payable upon the surrender of any Certificate. The
Surviving Corporation or the Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Shares such amounts as the Surviving Corporation or the
Paying Agent is required to deduct and withhold with respect to the making of
such payment under the Code or under any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made by the Surviving
Corporation or the Paying Agent.
(c) No Further Ownership Right in Shares. All cash paid upon the surrender
of Certificates in accordance with the terms of this Article II shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates.
At the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers on the
4
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(d) Termination of Payment Fund. Any portion of the funds made available to
the Paying Agent (and the proceeds of any interest or other income received by
the Paying Agent in respect of all such funds) to pay the Merger Consideration
which remains undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any holders of Shares who have not theretofore complied with this Article
II and the instructions set forth in the letter of transmittal mailed to such
holders after the Effective Time shall thereafter look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) for
payment of the Merger Consideration to which they are entitled, without
interest.
(e) No Liability. None of Newco, the Company or the Paying Agent shall be
liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco as follows:
SECTION 3.1 Organization. The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized and in good standing or to have such
power and authority would not reasonably be expected to have a Material
Adverse Effect on the Company. Item 3.1 of the letter from the Company to
Newco dated the date hereof, which letter relates to this Agreement and is
designated therein as the Company Letter (the "Company Letter") sets forth a
true and complete list of the jurisdiction of incorporation of the Company and
its Subsidiaries, and identifies each jurisdiction in which such entity is
qualified to do business. The Company and each of its Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
identified in Item 3.1 of the Company Letter, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would not have a Material Adverse Effect on the Company or prevent or result
in a third party delaying the consummation of the Merger and except as set
forth in Item 3.1 of the Company Letter. The Company has delivered to Newco
complete and correct copies of its Certificate of Incorporation and By-Laws
and has made available to Newco the Certificate of Incorporation and By-Laws
(or similar organizational documents) of each of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is in violation of any provision of its
Certificate of Incorporation.
SECTION 3.2 Subsidiaries. Except as set forth in Item 3.2 of the Company
Letter, all of the outstanding shares of capital stock of each Subsidiary of
the Company are owned by the Company, by another Subsidiary of the Company or
by the Company and another Subsidiary of the Company, free and clear of all
pledges, claims, liens, charges, options, rights of first refusal, agreements,
equitable interests, restrictions on transfer, limitations in the Company's
voting rights, encumbrances and security interests of any kind or nature
whatsoever or restrictions on the creation of any of the foregoing
(collectively, "Liens") other than restrictions on transfer under applicable
securities laws, and are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Item 3.2 of the Company Letter and
except for the capital stock of its Subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture, limited liability company or other
entity.
5
SECTION 3.3 Capital Structure. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock, $.01 par value per share (the "Company Preferred Stock"). At
the close of business on February 6, 1998, (i) 13,856,922 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights, (ii) 495,072
shares of Company Common Stock were held by the Company in its treasury and
(iii) no shares of Company Preferred Stock were issued and outstanding. As of
the date of this Agreement, except for (i) the rights to purchase shares of
the Series A Junior Participating Preferred Stock, $.01 par value, of the
Company (the "Rights") issued pursuant to the Stockholders Rights Agreement
dated as of September 22, 1994, as amended by First Amendment to Stockholders
Rights Agreement dated as of February 15, 1995 (collectively, the "Rights
Agreement"), between the Company and ▇▇▇▇▇▇ Trust and Savings Bank, as Rights
Agent, (ii) (A) options to purchase not in excess of 1,643,071 shares of
Company Common Stock granted under the Company's Restated and Amended 1991
Management Stock Incentive Plan, the Company's Restated and Amended 1992
Management Stock Incentive Plan, the Company's Restated and Amended 1992
Outside Directors Stock Option Plan, the Company's Restated and Amended 1993
Outside Directors Stock Option Plan, the Company's 1996 Stock Option Plan and
the American Recreation Company Holdings, Inc. Stock Option Plan
(collectively, the "Company Benefit Plan Stock Options"), (B) options to
purchase not in excess of 27,500 shares of Company Common Stock granted to
certain representatives of the Company (the "Company Representative Stock
Options"), (C) an option to purchase 600,000 shares of Company Common Stock
granted to Brunswick Corporation (the "Brunswick Stock Option") and (D)
options to purchase not in excess of 26,900 shares of Company Common Stock
granted in connection with certain acquisitions made by the Company or its
Subsidiaries (the "Company Acquisition Stock Options"), (iii) awards of shares
of restricted Company Common Stock covering not in excess of 24,787 shares of
Company Common Stock (the "Company Restricted Stock Awards"), (iv) awards of
phantom stock units covering not in excess of 112,060 units and awards of
phantom stock units that may be made in satisfaction of the obligations of the
Company pursuant to a certain employment agreement (the "Company Phantom Stock
Unit Awards") and (v) 1,595,450 shares of Company Common Stock that may become
deliverable upon conversion of the Company's 4 1/4% Convertible Subordinated
Debentures due 2000 (the "Debentures"), there are no options, warrants, calls,
rights or agreements 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 or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or phantom stock units of the Company or
any Subsidiary or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement. Item
3.3 of the Company Letter lists the holders of Options outstanding at the
close of business on February 6, 1998, the number of shares of Company Common
Stock subject to each such Option, the first date such Option became or will
become exercisable and the exercise price applicable to such Option. All of
the shares of capital stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive or other similar rights. There
are not as of the date hereof and there will not be at the Effective Time, any
stockholder agreements, voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which any of
them is bound relating to the voting of any shares of the capital stock of the
Company which will limit in any way the solicitation of proxies by or on
behalf of the Company from, or the casting of votes by the stockholders of the
Company with respect to the Merger and the transactions contemplated by this
Agreement.
Except as set forth in the Company SEC Documents or Item 3.3 of the Company
Letter, as of the date of this Agreement, there are no outstanding contractual
obligations of the Company or any of its Subsidiaries (i) to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
Subsidiary or (ii) to vote or to dispose of any shares of the capital stock of
any of the Company's Subsidiaries.
SECTION 3.4 Authority. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and, subject to approval by the Company's stockholders of the
Merger, to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions
6
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company, subject to approval by the Company's
stockholders of this Agreement and the Merger. The Special Committee, at a
meeting duly called and held, has by the unanimous vote of all of its members
approved this Agreement and determined that it is advisable and in the best
interests of the Company to enter into the Merger. The Board of Directors, at
a meeting duly called and held, pursuant to the recommendation of the Special
Committee, by the vote of all directors present and voting (i) approved this
Agreement and determined that it is advisable and in the best interests of the
Company to enter into the Merger and (ii) resolved to recommend that the
holders of shares of Company Common Stock approve and adopt this Agreement and
the transactions contemplated hereunder, including the Merger. The Board of
Directors of the Company, by a vote of at least two-thirds of the incumbent
directors, has approved the Merger for purposes of ARTICLE ELEVENTH of the
Company's Certificate of Incorporation. This Agreement has been duly executed
and delivered by the Company and (assuming the valid authorization, execution
and delivery of this Agreement by Newco) constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
SECTION 3.5 Consent and Approvals; No Violations. Except as set forth in
Item 3.5 of the Company Letter, the execution and delivery by the Company of
this Agreement do not, and the consummation by the Company of the transactions
contemplated hereby and compliance by the Company with the provisions hereof
will not, 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, redemption or acceleration of any obligation or the 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) any
provision of the Certificate of Incorporation, By-Laws or comparable
organization documents of the Company or any of the Subsidiaries of the
Company, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement (other than, with respect to termination, agreements
terminable at will or upon 90 days' or less notice by the terminating party),
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iii) assuming all the consents, filings and
registrations referred to in the next sentence are made and obtained, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, other than in the case of clause (ii) or
(iii), any such violations, defaults, rights, losses or liens, that,
individually or in the aggregate, are not material. No filing or registration
with, or authorization, consent or approval of, any domestic (federal and
state) or foreign court, commission, governmental body, regulatory agency,
authority or tribunal (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 is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement,
except (i) in connection, or in compliance, with the provisions of the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the Securities Exchange Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Exchange Act"), (ii) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
other transactions contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws
(the "State Takeover Approvals") or state securities or "blue sky" laws, (v)
such filings as may be required in connection with the taxes described in
Section 6.5, (vi) in connection, or in compliance, with the provisions of the
Competition Act (Canada) (the "Competition Act") and (vii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the laws of any foreign country in which the
Company or any of its Subsidiaries conducts any business or owns any property
or assets.
SECTION 3.6 SEC Documents and Other Reports. Except as set forth in Item 3.6
of the Company Letter, the Company has timely filed all required documents
with the Securities and Exchange Commission (the "SEC") since April 10, 1992
(the "Company SEC Documents"). As of their respective filing dates (or if
7
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing), and during any period of effectiveness, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), or the Exchange Act, as the
case may be, each as in effect on the date so filed, and at the time filed
with the SEC none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as of
their respective dates as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto) and fairly present the consolidated financial position of
the Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein).
SECTION 3.7 Absence of Material Adverse Change. Except as disclosed in Items
3.7 or 3.12(b) of the Company Letter or in the Company SEC Documents, between
June 28, 1997 and the date hereof, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course consistent
with past practice, and there has not been (i) any Material Adverse Change
with respect to the Company or any of its Subsidiaries, (ii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock or any redemption purchase or other acquisition of any of
its capital stock, (iii) any split, combination or reclassification of any of
its capital stock or any issuances 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) (x) any granting by the Company or any of its
Subsidiaries to any officer of the Company or any of its Subsidiaries of any
increase in compensation, except in the ordinary course of business (including
in connection with promotions) consistent with past practice or as was
required under employment agreements in effect as of June 28, 1997, (y) any
change to the Company's or any of its Subsidiaries' severance or termination
plans, agreements or arrangements with any of their employees, except as part
of a standard employment package to any person promoted or hired (but not
including the five most senior officers), or as was required under employment,
severance or termination agreements in effect as of June 28, 1997, or (z) any
entry by the Company or any of its Subsidiaries into any employment,
consulting, severance, termination or indemnification agreement with any
employee or executive officer, except for agreements entered into in the
ordinary course of business, consistent with past practice, with employees who
are not executive officers of the Company, none of which agreements,
individually or in the aggregate, are or would be reasonably likely to be
material to the Company, (v) any material damage, destruction or loss, whether
or not covered by insurance, (vi) any revaluation by the Company of any of its
material assets, (vii) any material change in accounting methods, principles
or practices by the Company, or (viii) any amendments or changes in the
Certificate of Incorporation or By-Laws of the Company.
SECTION 3.8 Information Supplied in Proxy Statement. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in the proxy statement, or in any amendments or
supplements thereto (the "Proxy Statement"), to be sent to the stockholders of
the Company in connection with the meeting of stockholders of the Company to
consider the Merger (the "Stockholders Meeting"), or, if required under the
Exchange Act, in the Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") filed under the Exchange Act with the Proxy Statement, will at the
date the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting, (i) be false or misleading with respect
to any material fact, in light of the circumstances under which made, or (ii)
contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading, except that no representation or
8
warranty is made by the Company in connection with any of the foregoing with
respect to statements made or incorporated by reference therein based on
information supplied by Newco or any of its respective representatives
specifically for inclusion or incorporation by reference therein. The Proxy
Statement and, if required, the Schedule 13E-3, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by
the Company in connection with any of the foregoing with respect to statements
made or incorporated by reference therein based on information supplied by
Newco or any of its respective representatives specifically for inclusion or
incorporation by reference therein.
SECTION 3.9 Compliance with Laws; Permits. The Company and its Subsidiaries
are not and the businesses of the Company and its Subsidiaries are not being
conducted in material violation of any law, ordinance or regulation, order,
judgment or decree of any Governmental Entity. The Company and its
Subsidiaries hold all material permits, licenses, variances, exemptions,
orders, franchises and approvals of all Government Entities necessary for the
lawful conduct of their respective businesses.
SECTION 3.10 Tax Matters. Except as set forth in Item 3.10 of the Company
Letter:
(a) All Tax Returns required to be filed by or with respect to the Company,
each of its Subsidiaries, and any affiliated, consolidated, combined, unitary
or similar group of which the Company or any of its Subsidiaries is or was a
member (together, the "Company, Subsidiaries and/or Groups"), for which there
could be material liabilities, interest or penalties, have been duly and
timely filed (taking into account all valid extensions of filing dates), and
all such Tax Returns are true, correct and complete in all material respects.
Each of the Company, Subsidiaries and/or Groups has duly and timely paid (or
there has been paid on its behalf) all material Taxes that are due. Except as
set forth in Item 3.10(a) of the Company Letter, none of the Company,
Subsidiaries and/or Groups currently is the beneficiary of any extensions of
time within which to file any Tax Return. With respect to any period for which
Taxes are not yet due with respect to the Company, Subsidiaries and/or Groups,
each of the Company, Subsidiaries and/or Groups has made due and sufficient
current accruals for such Taxes in accordance with GAAP in the most recent
financial statements contained in the Company SEC Documents. The Company and
each of its Subsidiaries have withheld and paid all Taxes required by all
applicable laws to be withheld or paid in connection with any amounts paid or
owing to any employee, creditor, independent contractor, stockholder or other
third party and such amounts have been reserved against and entered on the
books of the Company and its Subsidiaries.
(b) There are no outstanding agreements, waivers, or arrangements extending
the statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or with respect to any of
the Company, Subsidiaries and/or Groups for any taxable period. No audit or
other proceeding by any court, governmental or regulatory authority, or
similar person is pending in writing with regard to any Taxes due from or with
respect to the Company or any of its Subsidiaries or any Tax Return filed by
or with respect to any of the Company, Subsidiaries and/or Groups. All
deficiencies of Taxes assessed by any applicable taxing authority have been
paid, fully settled or adequately provided for in the financial statements
contained in the Company SEC Documents. Neither the Company nor any Subsidiary
of the Company has received written notice that any assessment of Taxes is
proposed against any of the Company or any of its Subsidiaries or any of their
assets.
(c) No consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to the
Company or any of its Subsidiaries or any of their assets.
(d) None of the Company, Subsidiaries and/or Groups has executed or entered
into with the Internal Revenue Service ("IRS"), or any taxing authority, a
closing agreement pursuant to Section 7121 of the Code or any similar
provision of state, local, foreign or other income tax law, which will require
any increase in taxable income or alternative minimum taxable income, or any
reduction in tax credits for, the Company or any of its Subsidiaries for any
taxable period ending after the Closing Date.
9
(e) There are no requests for rulings from any taxing authority for
information with respect to Taxes of the Company or any of its Subsidiaries
and, to the knowledge of the Company, no material reassessments (for property
or ad valorem Tax purposes) of any assets or any property owned or leased by
the Company or any of its Subsidiaries have been proposed in written form.
(f) None of the Company and its Subsidiaries has been a United States real
property holding corporation within the meaning of Code (S)897(c)(2) during
the applicable period specified in Code (S)897(c)(1)(A)(ii). Each of the
Company and its Subsidiaries has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax, within the meaning of Code (S)6662. None
of the Company, Subsidiaries and/or Groups (A) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has any liability for
the Taxes of any person (other than any of the Company, Subsidiaries and/or
Groups) under Reg. (S)1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
SECTION 3.11 Liabilities. Except (a) for liabilities incurred in the
ordinary course of business consistent with past practice, none of which
individually or in the aggregate would have a Material Adverse Effect on the
Company or any of its Subsidiaries, (b) for expenses incurred in connection
with this Agreement, (c) for liabilities set forth on the most recent balance
sheet (including any notes thereto) included in the Company's financial
statements included in the Company SEC Documents filed with the SEC since June
28, 1997, or (d) as set forth in Item 3.11 of the Company Letter, from June
28, 1997 until the date hereof, neither the Company nor any of its
Subsidiaries has incurred any liabilities of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise.
SECTION 3.12 Benefit Plans; Employees and Employment Practices. (a) Item
3.12(a) of the Company Letter contains a list of (i) each "employee pension
benefit plan" (as defined in Section 3(2) ERISA) maintained, sponsored or
contributed to by the Company or any of its U.S. or foreign Subsidiaries for
the benefit of current or former employees, officers or directors of the
Company and any such Subsidiaries and (ii) each "employee welfare pension
benefit plan" (as defined in Section 3(1) of ERISA) maintained, sponsored or
contributed to by the Company or any of its U.S. or foreign Subsidiaries for
the benefit of current or former employees, officers or directors of the
Company and any such Subsidiaries. The Company has made available to Newco
true, complete and correct copies of (i) each Benefit Plan together with all
amendments (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (ii) the most recent annual report on Form 5500 (and related
schedules and financial statements or opinions required in connection
therewith) filed with the IRS with respect to each Benefit Plan (if any such
report was required), (iii) the most recent actuarial report with respect to
each Benefit Plan, as applicable, (iv) the most recent summary plan
description or other summary (and a summary of material modifications, if
applicable) for each Benefit Plan (if such summary is required or available),
(v) each trust agreement and group annuity contract relating to any Benefit
Plan, and (vi) copies of any notices, letters or other correspondence from the
IRS or the Department of Labor relating to a Benefit Plan.
(b) Except as disclosed in the Company SEC Documents or Item 3.12(b) of the
Company Letter, since the date of the most recent audited financial statements
included in the Company SEC Documents, there has not been any adoption or
amendment in any material respect (including any increase or improvements in
benefits or coverage), whether or not in writing, by the Company or any of its
Subsidiaries of any collective bargaining agreement or any Benefit Plan
providing benefits to any current or former employee, officer, director,
consultant or independent contractor of the Company or any of its
Subsidiaries. Except as disclosed in Item 3.12(b) of the Company Letter or in
the Company SEC Documents, there exist no employment, consulting, severance,
termination or indemnification agreements between the Company or any of its
Subsidiaries and any current or former employee, officer, director, consultant
or independent contractor of the Company or any of its Subsidiaries.
(c) Except as disclosed in Item 3.12(c) of the Company Letter, all Pension
Plans which are intended to be tax-qualified are so tax-qualified and have
received determination letters in respect of such Pension Plans from
10
the Internal Revenue Service to the effect that such Pension Plans are
qualified and exempt from federal income taxes under Sections 401(a) and
501(a), respectively, of the Code and, to the knowledge of the Company, there
is no reason why any such Pension Plan is not currently so qualified.
(d) Except as disclosed in Item 3.12(d) of the Company Letter, each Benefit
Plan has been administered in all material respects in conformity with its
terms and the applicable requirements of ERISA and the Code and other
applicable laws and all contributions required to be made have been made in
accordance with the provisions of each such Benefit Plan and with ERISA, the
Code, applicable collective bargaining agreements and other applicable laws.
(e) None of the Company or any of its Subsidiaries, or any other person or
entity that, together with the Company, is treated as a single employer under
Section 414 of the Code or Section 4001 (b)(1) of ERISA (an "ERISA
Affiliate"), currently maintains or has, since becoming affiliated with the
Company, maintained any Pension Plan subject to Title IV or ERISA, including
any "multiemployer plan" (within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA), or has incurred any liability under Title IV of ERISA or
to the Pension Benefit Guaranty Corporation (other than contributions and
premiums in the ordinary course) that has not been fully paid as of the date
hereof which would be reasonably expected to have a Material Adverse Effect on
the Company and, to the knowledge of the Company, no ERISA Affiliate has,
prior to becoming affiliated with the Company, maintained any such Pension
Plan or incurred any such liability. To the Company's knowledge, none of the
Company, any of its Subsidiaries, any officer of the Company or any of its
Subsidiaries or any of the Benefit Plans which are subject to ERISA, including
the Pension Plans, any trusts created thereunder or, to the knowledge of the
Company, any trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975
of the Code) or any breach of fiduciary responsibility that could reasonably
be expected to subject the Company, any of its Subsidiaries or any officer of
the Company or any of its Subsidiaries to any material tax on prohibited
transactions imposed by Section 4975 of the Code or to any material liability
under Section 502(i) or (1) of ERISA, where the liability that would be
reasonably expected to occur would have a Material Adverse Effect on the
Company. With respect to any multiemployer plan within the meaning of Section
3(37) or 4001(a)(3) of ERISA to which the Company has ever contributed or been
obligated to contribute or to which an ERISA Affiliate has, since becoming
affiliated with the Company, contributed or been obligated to contribute, no
event has occurred that could give rise to a liability on the part of the
Company or any Subsidiary under Part 1 of Subtitle E of Title IV of ERISA and,
to the Company's knowledge, with respect to any such plan to which an ERISA
Affiliate has, prior to becoming affiliated with the Company, contributed or
been obligated to contribute, no event has occurred that could give rise to
such a liability.
(f) There is no pending dispute, arbitration, claim, suit or grievance
involving a Benefit Plan (other than routine claims for benefits payable under
any such Benefit Plan), and to the knowledge of the Company, there is no basis
for any such claim, that would reasonably be expected to have a Material
Adverse Effect on the Company.
(g) Except as disclosed in Item 3.12(g) of the Company Letter, there are no
controversies, strikes, work stoppages or disputes pending between the Company
or any of its Subsidiaries and any current or former employees, and, to the
Company's knowledge, no organizational effort by any labor union or other
collective bargaining unit currently is under way with respect to any
employee, which would reasonably be expected to have a Material Adverse Effect
on the Company. A true, complete and correct copy of any applicable collective
bargaining agreement has been made available to Newco, and the Company and its
Subsidiaries are in compliance in all material respects with the terms
thereof.
(h) Except as disclosed in Item 3.12(h) of the Company Letter, and other
than as required under Section 601 et seq. of ERISA, no Benefit Plan that is a
welfare plan provides benefits or coverage following retirement or other
termination of employment. Nothing has occurred with respect to any Benefit
Plan described in Section 4980B of the Code that could subject the Company or
any Subsidiary to a material tax under Section 4980B of the Code. Neither the
Company nor its Subsidiaries maintains or contributes to a welfare
11
benefit trust or fund that constitutes or is associated with a Benefit Plan
and that is intended to be exempt from federal income tax under Section
501(c)(9) of the Code.
(i) Except as disclosed in Item 3.12(i) of the Company Letter, no provision
of any Benefit Plan, other than any such plan that is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA, would result in any
limitation on the ability of the Company, any Subsidiary or the Investors to
amend or terminate the plan.
SECTION 3.13 Litigation. Except as disclosed in Item 3.13 of the Company
Letter or in the Company SEC Documents, as of the date hereof there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge
of the Company, threatened (i) against the Company or any of its Subsidiaries
or against any properties or rights of the Company and its Subsidiaries or
(ii) which would impair the ability of the Company to perform its obligations
under this Agreement or result in a third party delaying the consummation of
the Merger or which seeks to enjoin or obtain damages in respect of the
transactions contemplated by this Agreement. Except as disclosed in Item 3.13
of the Company Letter or in the Company SEC Documents, as of the date hereof
neither the Company nor any of its Subsidiaries is subject to any outstanding
judgment, order, writ, injunction or decree of any court or Governmental
Entity which would impair the ability of the Company to perform its
obligations under this Agreement or result in a third party delaying the
consummation of the Merger or which enjoins or imposes damages in respect of
the transactions contemplated by this Agreement.
SECTION 3.14 Environmental Matters. Except as set forth in Item 3.14 of the
Company Letter:
(a) The operations of the Company and its Subsidiaries have been and, as of
the Effective Time, will be, in compliance in all respects with all
Environmental Laws except for any such noncompliance which would not result in
a Material Adverse Effect on the Company;
(b) The Company and its Subsidiaries have obtained and will, as of the
Effective Time, maintain all permits required under applicable Environmental
Laws for the continued operations of their respective businesses, except such
permits the lack of which would not materially impair the ability of the
Company and its Subsidiaries to continue operations;
(c) The Company and its Subsidiaries are not subject to any outstanding
written orders from, or written agreements with, any Governmental Entity
respecting (A) violations or liability pursuant to Environmental Laws, (B)
Remedial Action or (C) any Release or threatened Release of a Hazardous
Material, except for any agreements which would not result in a Material
Adverse Effect;
(d) The Company and its Subsidiaries have not received any written
communication alleging, with respect to any such party, the violation of or
liability under any Environmental Law, which violation or liability is
outstanding, except for any such violation or liability which would not result
in a Material Adverse Effect on the Company;
(e) Neither the Company nor any of its Subsidiaries has any liability or
contingent liability in connection with the Release of any Hazardous Material
into the environment (whether on-site or off-site) which would result in the
Company and its Subsidiaries incurring Environmental Costs and Liabilities
that would result in a Material Adverse Effect;
(f) The Company or its Subsidiaries do not engage in the transportation,
treatment, storage or disposal of hazardous waste, as defined and regulated
under permit requirements set forth in 40 C.F.R. Parts 260-270 (in effect as
of the date of this Agreement) or any state equivalent;
(g) Except as would not have a Material Adverse Effect on the Company, there
is not now nor has there been in the past, on or in any property of the
Company or its Subsidiaries any of the following: (A) any underground storage
tanks or surface impoundments containing Hazardous Materials, (B) any
asbestos-containing materials, or (C) any polychlorinated biphenyls in
regulated quantities; and
(h) No judicial or administrative proceedings are pending and, to the
knowledge of the Company, no governmental investigations are pending and no
such proceedings or investigations are threatened against the
12
Company or any of its Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or as the result of the
Release or alleged Release of a Hazardous Material.
SECTION 3.15 State Takeover Statutes; Charter Provisions; Rights
Agreement. The action of the Board of Directors of the Company in approving
the Merger, this Agreement and the transactions contemplated by this Agreement
is sufficient to render inapplicable to the Merger and this Agreement the
provisions of (i) Section 203 of the DGCL, (ii) Article ELEVENTH of the
Company's Certificate of Incorporation and (iii) Article 14 of the Indenture
dated as of November 15, 1993 between the Company and ▇▇▇▇▇▇ Trust and Savings
Bank, Trustee (the "Indenture"), including without limitation the approval of,
election or appointment of representatives of Newco to the Board of Directors
of the Surviving Corporation. The Company has made available to Newco a
complete and correct copy of the Rights Agreement, including all current
amendments and exhibits thereto. The Board of Directors of the Company has
taken all action necessary to amend the Rights Agreement to provide that: (i)
a Distribution Date (as defined in the Rights Agreement) shall not occur, the
Rights shall not separate (to the extent the Rights Agreement otherwise
provides for such separation) or become exercisable and Newco shall not become
an Acquiring Person (as defined in the Rights Agreement) as a result of the
execution or delivery of this Agreement by the Company, the public
announcement of such execution and delivery or the performance or agreement by
the Company to effect the Merger in accordance with the terms of this
Agreement or perform any of its obligations under this Agreement and (ii) the
Rights shall cease to be exercisable at or after the Effective Time in
accordance with the terms thereof and the terms and conditions hereof. The
Company has provided Newco with a copy of such amendment to the Rights
Agreement executed by the Company and the Rights Agent.
SECTION 3.16 Brokers. No broker, investment banker, financial advisor or
other person, other than NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC ("NationsBanc
▇▇▇▇▇▇▇▇▇▇"), the fees and expenses of which will be paid by the Company (and
are reflected in an agreement between NationsBanc ▇▇▇▇▇▇▇▇▇▇ and the Company,
a complete copy of which has been furnished to Newco), 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.
SECTION 3.17 Title to Assets. Except as set forth in Item 3.17 of the
Company Letter, the Company and each of its Subsidiaries have good and
defensible title to all of their properties and assets, free and clear of all
Liens, charges and encumbrances, except Liens for taxes not yet due and
payable and such Liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which would not have a Material Adverse Effect;
and, all leases pursuant to which the Company or any of its Subsidiaries lease
from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default), except
where the lack of such good standing, validity and effectiveness or the
existence of such default or event of default would not have a Material
Adverse Effect.
SECTION 3.18 Intellectual Property. The Company or its Subsidiaries own or
have the right to use pursuant to license, sublicense, agreement or permission
all Intellectual Property material to the operation of the businesses of the
Company and its Subsidiaries as currently conducted. To the Company's
knowledge, no third party has asserted any challenge to the validity of any of
the patents and trademark registrations included in the Intellectual Property
that are material to the operation of the businesses of the Company or the
Subsidiaries as currently conducted. Except as disclosed on Item 3.18 of the
Company Letter, to the Company's knowledge, the Company has received no
notice, threat or claim from any third party, nor to the Company's knowledge
has any suit been filed by any third party, asserting that the operation of
the businesses of the Company or its Subsidiaries as currently conducted
infringes the Intellectual Property rights of any third party, nor, to the
knowledge of the Company, does any basis exist for such a notice, threat,
claim or suit. Except as disclosed on Item 3.18 of the Company Letter, to the
Company's knowledge, no third party has infringed or is believed by the
Company to be currently infringing any material Intellectual Property rights
of the Company or its Subsidiaries. Except as disclosed on Item 3.18 of the
Company Letter, neither the Company nor its Subsidiaries has licensed any
material
13
Intellectual Property of the Company or its Subsidiaries to any third party
and, to the knowledge of the Company, no third party has any right to use any
such Intellectual Property.
SECTION 3.19 Opinion of Financial Adviser. The Company has received the
opinion (the "Fairness Opinion") of NationsBanc ▇▇▇▇▇▇▇▇▇▇ to the effect that,
as of the date thereof, the cash consideration to be received by the holders
of Company Common Stock and the Merger are fair from a financial point of view
to such holders. As of the date of this Agreement, the Company has been
authorized by NationsBanc ▇▇▇▇▇▇▇▇▇▇ to include the Fairness Opinion in the
Proxy Statement. The Fairness Opinion has not been withdrawn or modified (it
being understood that the Company shall be under no obligation to furnish an
update of the Fairness Opinion dated as of the Effective Time). True and
complete copies of all agreements between the Company or any of its affiliates
and NationsBanc ▇▇▇▇▇▇▇▇▇▇ relating to the transactions contemplated by this
Agreement have previously been provided to the Investors.
SECTION 3.20 Insurance. Except as set forth in Section 3.20 of the Company
Letter, all material fire and casualty, general liability, business
interruption, product liability, professional liability, director and officer
liability and sprinkler and water damage insurance policies (the "Policies")
maintained by the Company or any of its Subsidiaries are with reputable
insurance carriers, provide full and adequate coverage for all normal risks
incident to the business of the Company and its Subsidiaries and their
respective properties and assets and are in character and amount at least
equivalent to that carried by entities engaged in similar businesses and
subject to the same or similar perils or hazards. Except as set forth in the
Company SEC Documents or in Item 3.20 of the Company Letter, the Company and
its Subsidiaries have continuously maintained Policies with reputable
insurance carriers which have provided full and adequate coverage for all
normal risks incident to the business of the Company and its Subsidiaries and
their respective property and assets.
SECTION 3.21 Interested Party Transactions. Except as set forth in Item 3.21
of the Company Letter or in the Company SEC Documents or as expressly
contemplated by this Agreement, since the date of the Company's proxy
statement dated October 17, 1997, no event has occurred that would be required
to be reported by the Company as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.22 Restrictions on Business Activities. Except for this Agreement
or as set forth in Item 3.22 of the Company Letter or in the Company SEC
Documents, there is no material agreement, judgment, injunction, order or
decree binding upon the Company or any of its Subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or impairing any
material business practice of the Company or any of its Subsidiaries, any
acquisition of property by the Company or any of its Subsidiaries or the
conduct of business by the Company or any of its Subsidiaries as currently
conducted or as proposed to be conducted by the Company, except for any
prohibition or impairment as would not have a Material Adverse Effect.
SECTION 3.23 Labor Matters. Except to the extent as set forth in Item 3.23
of the Company Letter or in the Company SEC Documents:
(a) Neither the Company nor any of its Subsidiaries is a party to any labor
or collective bargaining agreement, and no employees of the Company or any of
its Subsidiaries are represented by any labor organization. Within the
preceding three years, there have been no representation or certification
proceedings, or petitions seeking a representation proceeding, pending or, to
the knowledge of the Company, threatened to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. Within the preceding three years, to the knowledge of the Company,
there have been no organizing activities involving the Company or any of its
Subsidiaries with respect to any group of employees of the Company or any of
its Subsidiaries.
(b) As of the date hereof, there are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries. There are no unfair labor
practice charges or
14
complaints pending or, to the knowledge of the Company, threatened by or on
behalf of any employee or group of employees of the Company or any of its
Subsidiaries.
(c) As of the date hereof, there are no complaints, charges or claims
against the Company or any of its Subsidiaries pending or, to the knowledge of
the Company, threatened to be brought or filed, with any Governmental Entity
or arbitrator(s) based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment of any individual by
the Company or any of its Subsidiaries.
SECTION 3.24 Customers. Except as set forth in Item 3.24 of the Company
Letter, as of the date hereof, none of the top 5 customers (by annual dollar
volume in fiscal 1997) of the Company or any of its Subsidiaries has
terminated or significantly reduced, or notified the Company or any of its
Subsidiaries of its intention to or, to the knowledge of the Company, intends
to terminate or significantly reduce its relationship with the Company or any
of its Subsidiaries.
SECTION 3.25 Consents. Item 3.25 of the Company Letter sets forth a true,
correct and complete list of any person whose consent or approval is required,
or to whom notice is required to be sent, and the matter, agreement or
contract to which such consent, approval or notice relates, in connection with
the Merger and the transactions contemplated by this Agreement, except for any
consents or notices which do not relate to any material contract, agreement or
instrument to which the Company or any of its Subsidiaries is bound.
SECTION 3.26 Change in Control Payments. Except as contemplated by this
Agreement or as disclosed in Item 3.12(b) or Item 3.26 of the Company Letter
or in the Company SEC Documents, neither the Company nor any of its
Subsidiaries have any plans, programs or agreements to which they are parties,
or to which they are subject, pursuant to which payments (or acceleration of
benefits) may be required upon, or may become payable directly or indirectly
as a result of, a change of control of the Company or any of its Subsidiaries.
SECTION 3.27 Contractual Obligations. Except as disclosed in the Company SEC
Documents, neither the Company nor any of its Subsidiaries is a party to any
contract, agreement, deed, mortgage, lease, license, indenture, commitment,
undertaking, arrangement or understanding, written or oral, or other document
or instrument, including without limitation, any document or instrument
evidencing or otherwise relating to any indebtedness, stock redemption or
purchase agreements, financing agreements, distribution agreements or royalty
agreements, in each case, which is required to be filed as an exhibit to the
Company's SEC Documents which has not been so filed.
SECTION 3.28 Disclosure. The representations and warranties contained in
this Article III (including the Company Letter and any other schedules and
exhibits required to be delivered pursuant to this Agreement) do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in this
Article III not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to the Company as follows:
SECTION 4.1 Organization. Newco is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now being conducted. Newco is not in violation of any
provision of its Certificate of Incorporation.
SECTION 4.2 Authority. Newco has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Newco and the consummation by Newco of
the
15
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Newco. This Agreement has been duly executed
and delivered by Newco and (assuming the valid authorization, execution and
delivery of this Agreement by the Company) constitutes the valid and binding
obligation of Newco enforceable against it in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of
equity.
SECTION 4.3 Consents and Approvals; No Violations. The execution and
delivery by Newco of this Agreement does not, and the consummation by Newco of
the transactions contemplated hereby and compliance by Newco with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse or time, or both) under, or give rise to a right of
termination, cancellation, redemption or acceleration of any obligation or the
loss of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Newco under, (i) any provision of the Certificate of
Incorporation, By-Laws or comparable organization documents of Newco, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement (other than, with respect to termination, agreements terminable at
will or upon 90 days' or less notice by the terminating party), instrument,
permit, concession, franchise or license applicable to Newco or (iii) assuming
all the consents, filing and registrations referred to in the next sentence
are made and obtained, any judgment, order, decree, stature, law, ordinance,
rule or regulation applicable to Newco or any of its respective properties or
assets, other than, in the case of clause (ii) or (iii), any such violations,
defaults, rights, losses or Liens, that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Newco or
prevent or result in a third party materially delaying the consummation of the
Merger. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to Newco in
connection with the execution and delivery of this Agreement by Newco or is
necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except (i) in connection, or in compliance,
with the provisions of the HSR Act and the Exchange Act, (ii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other states in
which Newco is qualified to do business, (iii) such filings and consents as
may be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or the other transactions contemplated by this Agreement, (iv) such
filing, authorizations, orders and approvals as may be required to obtain the
State Takeover Approvals or state securities or "blue sky" laws, (v) such
filings as may be required in connection with the taxes described in Section
6.5, (vi) in connection, or in compliance, with the provisions of the
Competition Act and (vii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under the laws of any foreign country in which it conducts any business or
owns any property.
SECTION 4.4 Information Supplied in Proxy Statement. None of the information
supplied or to be supplied by Newco specifically for inclusion or
incorporation by reference in the Proxy Statement or, if required, the
Schedule 13E-3, will, at the time the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, (i) be
false or misleading with respect to any material fact, in light of the
circumstances which made, or (ii) contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders Meeting which has become false or
misleading, except that no representation or warranty is made by Newco in
connection with any of the foregoing with respect to statements made or
incorporated by reference therein based on information supplied by the Company
or any of its representatives specifically for inclusion or incorporation by
reference therein. The Proxy Statement and, if required, the Schedule 13E-3,
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Newco in connection with any of the
foregoing with respect to statements made or incorporated by reference therein
based on information supplied by the Company or any of its representatives
specifically for inclusion or incorporation by reference therein.
16
SECTION 4.5 Interim Operations of Newco. Newco was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
SECTION 4.6 Brokers. No third party 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 in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Newco.
SECTION 4.7 Financing. Newco has financing commitments described in the
commitment letter from Societe Generale Investment Banking dated February 12,
1998 (the "Commitment Letter") to provide funds in an amount adequate to pay
the Merger Consideration. Assuming that the financing contemplated by the
Commitment Letter is consummated in accordance with the terms thereof, the
funds to be borrowed and/or provided thereunder, together with Newco's
available cash, will provide sufficient funds to pay the Merger Consideration.
As of the date of this Agreement, Newco is not aware of any facts or
circumstances that create a reasonable basis for Newco to believe that Newco
will not be able to obtain financing in accordance with the terms of the
Commitment Letter.
SECTION 4.8 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of a material fact or omit to
state any material fact in order to make the statements and information
contained in this Article IV not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of Business by the Company Pending the Merger. During
the period from the date of this Agreement until the Effective Time the
Company shall, and shall cause each of its Subsidiaries to, in all material
respects, except as contemplated by this Agreement, carry on its business in
the ordinary course as currently conducted and, to the extent consistent
therewith, use reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and key
employees and preserve its present relationships with customers, suppliers and
others having significant business dealings with it. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement or Item 5.1 of the Company Letter, during such period, the
Company shall not, and shall not permit any of its Subsidiaries to, without
the prior written consent of Newco (which consent shall not be unreasonably
withheld or delayed):
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than the payment by a Subsidiary of a dividend or distribution to
the Company or another wholly-owned Subsidiary), (y) 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 (z) purchase, redeem or otherwise acquire any shares of
its capital stock or those of any Subsidiary or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(b) except as set forth in Item 3.12(b) of the Company Letter and except as
required under existing employee benefit plans, agreements, policies, awards
or arrangements in effect on the date of this Agreement (including, without
limitation, the Options) or upon conversion of Debentures, issue, deliver,
sell, pledge, dispose of or accelerate vesting, exercise or conversion of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire any such shares, voting securities,
equity equivalent or convertible securities (other than pursuant to the Rights
Agreement and other than issuances by a wholly-owned Subsidiary of the Company
of its capital stock to the Company);
17
(c) amend its Certificate of Incorporation or By-Laws or other similar
organizational documents, other than as contemplated by Section 6.9;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, limited liability
company, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, other than acquisitions or
purchases of assets to the extent permitted by Section 5.1(m) or the purchase
of supplies, raw materials or inventory of finished goods in the ordinary
course of business;
(e) sell, lease, license, encumber or otherwise dispose of, or agree to
sell, lease, license, encumber or otherwise dispose of, any of its tangible or
intangible assets, other than sales of inventory in the ordinary course of
business or which involve assets which in the aggregate are not in excess of
$1,000,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for borrowings incurred in the ordinary course of business consistent
with past practice, or make any loans, advances or capital contributions to,
or other investments in, any other person, other than to or in the Company or
any Subsidiary of the Company;
(g) except as set forth in Item 3.2 of the Company Letter, alter (through
merger, liquidation, reorganization, restructuring or in any other fashion)
the corporate structure or ownership of the Company or any Subsidiary;
(h) except as disclosed in Item 3.12(b) of the Company Letter, increase the
compensation payable or to become payable to its directors, officers,
employees, consultants or independent contractors, except for increases
required under agreements existing on the date hereof, and increases for
officers and employees in the ordinary course of business consistent with past
practice; or grant any severance or termination pay to, or enter into any
employment or severance or consulting agreement with, or establish, adopt,
enter into, or amend or take action to enhance or accelerate any rights or
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer,
consultant or independent contractor or employee, except, in each case, as may
be required by the terms of any such plan, agreement, trust, fund, policy or
arrangement or to comply with applicable law or regulation;
(i) knowingly violate or fail to perform any material obligation or duty
imposed upon it by any applicable material federal, state or local law, rule,
regulation, guideline or ordinance;
(j) settle or compromise any suit, proceeding or claim or threatened suit,
proceeding or claim for an amount that is more than $250,000 in the case of
any individual suit, proceeding or claim or $1,000,000 for all suits,
proceedings or claims;
(k) redeem the Rights or, other than as contemplated by Section 3.15 or
Section 5.2, amend the Rights Agreement or take action to declare Newco to be
an Adverse Person (as defined in the Rights Agreement);
(l) except as may be required as a result of a change in law or in generally
accepted accounting principles, make any material change in its method of
accounting;
(m) make or agree to make any new capital expenditure not expressly
contemplated by the current management plan (a copy of which has been
furnished to Newco) that exceeds $100,000;
(n) except to the extent permitted by Section 5.1(j), pay, discharge, settle
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, (1) in the ordinary course of business consistent
with past practice or in
18
accordance with their terms, of liabilities recognized or disclosed in the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company SEC Documents or incurred since the date of
such financial statements in the ordinary course of business consistent with
past practice or (2) of liabilities required to be paid, discharged or
satisfied pursuant to the terms of any contract in existence on the date
hereof;
(o) enter into, modify or amend in any respect, other than immaterial
modifications or amendments of which the Company shall give Newco prior
written notice, or terminate any material contract or agreement to which the
Company or any of its Subsidiaries is a party, or waive, release or assign any
material rights or claims, in each case, in any manner adverse to the Company
or any of its Subsidiaries; or
(p) authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
SECTION 5.2 No Solicitation. (a) The Company shall, and shall direct its
affiliates, officers, directors, employees, representatives and agents to
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to a Takeover Proposal. The Company shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize any of its
affiliates, officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its Subsidiaries, or permit any of the foregoing, other than
affiliates who are not controlled by the Company to, directly or indirectly,
(i) solicit or initiate any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover Proposal
or (ii) participate in or enter into any discussions or negotiations regarding
any Takeover Proposal; provided, however, that if, at any time prior to
adoption of this Agreement by the Company's stockholders at the Stockholders
Meeting, the Board of Directors of the Company receives a Takeover Proposal
and determines in good faith, after consultation with outside counsel, that it
would be required in order to fulfill its fiduciary responsibilities to the
Company's stockholders under applicable law, the Company may, in response to a
Takeover Proposal, and subject to providing prior notice to Newco as
contemplated below, (x) furnish information with respect to the Company to any
person pursuant to a confidentiality agreement in substantially the same form
as the confidentiality agreement entered into between the Company and Newco
and (y) participate in or enter into discussions, investigations and/or
negotiations regarding such Takeover Proposal.
From and after the date hereof, the Company shall promptly notify Newco
after receipt of any Takeover Proposal, or any modification of or amendment to
any Takeover Proposal, or any request for any nonpublic information relating
to the Company or any of its Subsidiaries in connection with a Takeover
Proposal or for access to the properties, books or records of the Company or
any Subsidiary by any person or entity that informs the Board of Directors of
the Company or such Subsidiary that it is considering making, or has made, a
Takeover Proposal. Such notice to Newco shall be made in writing, and shall
indicate whether the Company is providing or intends to provide the person
making the Takeover Proposal with access to information concerning the Company
as provided in the preceding sentence; such notice shall also (to the extent
required in order to fulfill the fiduciary duties of the Board of Directors to
stockholders under applicable law) include the identity of the person or
entity engaging in such discussions or negotiations, requesting such
information or making such Takeover Proposal, and the material terms and
conditions of any Takeover Proposal. The Company shall keep Newco reasonably
and timely informed as to all of the relevant details relating to, and all
material aspects of any such discussions or negotiations.
(b) Except as set forth in this Section 5.2, neither the Board of Directors
of the Company nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Newco, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement; (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal; or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Takeover Proposal. Notwithstanding
the foregoing, in the event that prior to the adoption of this Agreement by
the Company's stockholders at the Stockholders Meeting, the Board of Directors
of the Company or such committee determines in good faith, after consultation
with outside counsel, that it would
19
be required in order to fulfill its fiduciary responsibilities to the
Company's stockholders under applicable law, the Board of Directors of the
Company or such committee may (subject to this and the following sentences)
withdraw or modify its approval or recommendation of the Merger and this
Agreement, approve or recommend a Superior Proposal or terminate this
Agreement, but in each case, only at a time that is after the second business
day following Newco's receipt of written notice advising Newco that the Board
of Directors of the Company or such committee has received a Takeover Proposal
that may constitute a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal.
(c) Nothing contained in this Section 5.2 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, such
disclosure is required in order to fulfill its fiduciary duties to the
Company's stockholders under applicable law or is otherwise required under
applicable law.
SECTION 5.3 Disclosure to Newco; Delivery of Certain Filings. The Company
shall promptly advise Newco orally and in writing if there occurs, to the
knowledge of the Company, any change or event which results in the executive
officers of the Company having a good faith belief that such change or event
has resulted in or will result in a Material Adverse Effect on the Company.
The Company shall provide to Newco, and Newco shall provide to the Company,
copies of all filings made by the Company or Newco, as the case may be, with
any Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
SECTION 5.4 Employee Benefit Plans. Prior to the Effective Time, the Company
and/or any of its Subsidiaries, as necessary, shall amend the Retirement Plan,
and any other Benefit Plan providing for a right to receive Company Common
Stock, to provide that no participant in such plan will have a right to
receive Company Common Stock on or after the Effective Time.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholder Approval; Preparation of Proxy Statement.
(a) As soon as practicable following the date of this Agreement, the Company
shall prepare and file the Proxy Statement and, if required under the Exchange
Act, the Schedule 13E-3 with the SEC and shall use its reasonable best efforts
to have the Proxy Statement and, if required under the Exchange Act, the
Schedule 13E-3, cleared by the SEC as promptly as reasonably practicable.
Newco and its counsel shall be given reasonable opportunity to review and
comment upon the Proxy Statement prior to the Company's filing the Proxy
Statement, or any amendment thereto, with the SEC. Newco and the Company shall
promptly furnish to each other all information, and take such other actions,
as may reasonably be requested in connection with any action by any of them in
connection with the provisions of this Section 6.1.
(b) Prior to the date of approval of the Merger Agreement by the Company's
stockholders, each of Newco and the Company shall correct promptly any
information provided by it to be used specifically in the Proxy Statement and,
if required under the Exchange Act, the Schedule 13E-3, that shall have become
false or misleading in any material respect, and, the Company shall take all
steps reasonably necessary to file with the SEC and have cleared by the SEC
any amendment or supplement to the Proxy Statement and, if required under the
Exchange Act, the Schedule 13E-3, as so corrected to be disseminated to the
stockholders of Company to the extent required by applicable law. Without
limiting the generality of the foregoing, the Company shall notify Newco
promptly of the receipt of the comments of the SEC and of any request by the
SEC for amendments or supplements to the Proxy Statement or the Schedule 13E-
3, or for additional information, and shall supply Newco with copies of all
written correspondence and details of all oral correspondence between the
Company or its representatives, on the one hand, and the SEC or members of its
staff, on the other hand, with respect to the
20
Proxy Statement or the Schedule 13E-3. Whenever any event occurs which is
required to be described in an amendment or a supplement to the Proxy
Statement or the Schedule 13E-3, the Company shall, upon learning of such
event, promptly notify Newco and the Company and Newco shall cooperate to
promptly prepare, file and clear with the SEC and mail to the stockholders of
Company such amendment or supplement; provided, however, that, prior to such
mailing, (i) the Company and Newco shall consult with each other with respect
to such amendment or supplement, (ii) the Company and Newco shall afford each
other reasonable opportunity to comment thereon and (iii) each such amendment
or supplement shall be reasonably satisfactory to the Company and Newco.
(c) The Company shall call and, subject to the fiduciary responsibilities
required of the Board of Directors of the Company, hold the Stockholders
Meeting and provide the Proxy Statement to its stockholders in connection
therewith as promptly as reasonably practicable and in accordance with
applicable laws for the purpose of voting upon the approval of the Merger and
the adoption of this Agreement. The Company shall, subject to its right to
withdraw or modify its approval or recommendation of the Merger and this
Agreement, to approve or recommend a Superior Proposal or to terminate this
Agreement, in each case as set forth in Section 5.2(b), (i) recommend approval
of the transactions contemplated by this Agreement by the stockholders of the
Company and include in the Proxy Statement such recommendation and (ii) use
all reasonable efforts to solicit from stockholders of the Company proxies in
favor of adoption of this Agreement and approval of the transactions
contemplated hereby and shall take all other action necessary or advisable to
secure the vote or consent of stockholders to obtain such approvals.
SECTION 6.2 Access to Information. The Company shall, and shall cause each
of its Subsidiaries to, upon reasonable notice, afford to Newco and to the
officers, employees, accountants, counsel, actuaries, financial advisors and
other representatives of Newco reasonable access to, and permit them to make
such inspections as they may reasonably require of, during normal business
hours during the period from the date of this Agreement through the Effective
Time, all their respective properties, books, contracts, commitments,
documents and records and, during such period, the Company shall, and shall
cause each of its Subsidiaries to, furnish promptly to Newco (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its business, properties and
personnel as Newco may reasonably request; provided that the Company shall not
be required to furnish to Newco any information which is subject to an
attorney-client privilege or which constitutes attorney work product. All
information obtained by or on behalf of Newco pursuant to this Section 6.2
shall be kept confidential in accordance with the Confidentiality Agreement
dated October 8, 1997 between Coral Reef Capital L.L.C. and the Company.
SECTION 6.3 Fees and Expenses.
(a) Except as provided below in this Section 6.3, all fees and expenses
incurred in connection with the Merger, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to Newco
(x) $500,000 for reimbursement of Newco's expenses (the "Expense
Reimbursement") and (y) $2,500,000 (the "Termination Fee") under the
circumstances and at the times set forth as follows:
(i) if the Company terminates this Agreement under Section 8.1(b)(i), the
Company shall pay Newco the Expense Reimbursement within three business
days of such termination;
(ii) if the Company terminates this Agreement under Section 8.1(c)(ii) or
Newco terminates this Agreement under Section 8.1(f)(ii) or Section
8.1(f)(iii), the Company shall pay Newco the Expense Reimbursement and the
Termination Fee within three business days of such termination; and
(iii) if the Company terminates this Agreement under Section 8.1(c)(i) or
Newco terminates this Agreement under Section 8.1(e) or Section 8.1(f)(i),
the Company shall pay Newco the Expense Reimbursement within three business
days of such termination; provided, however, that if between the date
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hereof and such termination date a Takeover Proposal shall have been made
(other than a proposal made by Newco or the Investors) and if, concurrently
with such termination or within twelve months thereafter, the Company
enters into a merger agreement, acquisition agreement or similar agreement
(including, without limitation, a letter of intent) with respect to a
Takeover Proposal, or a Takeover Proposal is consummated, the Company shall
pay Newco the Termination Fee upon the earlier of the execution of such
agreement or upon consummation of such Takeover Proposal.
(c) Any amounts due and payable under this Section 6.3 that are not paid
when due shall bear interest at the prime rate as announced from time to time
by BankBoston, N.A. plus 1% from the date due through the date of final
payment of such amounts.
(d) Notwithstanding anything contained in this Agreement to the contrary,
the sole and exclusive remedy for any and all liabilities, demands, claims,
actions, judgments or causes of action (either at law or in equity),
assessments, losses, fines, penalties, costs, damages and expenses
(collectively, "Claims"), sustained or incurred by Newco or the Investors
resulting from this Agreement or the transactions contemplated hereby shall be
limited to an aggregate amount of $3,000,000 (which amount shall include any
required payments of the Termination Fee and Expense Reimbursement).
Notwithstanding anything contained in this Agreement to the contrary, the
Company's sole and exclusive remedy for any and all Claims resulting from this
Agreement or the transactions contemplated hereby shall be against Newco and,
provided that the Stock Subscription Agreements dated of even date herewith
between Newco and each of the Investors shall remain in full force and effect,
in no event shall the Company seek any relief or pursue any Claim against the
directors, officers, shareholders or partners of either Newco or the
Investors. Nothing contained in this Section 6.3(d) shall be construed to
limit any obligation of Newco or the Surviving Corporation hereunder in the
event the Merger is consummated.
SECTION 6.4 Public Announcement. Newco and the Company will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement 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, fiduciary
duties or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 6.5 Real Estate Transfer Tax. Newco and the Company agree that the
Surviving Corporation (without any liability to any of the Company's
stockholders) will pay any state or local tax which is attributable to the
transfer of the beneficial ownership of the Company's or its Subsidiaries'
real property, if any (collectively, the "Transfer Taxes"), and any penalties
or interest with respect to the Transfer Taxes, payable in connection with the
consummation of the Merger. The portion of the consideration allocable to the
real property of the Company and its Subsidiaries shall be determined by the
Surviving Corporation in its sole discretion. To the extent permitted by law,
the Company's stockholders shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section 6.5 in the preparation of any
return with respect to the Transfer Taxes.
SECTION 6.6 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Newco and the Company and
their respective Boards of Directors shall use reasonable efforts to grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
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SECTION 6.7 Indemnification; Directors and Officers Insurance.
(a) All rights to indemnification or exculpation, existing in favor of a
director, officer, employee or agent (an "Indemnified Person") of the Company
or any of its Subsidiaries (including, without limitation, rights relating to
advancement of expenses and indemnification rights to which such persons are
entitled because they are serving as a director, officer, agent or employee of
another entity at the request of the Company or any of its Subsidiaries), as
provided in the Certificate of Incorporation of the Company, the By-Laws of
the Company or any indemnification agreement, in each case, as in effect on
the date of this Agreement, and relating to actions or events through the
Effective Time, shall survive the Merger and shall continue in full force and
effect, without any amendment thereto; provided, however, that the Surviving
Corporation shall not be required to indemnify any Indemnified Person in
connection with any proceeding (or portion thereof) to the extent involving
any claim initiated by such Indemnified Person unless the initiation of such
proceeding (or portion thereof) was authorized by the Board of Directors of
the Company or unless such proceeding is brought by an Indemnified Person to
enforce rights under this Section 6.7; provided further that any determination
required to be made with respect to an Indemnified Person's conduct complies
with the standards set forth under the DGCL, the Certificate of Incorporation
of the Company, the By-Laws of the Company or any such agreement, as the case
may be, shall be made by independent legal counsel selected by the Company and
reasonably acceptable to the Indemnified Person; and provided further that
nothing in this Section 6.7 shall impair any rights of any Indemnified Person.
Without limiting the generality of the preceding sentence, in the event that
any Indemnified Person becomes involved in any actual or threatened action,
suit, claim, proceeding or investigation after the Effective Time, Newco
shall, or shall cause the Surviving Corporation to, periodically advance to
such Indemnified Person its legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject
to the providing by such Indemnified Person of an undertaking to reimburse all
amounts so advanced in the event of a non-appealable determination of a court
of competent jurisdiction that such Indemnified Person is not entitled
thereto.
(b) Prior to the Effective Time, the Company shall have the right to obtain
and pay for in full a "tail" coverage directors' and officers' liability
insurance policy ("D&O Insurance") covering a period of not less than six
years after the Effective Time and providing coverage in amounts and on terms
consistent with the Company's existing D&O Insurance. In the event the Company
is unable to obtain such insurance, Newco shall cause the Surviving
Corporation to maintain the Company's D&O Insurance for a period of not less
than six years after the Effective Time; provided, that the Surviving
Corporation may substitute therefor policies of substantially similar coverage
and amounts containing terms no less advantageous to such former directors or
officers; provided further that if the existing D&O Insurance expires or is
canceled during such period, Newco or the Surviving Corporation shall use
their best efforts to obtain substantially similar D&O Insurance; and provided
further that the Company shall not, without Newco's consent, expend an amount
in excess of 250% of the last annual premium paid prior to the date hereof to
procure the above described "tail" coverage and neither Newco nor the
Surviving Corporation shall be required to expend, in order to maintain or
procure an annual D&O Insurance policy, in lieu of a tail policy, an amount in
excess of 200% of the last annual premium paid prior to the date hereof. The
last annual premium paid by the Company was $123,100.
(c) The provisions of this Section 6.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives.
SECTION 6.8 Notification of Certain Matters. Newco shall give prompt notice
to the Company, and the Company shall give prompt notice to Newco, of: (i) the
occurrence, or non-occurrence, in each case, to the knowledge of the Company
or Newco, as the case may be, of any event the occurrence, or non-occurrence,
of which results in the executive officers of the Company or Newco, as the
case may be, having a good faith belief that such change or event would be
reasonably likely to cause (x) any representation or warranty of such entity
contained in this Agreement that is not qualified as to materiality to be
untrue or inaccurate in any material respect, (y) any representation or
warranty of such entity contained in this Agreement that is qualified as to
materiality to be untrue or inaccurate in any respect, or (z) any covenant,
condition or agreement of such entity contained in this Agreement not to be
complied with or satisfied in all material respects; and (ii) the executive
23
officers of the Company or Newco, as the case may be, believing in good faith
that the Company or Newco, as the case may be, has, to the knowledge of the
Company or Newco, as the case may be, failed to comply with in all material
respects or satisfy in all material respects any covenant, condition or
agreement of such entity to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
6.8 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 6.9 Recapitalization. Each of the Company and Newco agrees to use
its reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a recapitalization and
such accounting treatment to be accepted by their respective accountants and
by the SEC, and each of the Company and Newco agrees that it shall take no
action that would cause such accounting treatment not to be obtained in the
event the Merger is consummated. Each of the Company and Newco agrees to take
all steps reasonable and necessary to effect the Recapitalization.
SECTION 6.10 Reasonable Efforts. Subject to fiduciary responsibilities, each
of the Company and Newco agrees to use reasonable efforts to cause the
consummation of the Merger to occur as soon as practicable in accordance with
the terms hereof. Without limiting the foregoing, (a) each of the Company and
Newco agree to use reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements that may be
imposed on itself with respect to the Merger (which actions shall include
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and shall promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their Subsidiaries in
connection with the Merger and (b) each of the Company and Newco shall, and
shall cause its Subsidiaries to, use reasonable efforts to obtain (and shall
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, or notice to be sent to, any Governmental
Entity or other public or private third party required to be obtained, made or
sent by Newco, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, in
connection with any filing or submission required or action to be taken by
Newco, the Company or any of its respective Subsidiaries to consummate the
Merger or the other transactions contemplated in this Agreement, the Company
shall not, without Newco's prior written consent, commit to any divestiture of
assets or businesses of the Company and its Subsidiaries if such divested
assets and/or businesses are material to the assets or profitability of the
Company and its Subsidiaries taken as a whole; and Newco shall not be required
to divest or hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, the
Company or any of the businesses, product lines or assets of the Company or
that would have a Material Adverse Effect on Newco.
SECTION 6.11 Certain Litigation. The Company agrees that it shall not settle
any litigation commenced after the date hereof against the Company or any of
its directors by any stockholder of the Company relating to the Merger or this
Agreement without the prior written consent of Newco, which consent shall not
be unreasonably withheld.
SECTION 6.12 Employee Benefits.
(a) Each employee of the Company or its Subsidiaries at the Effective Time
(including each employee who is on vacation, temporary layoff, approved leave
of absence, sick leave or short- or long-term disability) shall remain an
employee of the Company or a Subsidiary of the Company, as the case may be,
immediately following such time at the same compensation and wages as in
effect immediately preceding such time. Until the first anniversary of the
Effective Time, the Surviving Corporation shall maintain or cause to be
maintained, wages, compensation levels and such benefits provided under the
Benefit Plans for the benefit of employees and former employees of the Company
or its Subsidiaries which are not less favorable than those wages,
compensation levels and other benefits provided under the Benefit Plans that
are in effect as of the date hereof; provided, however, that the Surviving
Corporation shall not have any obligation to provide benefits based on equity
securities of the Company or any equivalent thereof. Each employee of the
Company or its Subsidiaries shall be credited with the unused vacation and
sick leave credited to such employee through the Effective Time under the
applicable
24
vacation and sick leave policies of the Company and its Subsidiaries, and the
Surviving Corporation shall permit or cause its Subsidiaries to permit such
employees to use such vacation and sick leave. For all purposes under each
employee benefit plan maintained by the Surviving Corporation which employees
and former employees of the Company become eligible to participate in after
the Effective Time, all persons previously employed by the Company and its
Subsidiaries and then employed by the Surviving Corporation shall be credited
with their years of service to the extent such service is taken into account
under the most closely corresponding Benefit Plan provided, however, any such
service need not be taken into account in determining accrual under a defined
benefit pension plan established after the Effective Time.
(b) Employment of any of the employees by the Surviving Corporation will be
"at will" and may be terminated by the Surviving Corporation at any time for
any reason (subject to any legally binding agreement other than this
Agreement, or any applicable laws or collective bargaining agreement, or any
other arrangement or commitment). Except as otherwise provided in Sections
6.13 through 6.17, nothing in this Agreement shall be interpreted as limiting
the power of the Surviving Corporation to amend or terminate any particular
Benefit Plan or any other employee benefit plan, program, agreement or policy
or as requiring the Surviving Corporation to offer to continue (other than as
required by its terms) any written employment contract.
SECTION 6.13 Severance Policy and Other Agreements.
(a) For a period of not less than twelve months from the Effective Time,
Newco shall and shall cause the Surviving Corporation to maintain (or shall
cause to be maintained) the Company's standard severance practice as in effect
as of the date hereof (which severance practice is described in Item 6.13 of
the Company Letter).
(b) Newco shall and shall cause the Surviving Corporation to honor or cause
to be honored all employment agreements, bonus agreements, severance
agreements and non-competition agreements with the Company's directors,
officers and employees (it being understood that nothing herein shall be
deemed to mean that the Company shall not be required to honor its obligations
under any employment agreement, bonus agreement, severance agreement or non-
competition agreement to which it is a party).
SECTION 6.14 1998 Bonus Plan. Without limitation of Newco's or the Company's
obligations under any existing employment agreement, bonus agreement,
severance agreement or non-competition agreement, Newco shall maintain, or
shall cause the Surviving Corporation to maintain, the Company's 1998 bonus
plan (as in effect on the date of this Agreement) through the end of the
Company's 1998 fiscal year, with bonuses to be paid to each employee equal to
the bonus such employee would have earned under the Company's 1998 bonus plan
if the transactions contemplated by this Agreement had not occurred, in all
events on a basis consistent with past practice.
SECTION 6.15 Welfare Plans. Newco shall, or shall cause the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the employees of the Company and its Subsidiaries
under any welfare plan that such employees may be eligible to participate in
after the Effective Time, other than limitations or waiting periods that are
in effect with respect to such employees and that have not been satisfied as
of the Effective Time under any welfare plan maintained for the employees of
the Company or its Subsidiaries immediately prior to the Effective Time, and
(ii) provide each employee of the Company or its Subsidiaries with credit for
any co-payments and deductibles paid by such employee for the applicable plan
year prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employee is
eligible to participate in after the Effective Time.
SECTION 6.16 Retirement Plan. For a period of not less than twelve months
from the Effective Time, Newco shall (i) maintain, or cause to be maintained,
the ▇▇▇▇ Sports Corp. Employees' Retirement and 401(k) Plan (the "Retirement
Plan") and (ii) contribute, or cause to be contributed, to the Retirement
Plan, on behalf of each participant therein, matching contributions in amounts
determined in accordance with the terms of the Retirement Plan as in effect as
of the date hereof, such contributions to be made on at least a bi-weekly
basis.
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SECTION 6.17 Certain Tax Matters.
(a) Until the Effective Time, the Company and its Subsidiaries agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Company, Subsidiaries and/or Groups relating to any taxable period beginning
before the Closing Date, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give Newco reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if Newco so requests, the Company and its Subsidiaries, as
the case may be, shall allow Newco to take possession of such books and
records.
(b) Until the Effective Time, the Company further agrees, upon request and
at the expense of Newco, to use its reasonable best efforts to obtain any
certificate or other documents from any governmental authority or any other
person as may be reasonably necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(c) Until the Effective Time, the Company further agrees, upon request, to
provide Newco with all information that may be reasonably required to report
pursuant to Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
SECTION 6.18 Actions Respecting Commitment Letters. (a) The Company agrees
to provide reasonable cooperation in connection with the negotiation,
execution and delivery of definitive documentation in connection with the
Commitment Letter and the transactions contemplated thereunder, or any
financings in substitute therefor, including without limitation, (i) causing
its Subsidiaries and its and their respective officers and employees to
provide reasonable cooperation in connection with such negotiation, execution
and delivery, (ii) causing its Subsidiaries and its and their respective
officers and employees to host and participate, upon reasonable advance
notice, in any informational meetings for investors or "road shows" (iii)
causing its Subsidiaries and its and their respective officers and employees
to provide such information about the Company and its Subsidiaries as is
reasonably necessary to outline, draft, prepare and circulate any offering
memoranda, prospectuses, reports, presentations or analyses and to ensure that
such information is not false or misleading and (iv) executing and delivering
any commitment letters, underwriting or placement agreements, purchase
agreements, pledge and security documents, indentures, other definitive
financing documents, which documents shall be in form and substance reasonably
satisfactory to the Company, or other reasonably requested certificates or
documents, including a certificate of the chief financial officer of the
Company with respect to solvency matters, as may be reasonably requested by
Newco or its lenders. In conjunction with the obtaining of any such financing,
the Company agrees, at the request of Newco, to call for prepayment or
redemption, or to prepay, redeem and/or renegotiate, as the case may be, any
then existing indebtedness of the Company; provided that no such prepayment or
redemption shall actually be made until, contemporaneously with or after the
Effective Time. Newco shall reimburse, indemnify and hold harmless the Company
for any costs, expenses, losses, liabilities, damages, redemption payments,
prepayments or other charges incurred by the Company at the request of Newco
in connection with the Company's compliance with the provisions of this
Section 6.18.
(b) Newco agrees to use its reasonable efforts to arrange the financing
contemplated by the Commitment Letter, including using its reasonable efforts
to satisfy all conditions applicable to Newco in the Commitment Letter and the
definitive agreements relating thereto.
26
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Company Stockholder Approval. This Agreement and the transactions
contemplated hereby, including the Merger, shall have been approved and
adopted by the requisite vote of the stockholders of the Company under the
DGCL;
(b) No Injunction or Restraint. No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction, writ or other judgment or order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of the
Merger shall be in effect; provided, however, that each of the parties shall
have used reasonable efforts to prevent the entry of any such temporary
restraining order, injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered;
(c) Authorizations, Consents. Other than filing the Certificate of Merger in
accordance with the DGCL, all authorizations, consents and approvals of all
Governmental Entities and the consents set forth in Item 3.25 of the Company
Letter required to be obtained prior to consummation of the Merger shall have
been obtained;
(d) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the Merger shall have expired or been terminated; and
(e) Recapitalization. The definitive Proxy Statement shall contain a
statement to the effect that it is expected that the Merger and the
transactions contemplated by this Agreement will be treated as a
recapitalization for accounting purposes and the SEC shall not have required
that such statement be removed from the definitive Proxy Statement.
SECTION 7.2 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of Newco contained in Article IV of
this Agreement shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification) at and as of the Effective Time as if made at and
as of such time (other than to the extent that any such representation or
warranty, by its terms, is expressly limited to a specific date in which case
such representation and warranty shall be true and correct as of such date),
in each case except as contemplated or permitted by this Agreement;
(b) Newco shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the
Effective Time pursuant to the terms hereof;
(c) Newco shall deliver to the Company a certificate, dated the Closing Date
and signed on behalf of Newco by the President or Chief Executive Officer of
Newco certifying as to compliance with Section 7.2(a) and Section 7.2(b); and
(d) The Company shall have received from Newco copies of the Newco solvency
certificates and the third party solvency opinion contemplated by the
Commitment Letter.
27
SECTION 7.3 Conditions to Obligation of Newco to Effect the Merger. The
obligation of Newco to effect the Merger are further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of the Company contained in Article
III of this Agreement shall be true and correct in all respects (in the case
of any representation or warranty containing any materiality qualification) or
in all material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the Effective Time as if
made at and as such time (other than to the extent that any such
representation or warranty, by its terms, is expressly limited to a specific
date in which case such representation and warranty shall be true and correct
as of such date), in each case except as contemplated or permitted by this
Agreement;
(b) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof;
(c) Since the date hereof, there shall have been no suit, claim, action,
proceeding or investigation filed or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or against any
properties or rights of the Company and its Subsidiaries, which would in the
good faith judgment of Newco, after consultation with the Company and its
counsel, be reasonably likely (after taking into effect any applicable
insurance coverage) to (i) be material to the business, results of operations,
condition (financial or otherwise) of the Company, (ii) impair in a material
manner the ability of the Company to perform its obligations under this
Agreement, (iii) result in a third party materially delaying the consummation
of the Merger; or (iv) result in a third party enjoining or obtaining material
damages in respect of the transactions contemplated by this Agreement;
(d) No event, occurrence, fact, condition, change, development or effect
shall have occurred or come to exist or been threatened, in each case, since
the date hereof that, individually or in the aggregate, has resulted in, or
could reasonably be expected to become or result in, a Material Adverse Effect
on the Company and its Subsidiaries;
(e) The Company shall deliver to Newco a certificate, dated the Closing Date
and signed on behalf of the Company by the President or Chief Executive
Officer of the Company certifying as to compliance with Section 7.1(a),
Section 7.3(a) through Section 7.3(d); and
(f) Newco and the Company shall have received pursuant to the Commitment
Letter sufficient funds to pay the Merger Consideration and otherwise enable
Newco to consummate the transactions contemplated hereby and to meet the
working capital requirements of the Surviving Corporation.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
the Company:
(a) by mutual written consent duly authorized by the Boards of Directors of
Newco and the Company;
(b) by either Newco or the Company if: (i) the Merger has not been
consummated on or prior to July 31, 1998 or such other date, if any, as Newco
and the Company shall agree upon in writing (provided that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available
to a party who has been the cause of or resulted in the failure of the
Effective Time to occur on or before such date), or (ii) any Governmental
Entity shall have issued a statute, order, decree or regulation or taken any
other action in each case permanently
28
restraining, enjoining or otherwise prohibiting the Merger or making the
Merger illegal and such statute, order, decree, regulation or other action
shall have become final and non-appealable.
(c) by the Company,(i) if holders of at least the requisite number of Shares
as required by the DGCL fail to approve and adopt this Agreement and the
transactions contemplated hereby at the Stockholders Meeting (including any
postponement or adjournment thereof) or (ii) in accordance with Section
5.2(b); provided in the case of clause (ii) that (to the extent required to be
paid upon such termination) Company shall have made payment to Newco of the
Termination Fee and Expense Reimbursement in accordance with Section 6.3.
(d) by the Company, upon 15 business days' prior written notice, in the
event of a breach of any representation, warranty, covenant or agreement on
the part of Newco such that the condition set forth in Section 7.2(a) or
7.2(b) would not be satisfied as of the Effective Time, which breach is not
cured prior to the expiration of such 15 business day period (provided that if
such breach is not curable, the Company may terminate this Agreement
immediately under this Section 8.1(d)); except where the Company is in breach
of any representation, warranty, covenant or agreement as provided in Section
8.1(e).
(e) by Newco, upon 15 business days' prior written notice, in the event of a
breach of any representation, warranty, covenant or agreement on the part of
the Company such that the condition set forth in Section 7.3(a) or 7.3(b)
would not be satisfied as of the Effective Time, which breach is not cured
prior to the expiration of such 15 business day period (provided that if such
breach is not curable, Newco may terminate this Agreement immediately under
this Section 8.1(e)); except where Newco is in breach of any representation,
warranty, covenant or agreement as provided in Section 8.1(d).
(f) by Newco, if (i) holders of at least the requisite number of Shares as
required by the DGCL fail to approve and adopt this Agreement and the
transactions contemplated hereby at the Stockholders Meeting (including any
postponement or adjournment thereof); (ii) the Board of Directors of the
Company withdraws, modifies or changes its recommendation of this Agreement or
the Merger in a manner adverse to Newco or shall have resolved to do any of
the foregoing or the Board of Directors of the Company shall have recommended
to the shareholders of the Company any Takeover Proposal or resolved to do so;
or (iii) a tender offer or exchange offer for outstanding shares of capital
stock of the Company then representing 20% or more of the combined power to
vote generally for the election of directors is commenced, and the Board of
Directors of the Company, within the time periods required by law to state its
position thereon, does not recommend that stockholders of the Company not
tender their shares into such tender or exchange offer.
SECTION 8.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or Newco as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Newco or the Company or their respective officers or
directors, except with respect to Section 6.3, this Section 8.2 and Article IX
and the last sentence of Section 6.18; provided, however, that, subject to
Section 6.3(d), nothing herein shall relieve any party of liability for any
breach hereof.
SECTION 8.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or duly authorized by their respective Boards of Directors at
any time prior to approval of the Merger by the stockholders at the
Stockholders Meeting. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or duly authorized by their respective Board
of Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those
rights.
29
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations and Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
Effective Time except that the agreements which expressly by their terms
survive the Effective Date and those set forth in Article II, Sections 6.7,
6.12, 6.13, 6.14, 6.15 and 6.16 and Article IX shall survive the Effective
Time.
SECTION 9.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Newco, to:
c/o Harvard Private Capital Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
with a copy to:
Brentwood Associates Private Equity
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, Esq.
(b) if to the Company, to:
▇▇▇▇ Sports Corp.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇
Chairman and Chief Executive Officer
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
30
with copies to:
Sidley & Austin
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Finger
One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
SECTION 9.3 Interpretation. 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."
SECTION 9.4 Definitions. For purposes of this Agreement, the term:
(a) "Benefit Plan" means any plan, program, policy, agreement and
arrangement, whether or not reduced to writing, that is (i) an "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (sometimes referred to
herein as "Pension Plans"), (ii) an "employee welfare benefit plan (as defined
in Section 3(1) of ERISA), (iii) a stock bonus, stock purchase, stock option,
restricted stock, stock appreciation right or similar equity-based plan or
arrangement, or (iv) any other deferred compensation, retirement, welfare-
benefit, bonus, incentive or fringe benefit plan or arrangement maintained,
sponsored or contributed to, by the Company or any of its U.S. or foreign
Subsidiaries (or to which the Company or any of its Subsidiaries is obligated
to contribute or for which the Company or any of its Subsidiaries may be
liable) for the benefit of any current or former employees, officers,
directors, consultants or independent contractors of the Company or of any of
such Subsidiaries other than a governmental plan that a foreign Subsidiary
contributes to on behalf of any current or former employees, officers,
directors, consultants or independent contractors.
(b) "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.) and the regulations promulgated
thereunder.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "DGCL" means the General Corporation Law of the State of Delaware.
(e) "Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, fees, disbursements
and expenses of legal counsel, experts, engineers and consultants and the
reasonable costs of investigation and feasibility studies and the reasonable
costs to clean up, remove, treat, or in any other way address any Hazardous
Materials) arising with respect to any violation of or liability arising
pursuant to or under any Environmental Law or as the result of any exposure or
alleged exposure of any person or property to any Hazardous Material.
(f) "Environmental Law" means any applicable law regulating or prohibiting
Releases of Hazardous Materials into any part of the natural environment, or
pertaining to the protection of natural resources, the environment and public
and employee health and safety from Hazardous Materials including, without
limitation, CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. ss.
1801 et seq.), the Resource Conservation
31
and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C.
ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and OSHA and the
regulations promulgated pursuant thereto, and any such applicable state or
local statutes, and the regulations promulgated pursuant thereto, as such laws
have been and may be amended or supplemented through the Effective Time.
(g) "ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
(h) "Hazardous Material" means any substance, material or waste which is
regulated with respect to its toxic or otherwise hazardous character by any
governmental authority in the jurisdictions in which the applicable party or
its Subsidiaries conducts business, or the United States, including, without
limitation, any material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "solid waste," "toxic waste" or
"toxic substance" under any provision of Environmental Law and shall also
include, without limitation, petroleum, petroleum products, asbestos,
polychlorinated biphenyls and radioactive materials.
(i) "Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any license or agreements
granting rights related to the foregoing (i) subsisting in, covering, reading
on, directly applicable to or existing in the Products, (ii) that are owned,
licensed or controlled in whole or in part by the Company or any of its
Subsidiaries and relate to the business of the Company or any of its
Subsidiaries; or (iii) that are used in or necessary to the development,
manufacture, sales, marketing or testing of the Products.
(j) "Investors" means collectively Harvard Private Capital Holdings, Inc.
and Brentwood Associates Buyout Fund II, L.P.
(k) "Knowledge" or "Best Knowledge" means the actual knowledge, after
reasonable inquiry, of the officers of the Company (in the case of the
Company) or the officers of Newco or the Investors (in the case of Newco).
(l) "Material Adverse Change" or "Material Adverse Effect" means any event,
change, effect, or diminution in value that, individually or in the aggregate,
is or would reasonably be expected to be materially adverse to the business,
operations, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, or Newco, as
the case may be.
(m) "OSHA" means the Occupational Safety and Health Act (29 U.S.C. ss. 651
et seq.), and the regulations promulgated thereunder.
(n) "Products" means all current products and services of the Company or any
of its Subsidiaries, any subsequent versions of such products currently being
developed, any products currently being developed by the Company or any of its
Subsidiaries which are designed to supersede, replace or function as a
component of such products, and any upgrades, enhancements, improvements and
modifications to the foregoing.
(o) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment;
(p) "Remedial Action" means all actions, including, without limitation, any
capital expenditures, required by a governmental entity or required under any
Environmental Law, or voluntarily undertaken to (1) clean up, remove, treat,
or in any other way ameliorate or address any Hazardous Materials or other
substance in the environment; (2) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material so it does not endanger
or threaten to endanger the public health or welfare or the environment;
(3) perform pre-remedial studies and investigations or post-remedial
monitoring and care pertaining or relating to a Release; or (4) bring the
applicable party into compliance with any Environmental Law.
32
(q) "Subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
person.
(r) "Superior Proposal" means any proposal determined by the Board of
Directors of the Company in good faith, after consultation with outside
counsel, to be a bona fide proposal and made by a third party to acquire,
directly or indirectly, for consideration consisting of cash, property and/or
securities, more than 50% of the combined voting power of the shares of
Company Common Stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment, after consultation with a
financial advisor of nationally recognized reputation (such as NationsBanc
▇▇▇▇▇▇▇▇▇▇), to be more favorable to the Company's stockholders than the
Merger.
(s) "Takeover Proposal" means any proposal or offer (other than the
transactions between the Company and Newco contemplated hereunder) involving
the Company or any of its Subsidiaries for, or an inquiry or indication of
interest that reasonably could be expected to lead to: (A) any merger,
consolidation, share exchange, recapitalization, business combination, or
other similar transaction; (B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 20% or more of the assets of the Company and
its Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (C) any material debt or equity investment in the Company or
recapitalization transaction in substitution for the transactions contemplated
by this Agreement; or (D) any tender offer or exchange offer for 20% or more
of the outstanding shares of capital stock of the Company or any of its
Subsidiaries or the filing of a registration statement under the Securities
Act in connection therewith.
(t) "Tax" (and, with correlative meaning, "Taxes") means (i) any net income,
alternative or add-on minimum, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid by the Company or any of its Subsidiaries, payroll, employment,
excise, production, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest and/or any penalty, addition to tax or additional amount imposed
by any taxing authority and (ii) any liability of the Company or any of its
Subsidiaries for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated or consolidated group or arrangement
whereby liability of the Company or any of its Subsidiaries for the payment of
such amounts was determined or taken into account with reference to the
liability of any other person for any period.
(u) "Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect to
the Company or any of its Subsidiaries in respect of any Taxes, including,
without limitation, (i) any consolidated federal income Tax return in which
any of the Company, Subsidiaries and/or Groups is included and (ii) any state,
local or foreign income Tax returns filed on a consolidated, combined or
unitary basis (for purposes of determining tax liability) in which any of the
Company, Subsidiaries and/or Groups is included.
33
The following terms are defined in the Sections hereof indicated below:
TERM DEFINITION
---- ----------
"Agreement"................................................ Preamble
"Brunswick Stock Option"................................... Section 3.3
"CBI"...................................................... Section 2.1(f)
"Certificate of Merger".................................... Section 1.3
"Certificates"............................................. Section 2.2(b)
"Claims"................................................... Section 6.3(d)
"Closing Date"............................................. Section 1.2
"Commitment Letter"........................................ Section 4.7
"Company".................................................. Preamble
"Company Acquisition Stock Options"........................ Section 3.3
"Company Benefit Plan Stock Options"....................... Section 3.3
"Company Common Stock"..................................... Section 2.1
"Company Letter"........................................... Section 3.1
"Company Phantom Stock Unit Awards"........................ Section 3.3
"Company Preferred Stock".................................. Section 3.3
"Company Representative Stock Options"..................... Section 3.3
"Company Restricted Stock Awards".......................... Section 3.3
"Company SEC Documents".................................... Section 3.6
"Company, Subsidiaries and/or Groups"...................... Section 3.10(a)
"Competition Act".......................................... Section 3.5
"Constituent Corporations"................................. Preamble
"D&O Insurance"............................................ Section 6.7(b)
"Debentures"............................................... Section 3.3
"Dissenting Shares"........................................ Section 2.1(d)
"Dissenting Stockholder"................................... Section 2.1(d)
"Effective Time"........................................... Section 1.3
"ERISA Affiliate".......................................... Section 3.12(e)
"Exchange Act"............................................. Section 3.5
"Expense Reimbursement".................................... Section 6.3(b)
"Fairness Opinion"......................................... Section 3.19
"Governmental Entity"...................................... Section 3.5
"HSR Act".................................................. Section 3.5
"Indemnified Person"....................................... Section 6.7(a)
"Indenture"................................................ Section 3.15
"IRS"...................................................... Section 3.10(d)
"Liens".................................................... Section 3.2
"Merger"................................................... Recitals
"Merger Consideration"..................................... Section 2.1(a)
"NationsBanc ▇▇▇▇▇▇▇▇▇▇"................................... Section 3.16
"Newco".................................................... Preamble
"Newco Common Stock"....................................... Section 2.1
"Option Holders"........................................... Section 2.1(c)
"Options".................................................. Section 2.1(c)
"Paying Agent"............................................. Section 2.2(a)
"Policies"................................................. Section 3.20
"Proxy Statement".......................................... Section 3.8
"Recapitalization"......................................... Recitals
"Retirement Plan".......................................... Section 6.16
"Rights"................................................... Section 3.3
34
TERM DEFINITION
---- ----------
"Rights Agreement".......................................... Section 3.3
"Schedule 13E-3"............................................ Section 3.8
"SEC"....................................................... Section 3.6
"Securities Act"............................................ Section 3.6
"Series A Preferred Stock".................................. Section 2.1(e)
"Shares".................................................... Section 2.1
"Special Committee"......................................... Recitals
"State Takeover Approvals".................................. Section 3.5
"Stockholders Meeting"...................................... Section 3.8
"Surviving Corporation"..................................... Section 1.1
"Surviving Corporation Common Stock"........................ Section 2.1(e)
"Surviving Corporation Shares".............................. Section 2.1(e)
"Termination Fee"........................................... Section 6.3(b)
"Transfer Taxes"............................................ Section 6.5
SECTION 9.5 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries. Except for the
Confidentiality Letter referred to in the last sentence of Section 6.2, this
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof. This Agreement, except for the provisions of
Section 6.7, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either parties hereto
without the prior written consent of the other party, except that Newco may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to any of the Investors or their affiliates,
but no such assignment shall relieve Newco of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 9.9 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this
Agreement may be consummated as originally contemplated to the fullest extent
possible.
SECTION 9.10 Enforcement of This Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction, such remedy being in
addition to any other remedy to which any party is entitled at law or in
equity.
35
SECTION 9.11 Obligations of Subsidiaries. Whenever this Agreement requires
any Subsidiary of the Company to take any action, such requirement shall be
deemed to include an undertaking on the part of the Company to cause such
Subsidiary to take such action.
SECTION 9.12 Negotiation of Agreement. Each of the parties acknowledges that
it has been represented by independent counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement and that it
has executed the same with consent and upon the advice of said independent
counsel. Each party and its counsel cooperated in the drafting and preparation
of this Agreement and the documents referred to herein, and any and all drafts
relating thereto shall be deemed the work product of the parties and may not
be construed against any party by reason of its preparation. Accordingly, any
rule of law or any legal decision that would require interpretation of any
ambiguities in this agreement against the party that drafted it is of no
application and is hereby expressly waived.
IN WITNESS WHEREOF, Newco and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the
date first written above.
HB ACQUISITION CORPORATION
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
By:
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Signatory
▇▇▇▇ SPORTS CORP.
/s/ ▇▇▇▇▇ ▇. ▇▇▇
By:
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman and Chief
Executive Officer
36