SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
Concord Fabrics Inc.
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(Name of Issuer)
Class A Common Stock, par value $.50 per share
Class B Common Stock, par value $.50 per share
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(Title of Class of Securities)
Class A Common Stock: 206219206
Class B Common Stock: 206219305
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(CUSIP Number)
Peter A. Eisenberg, Esq.
Bryan Cave LLP
245 Park Avenue
New York, New York 10167
(212) 692-1800
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
August 4, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
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SCHEDULE 13D
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CUSIP No._______ Page _____ of _____ Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Concord Merger Corp.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
SC, BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS |_|
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF
SHARES 1,168,699 shares of Class A Common Stock.
BENEFICIALLY 1,112,799 shares of Class B Common Stock.
OWNED BY ==================================================================
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 0
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9 SOLE DISPOSITIVE POWER
1,168,699 shares of Class A Common Stock.
1,112,799 shares of Class B Common Stock.
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,168,699 shares of Class A Common Stock.
1,112,799 shares of Class B Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXLUDES CERTAIN
SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.9% of Class A Common Stock.
77.0% of Class B Common Stock.
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14 TYPE OF REPORTING PERSON*
HC
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*SEE INSTRUCTIONS BEFORE FILLING OUT!.
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Item 1. Security and Issuer.
This statement relates to shares of the Class A Common Stock, par
value $.50 per share (the "Class A Common Stock"), and the Class B Common Stock,
par value $.50 per share (the "Class B Common Stock," and collectively with the
Class A Common Stock, the "Common Stock"), of Concord Fabrics Inc., a Delaware
corporation (the "Company"). The Company's principal executive office is at 1359
Broadway, New York NY, 10018.
Item 2. Identity and Background.
(a)-(d) This statement is being filed pursuant to Rule 13d-1(k)(1)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") by
Concord Merger Corp., a Delaware corporation ("Merger Corp.").
Merger Corp. is a newly incorporated Delaware corporation
organized in connection with the tender offer by Merger Corp. for all of the
shares of the Company (the "Offer") and the ensuing merger between Merger
Corp. and the Company (the "Merger") and has not carried on any activities
other than in connection with the Offer and the Merger. The principal
offices of Merger Corp. are located at 1359 Broadway, New York, New York 10018.
Until immediately prior to the time that Merger Corp. will purchase
Shares pursuant to the Offer, it is not anticipated that Merger Corp. will have
any significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Following the merger between Merger Corp. and the
Company (as described in Item 4), its principal business will be development,
designing and producing, in its own facility and through unaffiliated
contractors, woven and knitted fabrics of actual and synthetic fibers in a wide
variety of color and patterns for sale to manufacturers (primarily of home
furnishings and apparel) and to retailers (including chains, department stores,
and independently owned fabric stores) for resale to the home sewing market. All
of Merger Corp.'s directors and executive officers are citizens of the United
States. A list of Merger Corp.'s executive officers and directors, their
addresses and their principal occupation or employment is noted below:
Alvin Weinstein
c/o Concord Fabrics Inc.
1359 Broadway
New York, NY 10018
Chairman of the Board of Directors of Concord Fabrics, Inc.
Chairman of the Board of Directors of Merger Corp.
David Weinstein
c/o Concord Fabrics Inc.
1359 Broadway
New York, NY 10018
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President of the Concord House Division of Concord Fabrics, Inc.
Vice President of Merger Corp.
Joan Weinstein
c/o Concord Fabrics Inc.
1359 Broadway
New York, NY 10018
Secretary of Concord Fabrics, Inc.
Secretary of Merger Corp.
Earl Kramer
c/o Concord Fabrics Inc.
1359 Broadway
New York, NY 10018
President of Concord Fabrics, Inc.
President of Merger Corp.
(e) During the last five years, neither Merger Corp. nor any of its
executive officers or directors has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(f) During the last five years, neither Merger Corp. nor any of its
executive officers or directors was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction which resulted in that person
being subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, Federal or State
securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Alvin Weinstein, Joan Weinstein, David Weinstein, Peter Weinstein,
Jonathan Weinstein and Earl Kramer (the "Continuing Shareholders") each
contributed all of their shares of Common Stock to Merger Corp. in exchange for
class A common stock, par value $.01 per share, and/or class B common stock, par
value $.01 per share, of Merger Corp. No funds were involved in forming Merger
Corp. All of the Continuing Shareholders, except Earl Kramer, have beneficially
owned their Common Stock for at least ten years. Earl Kramer acquired 50,000
shares of Common Stock through the exercise of stock options in January of 1999
at the exercise price of $3 per share. He acquired the remainder of his stock
through the exercise of options in 1996.
Item 4. Purpose of Transaction.
The Merger Agreement
Hereto following is a summary of the Merger Agreement, a copy of which is
filed hereto
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as an exhibit. Such summary does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement. Capitalized terms used in
this Item 4 but not otherwise defined shall have the meanings ascribed to them
in the Merger Agreement.
The Offer. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, Merger Corp. will commence the Offer as promptly as
reasonably practicable, but in no event later than five business days after the
initial public announcement of Merger Corp.'s intention to commence the Offer.
The obligation of Merger Corp. to accept for payment Shares tendered pursuant to
the Offer is subject to the satisfaction of the Minimum Condition and certain
other conditions that are described in the Offer. Merger Corp. has agreed that
no change in the Offer may be made which waives the Minimum Condition, and no
change may be made which decreases the price per Share payable in the Offer,
which changes the form of consideration, which reduces the maximum number of
Shares to be purchased in the Offer, which makes changes to the Offer which are
otherwise adverse to the Company or the Public Shareholders or which imposes
conditions to the Offer in addition to those set forth in Section 16 hereof
without the prior consent of the Company.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the Effective
Time, Merger Corp. shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Corp. will cease and the
Company will continue as the Surviving Corporation of the Merger. At the
Effective Time, by virtue of the Merger and without any action on the part of
Merger Corp., the Company or holders of any Shares, (a) each Share issued and
outstanding immediately prior to the Effective Time (other than any Shares held
in the treasury of the Company, or owned by Merger Corp., any Affiliate of
Merger Corp. or any direct or indirect subsidiary of the Company and any Shares
which are held by stockholders who have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with Delaware Law) shall be canceled and
converted automatically into the right to receive $7.875 in cash (the "Merger
Consideration") payable, after reduction for any required Tax withholding,
without interest, to the holder of such Share upon surrender, in the manner
provided in the Letter of Transmittal, of the certificate that formerly
evidenced such Share; (b) each Share held in the treasury of the Company and
each Share owned by Merger Corp., any Affiliate of Merger Corp. or any direct or
indirect wholly owned Subsidiary of the Company immediately prior to the
Effective Time shall be canceled without any conversion thereof and no payment
or distribution will be made with respect thereto; and (c) each share of Class A
Common Stock, par value $.01 per share, of Merger Corp. 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 Class A Common
Stock, par value $.50 per share, of the Surviving Corporation, and each share of
Class B Common Stock, par value $.01 per share, of Merger Corp. 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 Class B
Common Stock, par value $.50 per share, of the Surviving Corporation.
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The Merger Agreement provides that the directors of Merger Corp.
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation and that the officers of the Company immediately prior to
the Effective Time will be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified. The Merger Agreement provides that, at the Effective Time, the
Certificate of Incorporation of the Company restated in the form attached to the
Merger Agreement will be the Certificate of Incorporation of the Surviving
Corporation. The Merger Agreement also provides that the By-laws of the Company,
as in effect immediately prior to the Effective Time, will be the By-laws of the
Surviving Corporation.
The Merger Agreement provides that each Company Stock Option outstanding
at the Effective Time under the Company Stock Option Plan shall be canceled by
the Company immediately prior to the Effective Time, and each holder of a
canceled Company Stock Option shall be entitled to receive at the Effective Time
or as soon as practicable thereafter from the Company in consideration for the
cancellation of such Company Stock Option an amount equal to the product of (i)
the number of Shares previously subject to such Company Stock Option, and (ii)
the excess, if any, of the Merger Consideration over the exercise price per
share of Shares previously subject to such Company Stock Option, which shall be
paid in cash, after reduction for applicable tax withholding.
The Merger Agreement provides that notwithstanding any provision of the
Merger Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of Delaware Law shall not be converted into or represent the right
to receive the Merger Consideration. Such stockholders shall be entitled to
receive payment of the appraised value of such Shares held by them in accordance
with the provisions of such Section 262, except that all Dissenting Shares held
by stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Shares under such Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in the Merger Agreement of the certificate or certificates that
formerly evidenced such Shares.
Agreements of Merger Corp. and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby (the
"Stockholders' Meeting"). The Merger Agreement also provides that subject to its
fiduciary duties under applicable law as advised by independent counsel, if the
Minimum Condition shall not have been satisfied and such condition shall have
been waived by Merger Corp., at the Stockholders' Meeting, Merger Corp. will
cause all Shares then owned by it and the Shares under its control to vote in
favor of the Merger.
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The Merger Agreement provides that, notwithstanding the preceding
paragraph, in the event that Merger Corp. shall acquire at least 90 percent of
the then outstanding Shares, subject to certain conditions, Merger Corp. and the
Company agree, at the request of Merger Corp., to take all necessary and
appropriate action to cause the Merger to become effective in accordance with
Section 263 of Delaware Law as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders.
The Merger Agreement provides that the Company will, if required by
applicable law, as soon as practicable following consummation of the Offer, file
an information or proxy statement (the "Proxy Statement") with the Securities
and Exchange Commission (the "Commission") under the Exchange Act, and use best
efforts to have the Proxy Statement cleared by the Commission. Merger Corp. and
the Company will cooperate with each other in the preparation of the Proxy
Statement, and the Company will notify Merger Corp. of the receipt of any
comments of the Commission with respect to the Proxy Statement.
The Merger Agreement further provides that the Certificate of
Incorporation of the Surviving Corporation shall contain provisions no less
favorable with respect to indemnification than are set forth in Article Eighth
of the Certificate of Incorporation of the Company, which provisions shall not
be amended, repealed or otherwise modified for a period of ten years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification shall be required
by law.
The Merger Agreement provides that the Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the Effective Time,
the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company (collectively, the
"Indemnified Parties") against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as an officer, director, employee,
fiduciary or agent, whether occurring before or after the Effective Time, for a
period of ten years after the date hereof.
The Merger Agreement provides that the Surviving Corporation shall use its
best efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
the Surviving Corporation be required to expend pursuant to this provision: for
the period beginning at Effective Time and ending three years thereafter, more
than an amount per year equal to 300% of current annual premiums (the "Current
Annual Premiums") paid by the Company for such insurance, and (ii) for the
period
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beginning on the third anniversary of the Effective Time and ending three years
thereafter, more than an amount per year equal to 200% of the Current Annual
Premiums.
The Merger Agreement provides that Merger Corp. will use its reasonable
best efforts to obtain the financing required to obtain the necessary financing
for the Merger and Tender Offer on terms and conditions no less favorable to
Merger Corp. than those described in the Chase Commitment Letter, which is
attached as an exhibit hereto. The Company will cooperate with, and use its
reasonable best efforts to assist, Merger Corp. in obtaining such financing. The
Merger Agreement provides that, subject to its terms and conditions, each of the
parties thereto will use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including, without limitation, using all reasonable efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
the Subsidiaries as are necessary for the consummation of the Transactions and
to fulfill the conditions to the Offer and the Merger.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of each party to the Merger Agreement are required
to use their reasonable best efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to organization and qualification,
capitalization, authority to enter into the transactions contemplated by the
Merger Agreement, no conflicts between the Merger Agreement and the Company's
organizational documents and contracts or any laws and the absence of required
filings and consents.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the extent
required by Delaware Law and the Certificate of Incorporation of the Company;
(b) no United States or state governmental authority or other agency or
commission or United States or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the acquisition of Shares by Merger Corp. or any of its Affiliates illegal or
otherwise restricting, preventing or prohibiting consummation of the
Transactions; and (c) Merger Corp. or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that, with certain limitations, this condition may be waived
by Merger Corp.
Termination: Fees and Expenses. The Merger Agreement provides that it may
be
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terminated and the Merger and the other Transactions may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the Transactions by the stockholders of the
Company: (a) by mutual written consent duly authorized by the Board of Directors
of Merger Corp. and the Board of Directors of the Company; (b) by either Merger
Corp. or the Company if (i) the Effective Time shall not have occurred on or
before November 30, 1999; provided, however, that the right to terminate this
Agreement under this clause; (ii) shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date; or (iii) any court of competent jurisdiction in the United States or other
United States governmental authority shall have issued an order, decree, ruling
or taken any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; (c) by Merger Corp. if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any condition listed in
Section 14 herein, Merger Corp. shall have (A) failed to commence the Offer
within 5 Business Days following the date of the Merger Agreement, (B)
terminated the Offer without having accepted any Shares for payment thereunder
or (C) failed to pay for Shares pursuant to the Offer within 90 calendar days
following the commencement of the Offer, unless such failure to pay for Shares
shall have been caused by or resulted from the failure of Merger Corp. to
perform in any material respect any material covenant or agreement of it
contained in the Merger Agreement or the material breach by Merger Corp. of any
material representation or warranty of it contained in the Merger Agreement; or
(ii) prior to the Purchase of Shares pursuant to the Offer, the Board or any
committee thereof shall have withdrawn or modified in a manner adverse to Merger
Corp. or its approval or recommendation of the Offer, the Merger Agreement, the
Merger or any other Transaction or shall have recommended another merger,
consolidation, business combination with, or acquisition of, the Company or its
assets or another tender offer for Shares, or shall have resolved to do any of
the foregoing; or (d) by the Company, upon approval of the Board, if (i) Merger
Corp. shall have (A) prior to the date by which it is required to commence the
Offer, failed to furnish the Company with an executed commitment letter of a
financial institution evidencing its commitment, subject to customary
conditions, to provide the financing referred to in the Financing Condition,(B)
failed to commence the Offer within 5 Business Days following the date of the
Merger Agreement, (C) terminated the Offer without having accepted any Shares
for payment thereunder or (D) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer, unless such failure to
pay for Shares shall have been caused by or resulted from the failure of the
Company to perform in any material respect any material covenant or agreement of
it contained in the Merger Agreement or the material breach by the Company of
any material representation or warranty of it contained in the Merger Agreement;
or (ii) prior to the purchase of Shares pursuant to the Offer, the Board shall
have withdrawn or modified in a manner adverse to Merger Corp. its approval or
recommendation of the Offer, the Merger Agreement, the Merger or any other
Transaction or shall have recommended another merger, consolidation, business
combination, business combination with, or acquisition of, the Company or its
assets or another tender offer for Shares, or shall have resolved to do any of
the foregoing (a "Company Board Termination").
In the event of the termination of the Merger Agreement, the Merger
Agreement provides
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that it shall forthwith become void and there shall be no liability thereunder
on the part of any party thereto except; (i) under the provisions of the Merger
Agreement related to fees and expenses described below and under certain other
provisions of the Merger Agreement which survive termination; and (ii) nothing
in the Merger Agreement shall relieve any party from liability or any willful
breach thereof.
If the Merger Agreement is terminated pursuant to a Company Board
Termination and Merger Corp. is not in material breach of its material covenants
and agreements contained in the Merger Agreement or its representations and
warranties contained in the Merger Agreement, the Company shall, reimburse
Merger Corp. (and its stockholders and Affiliates) not later than one Business
Day after submission of statements therefor for all out-of-pocket expenses and
fees up to $1 million in the aggregate (including, without limitation, fees and
expenses payable to all banks, investment banking firms, other financial
institutions and other persons and their respective agents and counsel, for
arranging, committing to provide or providing any financing for the Transactions
or structuring the Transactions and all fees of counsel, accountants, experts
and consultants to Merger Corp. (and its stockholder and Affiliates, and all
printing and advertising expenses) actually incurred or accrued by it or on its
behalf in connection with the Transactions, including, without limitation, the
financing thereof, and actually incurred or accrued by banks, investment banking
firms, other financial institutions and other persons and assumed by Merger
Corp. in connection with the negotiation, preparation, execution and performance
of the Merger Agreement, the structuring and financing of the Transactions and
any financing commitments or agreements relating thereto (all the foregoing
being referred to herein collectively as the "Expenses").
Except as set forth in the Merger Agreement, the Merger Agreement provides
that all costs and expenses incurred in connection with the Merger Agreement and
the Transactions shall be paid by the party incurring such expenses, whether or
not any Transaction is consummated.
The Merger Agreement provides that in the event that the Company shall
fail to pay any Expenses when due, the term "Expenses" shall be deemed to
include the costs and expenses actually incurred or accrued by Merger Corp. (and
its stockholders and Affiliates) (including, without limitation, fees and
expenses of counsel) in connection with the collection under and enforcement of
Section 7.03 of the Merger Agreement, together with interest on such unpaid
Expenses, commencing on the date that such Expenses became due, at a rate equal
to the rate of interest publicly announced by The Chase Manhattan Bank, from
time to time, in the City of New York, as such bank's Base Rate plus 2%.
The Merger Agreement provides that any action permitted or required to be
taken thereunder by the Board of Directors of the Company, including without
limitation any termination of the Merger Agreement, any amendment of the Merger
Agreement or any waiver thereunder, and any consent, approval or determination
permitted or required to be made or given by the Company pursuant to the Merger
Agreement, shall be made, taken or given, as the case may be, only with the
concurrence, or at the direction, of the Special Committee.
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Purpose of the Offer and the Merger. The purpose of the Offer and the
Merger is for those shareholders of the Company who are also shareholders of
Merger Corp. (the "Continuing Shareholders") to become the sole owners of the
Company. While the Company would have been able to consummate the Merger through
a proxy solicitation to all holders of Shares seeking approval of the Merger,
the Offer, as the first step in the acquisition of the Company, is intended to
facilitate the acquisition of all the outstanding Shares and to provide cash to
the Public Stockholders of Company for their Shares as promptly as practicable.
The Merger Corp. currently intends, as soon as practicable following
consummation of the Offer, to propose and seek to consummate the Merger. After
consummation of the Offer, the Company may continue to assess various aspects of
its business and operations to maximize its strengths in implementing its
long-term strategy.
The purpose of the Merger is to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise and to enable the acquisition or
cancellation of all other equity interests in the Company. Pursuant to the
Merger, each then issued and outstanding Share (other than Dissenting Shares)
not owned by Merger Corp. or the Company will be converted into and represent
the right to receive an amount in cash equal to the price per Share paid by
Merger Corp. pursuant to the Offer. Under Delaware Law, the approval of the
Board and the affirmative vote or written consent of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Board of Directors
of the Company has unanimously approved and adopted the Merger Agreement and the
transactions contemplated thereby, and, unless the Merger is consummated
pursuant to the short-form merger provisions under Delaware Law described below,
the only remaining required corporate action of the Company is the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the affirmative vote of the holders of a majority of each class of the Shares.
Merger Corp. currently has sufficient voting power to cause the approval and
adoption of the Merger Agreement and the transactions contemplated thereby
without the affirmative vote of any other stockholder. Merger Corp. has agreed
however that if sufficient Shares are not tendered and purchased pursuant to the
Offer to satisfy the Minimum Condition and such condition is waived by Merger
Corp., Merger Corp. will vote all Shares owned or controlled by it in favor of
the Merger.
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a meeting of its stockholders as soon as practicable after
the consummation of the Offer for the purpose of considering and taking action
on the Merger Agreement and the transactions contemplated thereby, if such
action is required by Delaware Law. Under Delaware Law, if Merger Corp.
acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding
Shares, Merger Corp. will be able to approve the Merger without a vote of the
Company's stockholders. In such event, Merger Corp. and the Company have agreed
in the Merger Agreement to take, at the request of Merger Corp., all necessary
and appropriate action to cause the Merger to become effective as soon as
reasonably practicable after such acquisition, without a meeting of the
Company's stockholders. If, however, Merger Corp. does not acquire at least 90%
of the outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under Delaware Law, a significantly longer
period of time would be
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required to effect the Merger.
The Continuing Shareholders believe that causing the Company to be closely
held will:
o Afford the Public Stockholders an opportunity to dispose of their
Common Stock at a premium over the market price of the Common Stock
on July 29, 1999, the date the Continuing Shareholders made the
Proposal;
o Enable the Company's management to focus on long-term growth rather
than, as most publicly held companies, on short-term results;
o Provide the Continuing Shareholders with increased flexibility in
dealing with matters of succession and estate planning;
o Afford the Company's management with greater operational
flexibility, simplification of the management reporting process and
reduction of overhead and compliance costs;
o Enable the Company to elect to be taxed under the provisions of
Subchapter S under the Internal Revenue Code of 1986, as amended
(the "Code"), to avoid the double tax on distributions that
presently exists on dividends paid by the Company (although each
shareholder is taxed on his share of the Company's income whether or
not it is distributed);
o Reduce costs associated with publishing and distributing to its
shareholders annual and quarterly reports and proxy statements,
which the Purchaser estimate will result in annual savings to the
Company of approximately $_______, since the Company will no longer
be subject to the proxy solicitation rules under the Exchange Act.
No appraisal rights are available in connection with the Offer. However,
if the Merger is consummated, stockholders will have certain rights under
Delaware Law to dissent and demand appraisal of, and to receive payment in cash
of the fair value of, their Shares. Such rights to dissent, if the statutory
procedures are complied with, could lead to a judicial determination of the fair
value of the Shares, as of the day prior to the date on which the stockholders'
vote was taken approving the Merger or similar business combination (excluding
any element of value arising from the accomplishment or expectation of the
Merger), required to be paid in cash to such dissenting holders for their
Shares. In addition, such dissenting stockholders would be entitled to receive
payment of a fair rate of interest from the date of consummation of the Merger
on the amount determined to be the fair value of their Shares. In determining
the fair value of the Shares, the court is required to take into account all
relevant factors. Accordingly, such determination could be based upon
considerations other than, or in addition to, the market value of the Shares,
including, among other things, asset values and earning capacity. In Weinberger
v. UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and
12
<PAGE>
otherwise admissible in court" should be considered in an appraisal proceeding.
Therefore, the value so determined in any appraisal proceeding could be the
same, more or less than the purchase price per Share in the Offer or the Merger
Consideration.
In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Phillip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief
maybe available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
Plans for the Company. It is expected that, initially following the
Merger, the business and operations of the Company will be continued by the
Company substantially as they are currently being conducted. Other than as
described herein, the Continuing Shareholders do not have any present plans or
proposals which relate to or would result prior to the Merger in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any subsidiary, a sale or transfer of a
material amount of assets of the Company or any subsidiary to a third party, any
change in the present capitalization or dividend policy or any other material
changes in the Company's corporate structure or business, or the composition of
the Board. However, the Continuing Shareholders intend, from time to time, to
evaluate and review the Company's business, operations, properties, management
and other personnel, corporate structure and capitalization, and to make such
changes as are deemed appropriate under the circumstances. The Continuing
Shareholders also intend to continue to explore joint ventures and other
opportunities to expand the Company's business. In that regard, the Continuing
Shareholders, after consummation of the Offer and the Merger, may review
proposals or may propose the acquisition or disposition of assets or other
changes in the Company's business, corporate structure, capitalization,
management or dividend policy which they consider to be in the best interests of
the Company and its then shareholders. The Company and the Continuing
Shareholders anticipate that the indebtedness to be incurred in connection with
the Offer and the Merger will be repaid primarily with cash on hand or with cash
generated from the operations of the business of the Company or a subsequent
refinancing. However, subject to the terms of the debt financing and market and
other conditions, the Company may, in the future, consider such other means of
repaying such indebtedness as the Company and the Continuing Shareholders may
determine in their sole and absolute discretion.
If the Merger is consummated, the Continuing Shareholders currently intend
to cause the Company to change the Company's fiscal year to a calendar year and
to elect to be taxed under the provisions of Subchapter S of the Code commencing
with the fiscal year 2000. The Shareholders Agreement contemplates that
distributions will be made to the then shareholders of the Company in order to
enable them to pay income taxes to be borne by them as a result of that
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<PAGE>
election.
Item 5. Interest in Securities of the Issuer.
(a) Merger Corp. currently owns 1,168,699 shares of Class A
Common Stock, constituting 53.9% of such shares and
1,112,799 shares of Class B Common Stock constituting 77.0%
of such shares. No officers or directors of Merger Corp.
own of record any shares of the Company. However, certain
officers and directors of Merger Corp. beneficially own
shares of Class A Common Stock, due to the fact that such
officer and director holds options to purchase shares of
Class A Common Stock. The number of shares beneficially
owned by each of them is set forth in the chart below.
---------------------------------------------------------
Number Percent
Name of Shares of Class
---------------------------------------------------------
Alvin Weinstein,
Chairman of the Board of Merger
Corp. and of the Company 40,000 1.8
---------------------------------------------------------
David Weinstein,
Vice President of Merger Corp.
and President of the Concord
House Division of the Company 60,000 2.7
---------------------------------------------------------
Jonathan Weinstein and Peter Weinstein could be determined to
be controlling shareholders or members of a control group of
Merger Corp. They do not currently beneficially own shares of
the Company, as they contributed all of their shares to Merger
Corp. on July 29, 1999.
(b) Merger Corp. holds the sole power to vote all of its shares of
the Company. Alvin Weinstein, by virtue of his ownership of a
majority of the stock of Merger Corp., can direct the vote of
Merger Corp.'s shares of the Company.
(c) The Continuing Shareholders, on July 29, 1999, contributed all
of their shares of Common Stock to Merger Corp. in exchange
for shares of stock of Merger Corp. (one share of Merger Corp.
per share of the Company). The transaction took place at
Concord Fabrics Inc., 1359 Broadway, New York, New York 10018.
The actual number of shares contributed by each Continuing
Shareholder was:
Alvin Weinstein: 1,619,770 shares of Class A Common Stock.
Joan Weinstein: 120,000 shares of Class A Common Stock.
David Weinstein: 154,576 shares of Class A Common Stock.
Earl Kramer: 78,000 shares of Class A Common Stock.
Peter Weinstein: 70,113 shares of Class A Common Stock.
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84,463 shares of Class B Common Stock.
Jonathan Weinstein: 70,113 shares of Class A Common Stock.
84,463 shares of Class B Common Stock.
No other transaction in Common Stock was effected by any
persons named in Item 2 within the last 60 days.
(d) None.
(e) None.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer.
Shareholders' Agreement. Merger Corp. and each of the Continuing
Shareholders are parties to a shareholders' agreement dated July 29, 1999 (the
"Shareholders' Agreement") which restricts the transfer of any shares of the
capital stock of Merger Corp. owned by the Continuing Shareholders by requiring
that any of them who wishes to sell or transfer any such shares to a third party
first offer the shares to Merger Corp. and then to other signing stockholders at
the price offered by the third party. There are certain exceptions to the
transfer restrictions for gifts and transfers to other shareholders of Merger
Corp. or to family members of the transferring shareholder and for sales in an
underwritten public offering.
The Shareholders' Agreement provides that, upon the bankruptcy of a holder
of shares of Merger Corp. or the attachment of any such shares, the holder
thereof is deemed to have offered to sell such shares to Merger Corp. for a
price equal to the fair market value of such shares. The Shareholders' Agreement
also provides for (i) mandatory repurchases of shares by Merger Corp. upon the
death of a shareholder and (ii) the mandatory repurchase by Merger Corp. and
sale by Earl Kramer of the shares of Merger Corp. held by Mr. Kramer upon his
termination or retirement from Merger Corp., his disability for a period of at
least six months or the sale of the Knit Division of the Company, in each case
at a price equal to the book value of such shares as of the end of the month in
which the event giving rise to such repurchase occurs. Under the Shareholders'
Agreement, Alvin Weinstein and Joan Weinstein may require Merger Corp. to
purchase in five equal annual installments the shares of Merger Corp. owned by
each of them at a price equal to the book value of such shares as of the end of
the month immediately preceding the Merger beginning on or any time after the
third anniversary of the date of the Shareholders' Agreement. Alvin Weinstein
and/or Joan Weinstein may require Merger Corp. to accelerate such repurchase
upon the sale of either the Knit Division or the Concord House Division of the
Company. The Shareholders' Agreement also grants to Alvin Weinstein (and under
some circumstances Joan Weinstein and David Weinstein) the right to require the
other holders to sell their shares in connection with the sale of Merger Corp.
as a going concern. The Shareholders' Agreement grants certain registration
rights to the holders of shares of Merger Corp.. Holders of shares of Merger
Corp. are also entitled to pre-emptive rights under the Shareholders'
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<PAGE>
Agreement.
The parties to the Shareholders' Agreement have agreed to elect to treat
Merger Corp. as an "S corporation" for Federal income tax purposes and have
agreed that Merger Corp. shall pay dividends to the then shareholders of Merger
Corp. in order to enable them to pay income taxes to be borne by them as a
result of that election.
If the Merger is consummated, the Company as the Surviving Corporation
shall by operation of law become a party to the Shareholders' Agreement and the
shares of capital stock of the Company which will then be held by the Continuing
Shareholders shall be subject to, and the Continuing Shareholders shall be bound
by and entitled to the benefits of, the Shareholders' Agreement. The Merger
Agreement, a contract between the person described in Item 2 regarding the
securities of the issuer, is described in Item 4 hereof.
Item 7. Material to be Filed as Exhibits.
See Exhibits attached hereto.
(a) Form of Commitment Letter from the Chase Manhattan Bank to Alvin
Weinstein, Joan Weinstein and David Weinstein, dated July 26, 1999.
(b) Form of Agreement and Plan of Merger, dated as of July 29, 1999,
between Merger Corp. and the Company.
(c) Form of Shareholders Agreement, dated July 29, 1999, among Alvin
Weinstein, Joan Weinstein, David Weinstein, Peter Weinstein, Jonathan Weinstein
and Earl Kramer.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
August 4, 1999
--------------------------------
(Date)
/s/ Earl Kramer
--------------------------------
(Signature)
President
--------------------------------
(Name and Title)
17
Exhibit 99(a)
August 3, 1999
Mr. Alvin Weinstein, Ms. Joan Weinstein
and Mr. David Weinstein
1359 Broadway
Fourth Floor
New York, New York
Tender Facility Commitment Letter
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") that you intend
to form or cause to be formed a holding company organized under the laws of the
State of Delaware ("Newco"), which will make a friendly tender offer (the
"Tender Offer") for all of the issued and outstanding shares of all classes of
common stock, par value $.01 per share (the "Shares"), of a corporation
identified to us as "Target," a Delaware corporation (the "Target"). Newco will
receive a capital contribution (the "Investor Contribution") from you consisting
of not less than 61.08% of all outstanding Shares. The Investor Contribution
will be comprised of approximately 51.01% of all outstanding Shares of class A
common stock and approximately 77.04% of all outstanding Shares of class B
common stock. Each reference in this Commitment Letter or the Term Sheet (as
defined below) to a percentage of Shares or percentage of outstanding Shares
shall mean such percentage determined on a fully diluted basis after giving
effect to the exercise of any warrants, options, conversion privileges or
similar rights.
You have advised Chase that prior to commencement of the Tender
Offer Newco and Target will have entered into an agreement and plan of merger in
the form previously delivered to us (in such form, referred to herein as the
"Merger Agreement") providing for the merger (the "Merger") of Newco with and
into Target (with Target as the surviving entity) as soon as practicable after
completion of the Tender Offer pursuant to the terms of which shareholders of
Target will be offered cash consideration not to exceed $7.875 per Share. The
Merger Agreement provides, among other things, that each shareholder of Target
(other than Newco and other than shareholders that have perfected appraisal
rights) that has not participated in the Tender Offer will, upon consummation of
the Merger, receive a cash merger price per Share equal to $7.875. The Tender
Offer and the Merger are collectively referred to herein as the "Transactions."
We understand that to finance the Tender Offer and certain related
expenses, Newco will require a senior credit facility of $12,500,000 (the
"Tender Facility") and will receive the Investor Contribution.
Chase is pleased to advise you of its commitment to provide that
entire amount of the Tender Facility upon and subject to the terms and
conditions set forth or referred to in this Commitment Letter and/or the Summary
of Principal Terms and Conditions attached hereto as Exhibit A (the "Term
Sheet"). As consideration for Chase's commitment hereunder, you agree to pay and
agree to cause Newco to pay Chase the nonrefundable fees described in the Term
Sheet and the Fee Letter dated the date hereof and delivered herewith (the "Fee
Letter"). To the extent that the Fee Letter amends, supplements or otherwise
modifies any of the terms hereof (including the terms of the Term Sheet), the
terms of the Fee Letter shall be controlling.
You hereby represent and covenant that (a) all information other
than forecasts and projections
<PAGE>
("Information") concerning each of you, Newco, Target, its subsidiaires and the
Transactions that has been or will be made available to Chase by or on behalf of
any of you, Newco, Target, its subsidiaries or any authorized representatives of
any of the foregoing is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (b) all forecasts and
projections that have been or will be made available to Chase by or on behalf of
any of you Newco, Target, its subsidiaries or any authorized representatives of
any of the foregoing have been or will be prepared in good faith based upon
assumptions that are reasonable at the time made and at the time the related
materials are furnished to Chase. You agree that if, at any time from and
including the date hereof until the closing of the Tender Facility, any of the
representations in the preceding sentence would be incorrect if the Information,
forecasts and projections were being furnished, and such representations were
being made, at such time, then you will promptly supplement the Information,
forecasts and projections previously furnished to Chase so that the
representations will be complete and correct under those circumstances.
Chase's commitment hereunder is subject to (a) Chase's completion
of, and satisfaction in all respects with, its ongoing due diligence
investigation of Newco, Target, its subsidiaries and the Transactions, (b)
Chase's not having become aware of information not previously disclosed to Chase
that Chase reasonably believes to be materially inconsistent with its
understanding, based on information provided to Chase prior to the date hereof,
of the business, operations, properties, assets, condition (financial or
otherwise), liabilities, prospects or material agreements of any of you, Target,
its subsidiaries and Newco, (c) there not having occurred events or changes that
would have or could reasonably be expected to have, individually or in the
aggregate, a material adverse change in the business, operations, assets,
liabilities, prospects or material agreements of Newco since its formation or of
Target or any of its subsidiaries since May 31, 1999 or of any of you since the
date hereof, (d) Chase's satisfaction in all respects (i) that the structure of
the Tender Offer and the Merger are consistent with the terms set forth in the
Merger Agreement, this Commitment Letter and the Term Sheet and are otherwise
satisfactory to Chase with respect to all tax, legal, accounting and other
matters, (ii) with the terms and conditions of the Tender Offer and all other
agreements to be entered into in connection with the Transactions, (iii) with
the capitalization, structure and equity ownership of Newco and Target and its
subsidiaries after giving effect to the Transactions, and (iv) with the terms
and conditions of all material agreements of Newco and Target and its
subsidiaries, (e) the negotiation, execution and delivery of definitive
documentation with respect to the Tender Facility satisfactory to Chase and its
counsel and (f) the other conditions set forth in the Term Sheet.
By executing this Commitment Letter you agree, and agree to cause
Newco, jointly and severally, to (a) indemnify and hold harmless Chase and its
officers, directors, employees, affiliates, agents and controlling persons from
and against any and all losses, claims, damages, liabilities and expenses, joint
or several, to which any such indemnified party may become subject arising out
of or in connection with this Commitment Letter, the Fee Letter, the Term Sheet,
the Transactions or the Tender Facility or any related transaction or claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any such indemnified party is a party thereto, and to
reimburse each such indemnified party upon demand for any reasonable legal or
other expenses incurred in connection with investigating or defending any of the
foregoing; provided, that the foregoing indemnity will not, as to any such
indemnified party, apply to losses, claims, damages, liabilities or expenses to
the extent to the extent same are found by a final, nonappealable judgment of a
court to have resulted from the willful misconduct or gross negligence of such
indemnified party, and (b) to reimburse Chase from time to time upon demand for
all reasonable fees and out-of-pocket expenses incurred by Chase (including,
without limitation, out-of-pocket expenses of Chase's due diligence
investigation, travel expenses, consultant's fees and expenses and reasonable
fees, charges and disbursements of counsel) in connection with the preparation
of this Commitment Letter, the Term Sheet, the Fee Letter and the definitive
documentation for the Tender Facility and the security arrangements in
connection therewith. Notwithstanding any other provision of this Commitment
Letter, the Term Sheet, the Fee Letter or any other document, no indemnified
party shall be liable for any damages arising from the use by others of
information or other materials obtained through electronic, telecommunications
or other information transmission systems, or for any special, indirect,
consequential or punitive damages in connection with its activities related to
the Tender Facility.
2
<PAGE>
You acknowledge that Chase and its affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
Chase nor any of its affiliates will use confidential information obtained from
you by virtue of the transactions contemplated by this Commitment Letter or its
other relationships with you in connection with its performance of services for
other companies, and neither Chase nor any of its affiliates will furnish any
such information to other companies. You also acknowledge that neither Chase nor
any of its affiliates has any obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you,
Newco, Target or any of their respective affiliates, confidential information
obtained by Chase or any of its affiliates from other companies.
This Commitment Letter and Chase's commitment hereunder shall not be
assignable by you without the prior written consent of Chase and any attempted
assignment without such consent shall be null and void. Neither this Commitment
Letter, nor the Fee Letter nor the Term Sheet may be amended or any provision
hereof waived or modified except by an instrument in writing signed by each of
you and Chase. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement. Delivery of an executed counterpart of
a signature page of this Commitment Letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof. This Commitment
Letter is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto. This Commitment Letter shall be governed
by, and construed in accordance with, the laws of the State of New York.
You hereby agree that you will not disclose this Commitment Letter,
the Term Sheet, the Fee Letter, the contents of any of the foregoing or the
activities of Chase pursuant hereto or thereto to any party without the prior
written approval of Chase, except that you may disclose (a) this Commitment
Letter, the Term Sheet and the Fee Letter and the contents hereof and thereof
(i) to your respective attorneys, accountants and advisors on a confidential and
need-to-know basis and (ii) as may be compelled in a judicial or administrative
proceeding (in which case you agree to inform us promptly thereof); provided,
that if you shall have previously accepted this Commitment Letter in accordance
with the terms hereof, you may deliver a copy of this Commitment Letter and the
Term Sheet (but not the Fee Letter) to the Target and its advisors for their
review in connection with the Transactions.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation relating to the
Tender Facility shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or Chase's commitment hereunder.
If the foregoing correctly set forth our mutual agreement, please
indicate your acceptance of the terms hereof and of the Term Sheet and the Fee
Letter by (i) signing in the appropriate space provided below and returning to
Chase the enclosed duplicate originals of this Commitment Letter and the Fee
Letter not later than 5:00 p.m. (New York time) on August 4, 1999 and (ii)
paying to Chase the fees payable pursuant to the Fee Letter upon such
acceptance. Chase's commitment hereunder will expire at such time in the event
that Chase has not received such acceptance in accordance with the immediately
preceding sentence. In the event that the initial borrowing under the Tender
Facility does not occur on or before October 31, 1999, then this Commitment
Letter and Chase's commitments hereunder shall terminate automatically.
Chase is pleased to have been given the opportunity to assist with
the financing of the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK
3
<PAGE>
By: /s/ David Gibbs
--------------------------
Name: David Gibbs
Title: Vice President
Accepted and agreed to as
of the date first above written by:
/s/ Alvin Weinstein
- -----------------------------------
Mr. Alvin Weinstein
/s/ Joan Weinstein
- -----------------------------------
Ms. Joan Weinstein
/s/ David Weinstein
- -----------------------------------
Mr. David Weinstein
4
<PAGE>
Exhibit A
$12,500,000
Summary of Principal Terms and Conditions
Tender Facility
August 3, 1999
----------------------
The following sets forth terms and conditions for a $12,500,000
Senior Secured Credit Facility that will be available to a holding company
organized under the laws of the State of Delaware ("Newco") in connection with
Newco's proposed friendly tender offer (the "Tender Offer") of not more than
$7.875 per share for all of the issued and outstanding shares of common stock,
par value $.50 per share (the "Shares"), of a corporation identified to us as
"Target," a Delaware corporation (the "Target"), pursuant to an agreement and
plan of merger in the form previously delivered to Chase (as defined below) (in
such form, referred to herein as the "Merger Agreement") providing for the
merger (the "Merger") of Newco with and into Target (with Target as the
surviving entity) as soon as practicable after completion of the Tender Offer
pursuant to the terms of which shareholders of Target will be offered cash
consideration not to exceed $7.875 per Share. Prior to consummation of the
Tender Offer, Newco shall receive a capital contribution (the "Investor
Contribution") consisting of not less than 61.08% of all outstanding Shares. The
Investor Contribution will be comprised of approximately 51.01% of all
outstanding Shares of class A common stock and approximately 77.04% of all
outstanding Shares of class B common stock.
I. Parties
Borrower: Newco
Guarantors: Alvin Weinstein, Joan Weinstein and David Weinstein will
provide unlimited, joint and several guarantees of
obligations arising under the Tender Facility.
Shareholders of Newco other than these three individuals
will provide limited recourse guarantees of obligations
arising under the Tender Facility, with recourse limited
exclusively to the capital stock of Newco pledged to
Chase by such shareholder as contemplated below.
Lender: The Chase Manhattan Bank ("Chase")
II. Tender Facility
Amount: $12,500,000 (the "Tender Facility")
Availability: Loans under the Tender Facility (the "Tender Loans")
will be available for multiple drawings during the
period commencing on the earliest date (in no event
later than October 31, 1999) on which Newco accepts any
Shares for payment (excluding Shares contributed to
Newco pursuant to the Investor Contribution) in and
pursuant to the terms of the Tender Offer (the "Closing
Date") and ending on the fifth business day following
the Closing Date; provided, that in no event may the
amount of the Tender Loans made available to
Newco exceed 50% of the aggregate value of all Shares
which have been pledged by Newco to Chase as described
below (such value to be based on a per
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Share value of $7.875).
Amortization: The Tender Loans will be repayable upon the "Maturity
Date," defined as the earliest to occur of (i) the date
that the Merger is consummated and (ii) the date that is
120 days after the Closing Date.
Purpose: The proceeds of the Tender Loans will be used to finance
(a) the acquisition by Newco of Shares in accordance
with the Merger Agreement and (b) the payment of
interest, fees and other expenses incurred in connection
with the Transactions.
III. Certain Payment Provisions
Interest Rate: The rate of interest publicly announced by Chase as its
Prime Rate.
Default Rate: At any time when Newco is in default in the payment of
any principal, interest, fees or other amounts due under
the Tender Facility, such amount shall bear interest at
2% above Chase's Prime Rate.
Rate Basis: All per annum rates shall be calculate on the basis of a
year of 360 days.
Interest Payment: Interest on the Tender Loans shall be due and payable on
the Maturity Date and thereafter upon demand.
Fees: As set forth in the attached Fee Letter.
Optional Prepayments
and
Commitment Reductions: Newco may prepay the Tender Loans and/or reduce the
Tender Facility in whole or in part (subject to minimum
amounts to be agreed upon) at any time without penalty.
Amounts prepaid in respect of the Tender Loans may not
be reborrowed.
Mandatory Prepayments: If at any time the aggregate amount of the outstanding
Tender Loans together with accrued interest thereon
exceeds 50% of the aggregate value of all Shares which
have been pledged by Newco to Chase as described below
(such value to be based on a per Share value of $7.875),
then Newco shall be required to prepay the Tender Loans
in an amount sufficient to eliminate such excess.
IV. Collateral
Collateral: The obligations of Newco in respect of the Tender
Facility shall be secured by a perfected first priority
security interest in all of the capital stock of Newco
and all Shares owned by Newco, whether acquired in the
Tender Offer or otherwise.
V. Certain Conditions
Initial Conditions: The availability of the Tender Facility shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent on or before October
31, 1999:
(a) Newco and the Guarantors shall have executed and
delivered
2
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satisfactory definitive documentation with respect
to the Tender Facility (the "Credit
Documentation").
(b) The Merger Agreement shall not have been amended,
supplemented or otherwise modified without the
prior written consent of Chase and Chase shall
have had an opportunity to review and shall be
satisfied in all respects with the terms and
conditions of (i) the Tender Offer and all other
agreements to be entered into in connection with
the Transactions and (ii) all materials,
agreements and documents filed publicly by Newco
or Target in connection with the Trnasactions.
(c) The Board of Directors of Target (including a
majority of the independent Directors) shall have
approved the Tender Offer.
(d) Newco shall have received the Investor
Contribution.
(e) Prior to or concurrently with the making of the
initial Tender Loans Newco shall have acquired
Shares in accordance with the Merger Agreement and
there shall not have been any material change in
the number of Shares outstanding on the date
hereof.
(f) Newco shall have no outstanding indebtedness,
liens or preferred equity other than indebtedness
and liens under the Tender Facility.
(g) All governmental, shareholder and third party
approvals (including debtholders', landlords' and
other consents) necessary or advisable in
connection with the Tender Offer, the Merger, the
Tender Facility and/or the continuing operations
of Newco and Target after consummation of the
Tender Offer and the Merger, shall have been
obtained and be in full force and effect, and all
applicable waiting periods shall have expired
without any action being taken or threatened by
any competent authority that would restrain,
prevent or otherwise impose adverse conditions on
the Tender Offer, the Merger or the financing
thereof. Without limiting the foregoing, Chase
shall be satisfied that consummation of the
Transactions would not constitute (i) a default or
event of default under Target's existing Note
Purchase Agreement with John Hancock Mutual Life
Insurance Company or the senior notes issued
thereunder or (ii) an event otherwise requiring
repayment of all or any portion of the
indebtedness outstanding under said note purchase
agreement and notes. There shall be no order,
injunction or restraining order that would prevent
or delay the consummation of or impose adverse
conditions on the Tender Offer or the Merger.
(h) Chase shall have received (i) a satisfactory
projected pro forma balance sheet of Newco and
Target and its subsidiaries as at the Closing Date
and after giving effect to the Tender Offer and
the financing contemplated hereby, consistent with
the statement of proposed sources and uses
previously furnished to Chase.
(i) Chase shall have received all fees and expenses
required to be paid to it on or before the Closing
Date, whether pursuant to the Fee Letter, the
Credit Documentation or otherwise.
(j) Chase shall have received such legal and solvency
opinions and such
3
<PAGE>
other documents and instruments as are customary for
transactions of this type or as Chase may reasonably
request.
On-Going Conditions: The making of each Tender Loan shall be conditioned upon
(a) the accuracy of all representations and warranties
in the Credit Documentation (including, without
limitation the material adverse change and litigation
representations) and (b) there being no default or event
of default in existence at the time of, or after giving
effect to the making of, such Tender Loan.
VI. Certain Documentation Matters
The Credit Documentation shall contain representations,
warranties, covenants and events of default customary
for financings of the type contemplated herein and other
terms reasonably deemed appropriate by Chase in the
context of the Transactions, including, without
limitation:
Representations
and Warranties: Financial statements (including pro forma financial
statements); absence of undisclosed liabilities; no
material adverse change; corporate existence; compliance
with law; corporate power and authority; enforceability
of Credit Documentation; no conflict with law or
contractual obligations, no material litigation; no
default; ownership of property; no third party
indebtedness or liens; no burdensome restrictions;
intellectual property; taxes, Federal Reserve
regulations; ERISA; Investment Company Act:
subsidiaries; environmental matters; solvency; labor
matters; year 2000 matters; accuracy of disclosure;
creation and perfection of liens in favor of Chase
Affirmative Covenants: Delivery of financial statements, reports, officer's
certificates and other materials and information
requested by Chase; payment of obligations; continuation
of business and maintenance of existence, rights and
privileges; compliance with laws and contractual
obligations; maintenance of property and insurance;
maintenance of books and records; notices of defaults,
litigation and other material events; and further
assurances (including, without limitation, with respect
to security interests in favor of Chase in
after-acquired property)
Negative Covenants: Limitations on indebtedness; liens; guarantee
obligations; mergers, consolidations, liquidations and
dissolutions (but permitting the Merger); sales of
assets; leases; dividends and other payments; capital
expenditures; investments; loans and advances;
modification of agreements; transactions with
affiliates; sale/leasebacks; changes in fiscal year;
negative pledges; changes in lines of business; changes
in passive holding company status of Newco
Events of Default: Nonpayment of principal, interest, fees or other amounts
when due; material inaccuracy of representations and
warranties; violation of covenants (subject, in the case
of certain affirmative covenants to a grace period to be
agreed upon); cross-default; bankruptcy events; certain
ERISA events; material judgments; actual or asserted
invalidity of any guarantee or security document or
security interest; change of control
Expenses and
Indemnification: Newco will pay all reasonable expenses and charges of
Chase incurred in connection with the preparation,
execution and delivery, administration and enforcement,
as well as waivers and modifications, of the Credit
Documentation (including the reasonable fees, charges
and disbursements of Chase's counsel), as well as all
documentary taxes (if any). Chase, its officers,
directors,
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<PAGE>
employees, advisors, agents and affiliates will have no
liability for, and will be indemnified and held harmless
against, any and all losses, claims, damages,
liabilities and expenses arising out of or relating to
the Tender Facility, the proposed use of proceeds
thereof, the Tender Offer, the Merger or other
transactions contemplated herein, except to the extent
same are found by a final, nonappealable judgment of a
court to have resulted from the gross negligence or
willful misconduct of the indemnified party.
Assignments and
Participation: Chase will be permitted to participate and assign loans,
notes and commitments without the consent of Newco or
the Guarantors.
Governing
Law and Forum: State of New York
Counsel to Chase: Kaye, Scholer, Fierman, Hays & Handler, LLP
5
<PAGE>
August 3, 1999
Mr. Alvin Weinstein, Ms. Joan Weinstein
and Mr. David Weinstein
1359 Broadway
Fourth Floor
New York, New York
Tender Facility Fee Letter
Ladies and Gentlemen:
Reference is made to the Commitment Letter dated the date hereof
(including the attached Term Sheet, the "Commitment Letter") between us and you
regarding the Transactions and tender offer financing described therein.
Capitalized terms used but not defined herein are used with the meanings
assigned to them in the Commitment Letter. This letter agreement is the Fee
Letter referred to in the Commitment Letter.
As consideration for Chase's commitment under the Commitment Letter,
you agree jointly and severally to pay to Chase an underwriting fee in an amount
equal to $125,000. You hereby agree that such fee is fully earned upon your
acceptance of the Commitment Letter, although it shall be payable in two equal
installments. The first installment of $62,500 shall be payable upon, and shall
be a condition precedent to, your acceptance of the Commitment Letter. The
second installment of $62,500 shall be payable on the Closing Date (as defined
in the Term Sheet attached to the Commitment Letter).
You agree that, once paid, the fees or any part thereof payable hereunder
and under the Commitment Letter shall not be refundable under any circumstances,
regardless of whether the transactions or borrowings contemplated by the
Commitment Letter are consummated. All fees payable hereunder and under the
Commitment Letter shall be paid in immediately available funds and shall be in
addition to your compensation, reimbursement and indemnity obligations arising
under the Commitment Letter and/or the Credit Documentation.
It is understood and agreed that this Fee Letter shall not constitute or
give rise to any obligation to provide any financing; such an obligation will
arise only to the extent provided in the Commitment Letter if accepted in
accordance with its terms. This Fee Letter may not be amended, modified or
waived except by an instrument in writing signed by Chase and each of you. This
Fee Letter may be executed in any number of counterparts, each of which shall be
an original, and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Fee Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. This Fee Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
You agree that this Fee Letter and its contents are subject to the
confidentiality provisions of the Commitment Letter.
<PAGE>
Please confirm that the foregoing is our mutual understanding by signing
and returning to us an executed counterpart of this Fee Letter.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ David Gibbs
--------------------------
Name: David Gibbs
Title: Vice President
Accepted and agreed to as
of the date first above written by:
/s/ Alvin Weinstein
- -----------------------------------
Mr. Alvin Weinstein
/s/ Joan Weinstein
- -----------------------------------
Ms. Joan Weinstein
/s/ David Weinstein
- -----------------------------------
Mr. David Weinstein
================================================================================
AGREEMENT AND PLAN OF MERGER
Between
CONCORD MERGER CORP.
and
CONCORD FABRICS INC.
Dated as of July 29, 1999
as amended
August 4, 1999
================================================================================
<PAGE>
AMENDED AGREEMENT AND PLAN OF MERGER, dated as of August 4, 1999
(this "Agreement") between Concord Merger Corp., a Delaware corporation
("Purchaser"), and Concord Fabrics Inc., a Delaware corporation (the "Company").
WHEREAS, prior to organizing Purchaser, the shareholders of
Purchaser (the "Continuing Shareholders") owned, in the aggregate, 1,168,699
shares of Class A Common Stock, par value $.50 per share (the "Class A Stock"),
and 1,112,799 shares of Class B Common Stock, par value $.50 per share (the
"Class B Stock," and together with the Class A Stock, the "Common Stock"), of
the Company, representing approximately 63% of the shares of Common Stock
("Shares") outstanding; and
WHEREAS, the Continuing Shareholders have transferred all of their
Shares to the Purchaser in exchange for all the issued and outstanding shares of
capital stock of the Purchaser; and
WHEREAS, it is proposed that the Continuing Shareholders, through
their ownership of Purchaser, acquire the remaining issued and outstanding
Shares; and
WHEREAS, it is proposed that Purchaser shall make a tender offer to
acquire all outstanding Shares not held by it for a cash amount of $7.875 per
Share (such amount, or any greater amount per Share paid pursuant to the tender
offer, being hereinafter referred to as the "Per Share Amount") net to the
seller in cash, upon the terms and subject to the conditions of this Agreement
(the "Offer"); and
WHEREAS, Peter J. Solomon Company ("Solomon") has delivered to the
Special Committee of independent directors (the "Special Committee") of the
Board of Directors of the Company (the "Board"), for the Special Committee's
consideration, its written opinion that, subject to the various assumption and
limitations set forth thereon as of the date of such opinion, the cash
consideration to be received in the Offer and the Merger by the stockholders of
the Company other than Purchaser or it affiliates is fair to such stockholders
from a financial point of view; and
WHEREAS, the Special Committee, at a meeting duly called and held on
July 29, 1999, has (A) unanimously determined that $7.875 is a fair price, (B)
determined that this Agreement and the transactions contemplated by this
Agreement (the "Transactions") are fair to the stockholders of the Company
(other than Purchaser and its affiliates), and (C) on the basis of the foregoing
and the opinion of Solomon, unanimously recommended that the Board approve and
authorize the Offer, the Merger (as defined below) and this Agreement; and
WHEREAS, the Board, at a meeting duly called and held on July 29,
1999 has (A) approved and adopted this Agreement and the Transactions, including
the Offer and the merger between Purchaser and the Company contemplated by
Section 2.01 hereof (the "Merger") in accordance with the Delaware General
Corporations Law ("Delaware Law") and upon the terms and subject to the
conditions set forth in this Agreement, and (B) resolved to recommend
<PAGE>
that the stockholders of the Company accept the Offer, tender their Shares
thereunder to Purchaser and, if required by applicable law, approve and adopt
this Agreement and the Merger; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 7.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing, Purchaser shall
commence the Offer as promptly as reasonably practicable after the date hereof,
but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject to the condition (the "Minimum Condition") that at least
a majority of those then outstanding Shares of each class not owned beneficially
and of record by Purchaser (including, without limitation, all Shares issuable
upon the conversion of any convertible securities or upon the exercise of any
options, warrants or rights) shall have been validly tendered and not withdrawn
prior to the expiration of the Offer and also shall be subject to the
satisfaction of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; provided, however, that the Minimum Condition may not
be waived without the prior approval of the Company and that no change may be
made which (v) changes the form of consideration payable in the Offer, (w) which
decreases the price per Share payable in the Offer, (x) which reduces the
maximum number of Shares to be purchased in the Offer, (y) which imposes
conditions to the Offer in addition to those set forth in Annex A hereto or (z)
which is otherwise adverse to the Company or its stockholders (other than
Purchaser and its affiliates). Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, (i) extend the Offer beyond the scheduled
expiration date (the initial scheduled expiration date being 20 business days
following the commencement of the Offer) if, at the scheduled expiration date of
the Offer, any of the conditions to Purchaser's obligation to accept for
payment, and to pay for, the Shares, shall not be satisfied or waived, (ii)
extend the Offer for any period required by any rule, regulation or
interpretation of the Securities and Exchange Commission (the "SEC") or the
staff thereof applicable to the Offer, or (iii) extend the Offer for an
aggregate period of not more than 20 business days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, if as of such date, all of the conditions to Purchaser's obligations
to accept for payment, and to pay for, the Shares are satisfied or waived, but
the number of Shares validly tendered and not withdrawn pursuant to the Offer is
less than 90 percent of each class of the outstanding Shares on a fully diluted
basis; provided, however, that if any condition remains unsatisfied on the
initial scheduled expiration date of the Offer, at the request of the Company,
the Purchaser shall extend the Offer from time
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<PAGE>
to time until five business days after such condition is satisfied (provided
that Purchaser shall not be required to extend the Offer beyond 35 calendar days
after such initial scheduled expiration date). The Per Share Amount shall,
subject to applicable withholding of taxes, be net to the seller in cash, upon
the terms and subject to the conditions of the Offer. Subject to the terms and
conditions of the Offer, Purchaser shall pay, as promptly as practicable after
expiration of the Offer, for all Shares validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Purchaser shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer and (ii) a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3") with respect to the Offer and the other
Transaction. The Schedule 14D-1 and the Schedule 13E-3 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Purchaser shall provide the
Company and its counsel a reasonable opportunity to review and comment on the
Offer Documents prior to the filing and/or dissemination thereof. Purchaser and
the Company agree to correct promptly any information provided by any of them
for use in the Offer Documents which shall have become false or misleading, and
Purchaser and the Company further agree to take all steps necessary to cause the
Schedule 14D-1 and the Schedule 13E-3 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board, acting upon the
unanimous recommendation of the Special Committee, at meetings duly called and
held on July 29, 1999 and August 4, 1999, has (A) determined that this
Agreement, as amended, and the Transactions, including each of the Offer and the
Merger, are advisable and fair to and in the best interests of the holders of
Shares (other than Purchaser and its Affiliates), (B) approved and adopted this
Agreement and the Transactions, including each of the Merger and the Offer, (C)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to Purchaser and, if required by applicable law,
approve and adopt this Agreement and the Merger, and (ii) Solomon has delivered
to the Board a written opinion that the consideration to be received by the
holders of Shares pursuant to each of the Offer and the Merger is fair to the
holders of Shares from a financial point of view. The Company hereby consents to
the inclusion in the Offer Documents and the Proxy Statement (as hereinafter
defined) of the recommendation of the Board described in the immediately
preceding sentence. The Company has been advised by each of its directors and
executive officers that they intend to vote such Shares in favor of the approval
and adoption by the stockholders of the Company of this Agreement and the
Transactions.
(b) As soon as practicable on the date of commencement of the Offer,
the
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<PAGE>
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto the
"Schedule 14D-9") and shall mail the Schedule 14D-9 to the stockholders of the
Company promptly after the commencement of the Offer. The Schedule 14D-9 shall,
except to the extent inconsistent with the fiduciary duties of the Board under
applicable law (as determined in good faith after consultation with independent
counsel), at all times contain the determinations, approvals and recommendations
described in Section 1.2(a). Purchaser and the Company each agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that any such information shall have become false or misleading in
any material respect and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Purchaser and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 prior to its
filing with the SEC and shall be provided with any written or verbal comments
the Company and its counsel may receive from the SEC or its staff with respect
to the Schedule 14D-9 promptly after receipt of such comments.
(c) In connection with the Offer, the Company will, or will cause
its transfer agent to, promptly furnish Purchaser with mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders and non-objecting beneficial owners of
the Shares and of Company Stock Options (as defined in Section 2.07) as of a
recent date and shall furnish Purchaser with such additional information and
assistance (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) as Purchaser or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of Shares. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Purchaser and its affiliates and
associates shall hold in confidence the information contained in any such
labels, listings and files, will use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information received from the Company
pursuant to this Agreement.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VI, and in accordance with Delaware Law, at the
Effective Time (as hereinafter defined) Purchaser shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). Notwithstanding
anything to the contrary contained in this Section 2.01, Purchaser may elect
instead, at any time prior to the fifth business day immediately preceding the
date on which the Proxy Statement (as hereinafter defined) is mailed initially
to the Company's stockholders, to merge the Company into Purchaser or another
corporation controlled by, controlling or under common control with Purchaser.
In such event, the parties agree to execute an appropriate amendment to this
Agreement in order to
5
<PAGE>
reflect the foregoing and to provide, as the case may be, that Purchaser or such
other corporation controlled by Purchaser shall be the Surviving Corporation.
SECTION 2.02. Effective Time; Closing. As promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VI, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or a certificate of merger or certificate of ownership and
merger (in either case, the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time of
such filing being the "Effective Time"). Prior to such filing, a closing shall
be held at the offices of Bryan Cave LLP, 245 Park Avenue, New York, New York,
10167, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VI.
SECTION 2.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Certificate of Incorporation; By-laws. (a) Unless
otherwise determined prior to the Effective Time, at the Effective Time the
Certificate of Incorporation of the Company shall be amended and restated as set
forth in Exhibit 2.04 hereto and such Certificate of Incorporation, as amended
and restated, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation.
(b) Unless otherwise determined by Purchaser prior to the Effective
Time, the By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.05. Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective
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<PAGE>
Time (other than any Shares to be canceled pursuant to Section 2.06(b) and
any Dissenting Shares (as hereinafter defined)) shall be canceled and
shall be converted automatically into the right to receive an amount equal
to the Per Share Amount in cash (the "Merger Consideration") payable,
without interest, to the holder of such Share, upon surrender, in the
manner provided in Section 2.08, of the certificate that formerly
evidenced such Share;
(b) Each Share held in the treasury of the Company and each Share
owned by Purchaser, any Affiliate of Purchaser or any direct or indirect
subsidiary of the Company, immediately prior to the Effective Time shall
be canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto; and
(c) Each share of Class A Common Stock, par value $.01 per share, of
Purchaser 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 Class A Common Stock, par value $.50 per share,
of the Surviving Corporation, and each share of Class B Common Stock, par
value $.01 per share, of Purchaser 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 Class B Common
Stock, par value $.50 per share, of the Surviving Corporation.
SECTION 2.07. Stock Options. Each stock option (a "Company Stock
Option") outstanding, whether or not exercisable and whether or not vested, at
the Effective Time under the Concord Fabrics Inc. Incentive Plan, as amended
December 4, 1996 (the "Company Stock Option Plan"), shall be canceled by the
Company immediately prior to the Effective Time, and each holder of a canceled
Company Stock Option shall be entitled to receive at the Effective Time or as
soon as practicable thereafter from the Company in consideration for the
cancellation of such Company Stock Option an amount (the "Option Spread") equal
to the product of (i) the number of Shares previously subject to such Company
Stock Option and (ii) the excess, if any, of the Per Share Amount over the
exercise price per share of Company Common Stock previously subject to such
Company Stock Option. The Option Spread, after reduction for applicable tax
withholding, if any, shall be paid in cash.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner
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<PAGE>
provided in Section 2.09, of the certificate or certificates that formerly
evidenced such Shares.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior
to the Effective Time, Purchaser shall designate a bank or trust company to act
as agent (the "Paying Agent") for the holders of Shares in connection with the
Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent as
directed by the Surviving Corporation, provided that such investments shall be
in obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital surplus and undivided profits aggregating in
excess of $50 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon
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<PAGE>
due surrender of the Certificates held by them. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Share for any Merger Consideration delivered in respect of such
Share to a public official pursuant to any abandoned property, escheat or other
similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that:
SECTION 3.01. Organization and Qualification; Subsidiaries. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below). The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company, the term
"Material Adverse Effect" means any change or effect that, when taken together
with all other adverse changes and effects that are within the scope of the
representations and warranties made by the Company in this Agreement and which
are not individually or in the aggregate deemed to have a Material Adverse
Effect, is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) or prospects
of the Company. Except as set forth on Schedule 3.01, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
SECTION 3.02. Authority Relative to this Agreement. The Company has
all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
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Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then outstanding Shares if
and to the extent required by applicable law, and the filing and recordation of
appropriate merger documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Purchaser, constitutes a legal,
valid and binding obligation of the Company. The Board of Directors has approved
the Offer, the Merger and the Transactions in accordance with the provisions of
Section 203 of the Delaware Law.
SECTION 3.03. Capitalization. The authorized capital stock of the
Company consists of 4,000,000 shares of Class A Common Stock, par value $.50 per
share ("Class A Common Stock"), and 4,000,000 shares of Class B Common Stock,
par value $.50 per share ("Class B. Common Stock"). As of the date hereof, (i)
2,169,814 shares of Class A Common Stock and 1,444,401 shares of Class B Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) 120,892 shares of Class A Common Stock are held in the
treasury of the Company, and (iii) 325,000 shares of Class A Common Stock are
reserved for future issuance pursuant to employee stock options or stock
incentive rights granted pursuant to the Company's Stock Option Plan. Except as
set forth in this Section 3.03, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or obligating the Company to issue or
sell any shares of capital stock of, or other equity interests in, the Company.
All Shares subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable.
SECTION 3.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws or equivalent organizational
documents of the Company, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company by which any
property or asset of the Company is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), state securities or "blue sky" laws ("Blue Sky
Laws") and state takeover laws, the pre-merger notification requirements of the
HSR Act, and filing and recordation of appropriate merger documents as required
by Delaware Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make
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such filings or notifications, would not prevent or delay consummation of the
Offer or the Merger, or otherwise prevent the Company from performing its
obligation under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company that:
SECTION 4.01. Corporate Organization. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
material adverse effect on the business or operations of Purchaser.
SECTION 4.02. Capitalization. As of the date hereof, 2,281,498
shares of Purchaser's Common Stock, par value $.01 per share, are issued and
outstanding, all of which have been issued to the Continuing Shareholders in
consideration of the respective transfer to Purchaser by each such Continuing
Shareholder of all of his or her Shares.
SECTION 4.03. Authority Relative to this Agreement. Purchaser has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Purchaser are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the filing
and recordation of appropriate merger documents as required by Delaware Law).
This Agreement has been duly and validly executed and delivered by Purchaser
and, assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms.
SECTION 4.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Purchaser do not, and the
performance of this Agreement by Purchaser will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws of Purchaser, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Purchaser or by which any of its property or assets is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Purchaser is a party or by which Purchaser or any property or asset of Purchaser
is bound or affected,
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except for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a material
adverse effect on the business or operations of Purchaser.
(b) The execution and delivery of this Agreement by Purchaser do
not, and the performance of this Agreement by Purchaser will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and
state takeover laws, the HSR Act, and filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Offer or the
Merger, or otherwise prevent Purchaser from performing its obligations under
this Agreement.
SECTION 4.05. No Current Intent to Sell Business. Purchaser has no
current intention to sell, transfer or otherwise dispose of the business of the
Company or any material part thereof following the consummation of the Merger,
but there can be no assurance that the Surviving Corporation will not determine
to cause such a transfer in the future.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Stockholders' Meeting. (a) If required by applicable
law in order to consummate the Merger, the Company, acting through the Board,
shall, in accordance with applicable law and the Company's Certificate of
Incorporation and By-laws, duly call, give notice of, convene and hold an annual
or special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
this Agreement and the Transactions (the "Stockholders' Meeting"). Subject to
its fiduciary duties under applicable law as advised by independent counsel, if
the Minimum Condition shall not have been satisfied and such condition shall
have been waived by Purchaser, at the Stockholders' Meeting Purchaser shall
cause all Shares then owned by it and the Shares under its control to be voted
in favor of the Merger.
(b) Notwithstanding the foregoing in the event that Purchaser shall,
following consummation of the Offer, hold beneficially and of record at least 90
percent of each class of the then outstanding Shares, the parties hereto agree,
subject to Article VI, to take all necessary and appropriate action to cause the
Merger to become effective, in accordance with Section 253 of Delaware Law, as
soon as reasonably practicable after such acquisition, without a meeting of the
stockholders of the Company.
SECTION 5.02. Proxy Statement. If required by applicable law, as
soon as practicable following consummation of the Offer, the Company shall file
the Proxy Statement with the SEC under the Exchange Act, and shall use its best
efforts to have the Proxy Statement cleared by the SEC. Purchaser and the
Company shall cooperate with each other in the preparation of the Proxy
Statement.
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SECTION 5.03. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation of the Surviving Corporation
shall contain provisions no less favorable with respect to indemnification than
are set forth in Article Eighth of the Certificate of Incorporation of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of ten years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who at the Effective Time
were directors, officers, employees, fiduciaries or agents of the Company,
unless such modification shall be required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company (collectively, the "Indemnified Parties") against all costs
and expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, whether
occurring before or after the Effective Time, for a period of ten years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation, (i) the Company or the Surviving Corporation, as the case may be,
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation, promptly after statements therefor are
received and (ii) the Company and the Surviving Corporation shall cooperate in
the defense of any such matter; provided, however, that neither the Company nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
provided, further, that neither the Company nor the surviving Corporation shall
be obligated pursuant to this Section 5.03(b) to pay the fees and expenses of
more than one counsel for all Indemnified Parties in any single action except to
the extent that two or more of such Indemnified Parties shall have conflicting
interests in the outcome of such action; and provided, further, that, in the
event that any claim for indemnification is asserted or made within such
ten-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim.
(c) The Surviving Corporation shall use its best efforts to maintain
in effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 5.03(c): (i) for period beginning at
Effective Time and ending three years thereafter, more than an amount per year
equal to 300% of current annual premiums (the "Current Annual Premiums") paid by
the Company for such insurance (which premiums the Company represents and
warrants to be approximately $63,000 in the aggregate), and (ii) for the
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period beginning on the third anniversary of the Effective Time and ending three
years thereafter, more than an amount per year equal to 200% of the Current
Annual Premiums.
SECTION 5.04. Financing. Purchaser shall use its reasonable best
efforts to obtain the financing required to satisfy the Financing Condition as
defined in Annex A hereto on terms and conditions no less favorable to Purchaser
than [those described on Annex B hereto]. The Company shall cooperate with, and
use its reasonable best efforts to assist, Purchaser in obtaining such
financing.
SECTION 5.05. Further Action; Reasonable Best Efforts. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the Transactions, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits (including, without limitation,
Environmental Permits), consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company as
are necessary for the consummation of the Transactions and to fulfill the
conditions to the Offer and the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action.
SECTION 5.06. New York Real Estate Gains Tax. Either Purchaser or
the Surviving Corporation shall pay the New York State Tax on Gain Derived from
Certain Real Property Transfers and the New York City Real Property Transfer Tax
and any similar tax in any other jurisdiction, if any (and any penalties or
interest with respect to such taxes), payable in connection with the Merger or
the acquisition of a controlling interest in the Company by Purchaser, and shall
indemnify and hold harmless the stockholders of the Company from and against any
liability with respect to such taxes (including any penalties, interest and
professional fees). The Company and Purchaser shall cooperate in the preparation
and filing of any required returns with respect to such taxes (including returns
on behalf of the stockholders of the Company).
SECTION 5.07. American Stock Exchange Listing. Until the Effective
Time the Company shall use all commercially reasonable efforts to maintain the
listing of the Class A Stock and the Class B Stock on the American Stock
Exchange; maintain the registration of such securities under the Securities
Exchange Act of 1934, as amended; and comply with the rules and regulations of
the SEC.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Merger. The respective obligations
of each party to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
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(a) Stockholder Approval. This Agreement and the Transactions shall
have been approved and adopted by the affirmative vote of the stockholders
of the Company to the extent required by Delaware Law and the Certificate
of Incorporation of the Company;
(b) No Order. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the consummation of the Merger
unlawful or preventing or prohibiting consummation of the Transactions;
and
(c) Offer. Purchaser or its permitted assignee shall have purchased
all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition may be waived by Purchaser;
provided, further, that this condition may not be relied upon by Purchaser
if Purchaser's breach of this Agreement was the cause of, or resulted in,
the failure of Purchaser to purchase Shares pursuant to the Offer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Board of
Directors of Purchaser and the Board of Directors of the Company; or
(b) If any court of competent jurisdiction in the United States or
other United States governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided, however that
each of the parties shall have used reasonable best efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered; or
(c) By Purchaser if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A
hereto, Purchaser shall have (A) failed to commence the Offer within 5
business days following the date of this Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder or (C)
failed to pay for Shares pursuant to the Offer within 90 days following
the commencement of the Offer, unless such failure to pay for Shares shall
have been caused by or resulted from the failure of Purchaser to perform
in any material respect any material covenant or agreement of it contained
in this Agreement or the material breach
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by Purchaser of any material representation or warranty of it contained in
this Agreement; or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser its approval or recommendation of the
Offer, this Agreement, the Merger or any other Transaction or shall have
recommended another merger, consolidation, business combination with, or
acquisition of, the Company or its assets or another tender offer for
Shares, or shall have resolved to do any of the foregoing; or
(d) By the Company, upon approval of the Board, if (i) Purchaser
shall have (A) prior to the date by which it is required to commence the
Offer, failed to furnish the Company with an executed commitment letter of
a financial institution evidencing its commitment, subject to customary
conditions, to provide the financing referred to in clause (ii) of the
first paragraph of Annex A hereto, (B) failed to commence the Offer within
5 business days following the date of this Agreement, (C) terminated the
Offer without having accepted any Shares for payment thereunder or (D)
failed to pay for Shares pursuant to the Offer within 90 days following
the commencement of the Offer, unless such failure to pay for Shares shall
have been caused by or resulted from the failure of the Company to perform
in any material respect any material covenant or agreement of it contained
in this Agreement or the material breach by the Company of any material
representation or warranty of it contained in this Agreement; or (ii)
prior to the purchase of Shares pursuant to the Offer, the Board shall
have withdrawn or modified in a manner adverse to Purchaser its approval
or recommendation of the Offer, this Agreement, the Merger or any other
Transaction or shall have recommended another merger, consolidation,
business combination with, or acquisition of, the Company or its assets or
another tender offer for Shares, or shall have resolved to do any of the
foregoing.
SECTION 7.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Sections 7.03 and 8.01 and (ii) nothing herein shall
relieve any party from liability for any willful breach hereof.
SECTION 7.03. Fees and Expenses. (a) If this Agreement is terminated
pursuant to clause (ii) of Section 7.01(d) and Purchaser is not in material
breach of its material covenants and agreements contained in this Agreement or
its representations and warranties contained in this Agreement, the Company
shall reimburse Purchaser (and its stockholders and Affiliates) not later than
one business day after submission of statements therefor for all out-of-pocket
expenses and fees up to $1 million in the aggregate (including, without
limitation, fees and expenses payable to all banks, investment banking firms,
other financial institutions and other persons and their respective agents and
counsel, for arranging, committing to provide or providing any financing for the
Transactions or structuring the Transactions and all fees of counsel,
accountants, experts and consultants to Purchaser and its respective
stockholders and Affiliates, and all printing and advertising expenses) actually
incurred or accrued by it or on its behalf in connection with the Transactions,
including, without limitation, the financing thereof, and actually incurred or
accrued by banks, investment banking firms, other financial institutions and
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other persons and assumed by Purchaser (or its stockholders or Affiliates) in
connection with the negotiation, preparation, execution and performance of this
Agreement, the structuring and financing of the Transactions and any financing
commitments or agreements relating thereto (all the foregoing being referred to
herein collectively as the "Expenses").
(b) Except as set forth in this Section 7.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(c) In the event that the Company shall fail to pay any Expenses
when due, the term "Expenses" shall be deemed to include the costs and expenses
actually incurred or accrued by Purchaser (and its stockholders and Affiliates)
(including, without limitation, fees and expenses of counsel) in connection with
the collection under and enforcement of this Section 7.03, together with
interest on such unpaid Expenses, commencing on the date that such Expenses
became due, at a rate equal to the rate of interest publicly announced by The
Chase Manhattan Bank, from time to time, in the City of New York, as such bank's
Base Rate plus 2%.
SECTION 7.04. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of the Board of Directors of
Purchaser and the Board of Directors of the Company at any time prior to the
Effective Time; provided, however, that, after the approval and adoption of this
Agreement and the Transactions by the stockholders of the Company, no amendment
may be made which would reduce the amount or change the type of consideration
into which each Share shall be converted upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 7.05. Waiver. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if (a) it is the
result of action taken by or on behalf of the Board of Directors of Purchaser,
if Purchaser is the party granting the extension or waiver, or the Board of
Directors of the Company, if the Company if the party granting the extension or
waiver, and (b) it is set forth in an instrument in writing signed by the party
or parties to be bound thereby.
SECTION 7.06. Special Committee. Any action permitted or required to
be taken under this Agreement by the Board of Directors of the Company,
including without limitation any termination of this Agreement pursuant to
Section 7.01 hereof, any amendment of this Agreement pursuant to Section 7.04 or
any waiver pursuant to Section 7.05, and any consent, approval or determination
permitted or required to be made or given by the Company pursuant to this
Agreement, shall be made, taken or given, as the case may be, only with the
concurrence, or at the direction, of the Special Committee, as the Special
Committee may determine, from time to time, in its sole discretion.
ARTICLE VIII
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GENERAL PROVISIONS
SECTION 8.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article II shall survive the Effective Time indefinitely and those set
forth in Section 7.03 shall survive termination indefinitely.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 8.02):
if to Purchaser:
Concord Merger Corp.
1359 Broadway
New York, New York 10018
Telecopier No: (212) 643-8051
Attention: Alvin Weinstein
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
Telecopier No.: (212) 735-8708
New York, New York 10022
Attention: Robert H. Cohen
if to the Company:
Concord Fabrics Inc.
1359 Broadway
New York, New York 10018
Telecopier No.: (212) 643-8051
Attention: Martin Wolfson,
Senior Vice President -
Chief Financial Officer
with a copy to:
Bryan Cave LLP
245 Park Avenue
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New York, New York 10167
Telecopier No.: (212) 692-1900
Attention: Peter A. Eisenberg
SECTION 8.03. Certain Definitions. For purposes of this Agreement,
the term:
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "beneficially own" or "beneficially hold" or any variation
thereon with respect to a person holding Shares means that such person
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its Affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
Affiliates or associates or person with whom such person or any of its
Affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of
a government; and
(f) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, or any other person means an Affiliate controlled by such
person, directly or indirectly, through one or more intermediaries.
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SECTION 8.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is 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 hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 8.05. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law or otherwise,
except that Purchaser may assign all or any of its rights and obligations
hereunder to any Affiliate of Purchaser provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
SECTION 8.06. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 8.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 8.08. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any New York state or federal court sitting in the City of New
York.
SECTION 8.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.10. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
20
<PAGE>
CONCORD MERGER CORP.
Attest:
Joan Weinstein By: /s/ Earl Kramer
- -------------- --------------------------
Title: President
CONCORD FABRICS INC.
Attest:
Joan Weinstein By: /s/ Alvin Weinstein
- -------------- --------------------------
Title: Chairman
ANNEX A
Conditions to the Offer
Notwithstanding any other provision of the Offer, Purchaser shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied, (ii) Purchaser shall not have obtained sufficient
financing to enable it to purchase the Shares to be purchased by it and to pay
fees and expenses of the Offer and the Merger, including, without limitation,
fees and expenses incurred or to be incurred in connection with the financing
(the "Financing Condition") or (iii) at any time on or after the date of this
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to
make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit or make materially more costly the making of the
Offer, the acceptance for payment of, or payment for, any Shares by
Purchaser or the consummation of any other Transaction, or seeking to
obtain material damages in connection with any Transaction; (ii) seeking
to prohibit or limit materially the ownership or operation by Purchaser of
all or any material portion of the business or assets of the Company, or
to compel Purchaser, to dispose of or hold separate all or any material
portion of the business or assets of Purchaser as a result of the
Transactions; (iii) seeking to impose or confirm limitations on the
ability of Purchaser or any of its Affiliates to exercise effectively full
rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of this Agreement
and the Transactions, (iv) seeking to require divestiture by Purchaser or
any of its Affiliates of any Shares; or (v) which is reasonably likely to
materially adversely affect the business, operations, properties,
condition (financial or otherwise), assets or liabilities (including,
without limitation, contingent liabilities) or prospects of Purchaser or
any of its Affiliates;
21
<PAGE>
(b) there shall have been any action taken, or any statute, rule
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Purchaser, the Company or any subsidiary or Affiliate of
Purchaser or the Company or (ii) any Transaction, by any legislative body,
court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, which is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on The American Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on,
or other event that, in the reasonable judgment of Purchaser, might
affect, the extension of credit by banks or other lending institutions,
(iv) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
or (v) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof which materially effects the
Company;
(e) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of the then outstanding Shares has been
acquired by any person, other than Purchaser or any of its Affiliates or
(ii) (A) the Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Purchaser the approval or recommendation
of the Offer, the Merger, the Merger Agreement, or approved or recommended
any takeover proposal or any other acquisition of Shares other than the
Offer, the Merger or the Merger Agreement or (B) the Board or any
committee thereof shall have resolved to do any of the foregoing;
(f) any representation or warranty of the Company in the Merger
Agreement which is qualified as to materiality shall not be true and
correct or any such representation or warranty that is not so qualified
shall not be true and correct in any material respect, in each case as if
such representation or warranty was made as of such time on or after the
date of this Agreement;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(h) the Merger Agreement shall have been terminated in accordance
with its terms; or
22
<PAGE>
(i) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
which, in the sole judgment of Purchaser in any such case, and regardless of the
circumstances giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and
may be asserted by Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion. The failure by Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
23
SHAREHOLDERS' AGREEMENT
AGREEMENT made as of the 29th day of July, 1999 by and among ALVIN
WEINSTEIN, an individual with a mailing address at 4 Forte Drive, Old Westbury,
New York 11568 ("AW"), JOAN WEINSTEIN, an individual with a mailing address at 4
Forte Drive, Old Westbury, New York 11568 ("JW"), DAVID WEINSTEIN, an individual
with a mailing address at 40 East 9th Street, Apt. 14M, New York, New York 10003
("DW"), PETER WEINSTEIN, an individual with a mailing address at 2339 Stone
Road, Ann Arbor, Michigan 48105 ("PW"), JONATHAN WEINSTEIN, an individual with a
mailing address at 2217 11th Avenue East, Seattle, Washington 98102 ("JonW") and
EARL KRAMER, an individual with a mailing address at 1100 Park Avenue, New York,
New York 10128 ("EK") (AW, JW, DW, PW, JonW and EK, each, a "Shareholder", and,
collectively, the "Shareholders") and CONCORD MERGER CORP., a Delaware
corporation (the "Company").
WHEREAS, the Shareholders are the principal shareholders and/or
management (or relatives thereof ) of Concord Fabrics Inc. ("Concord");
WHEREAS, the issued and outstanding capital stock of Concord not
held by the Shareholders is publicly traded;
WHEREAS, the Shareholders have organized the Company to hold their
shares of Concord capital stock, to purchase from the public the remaining
shares of Concord capital stock and to merge with Concord (the "Merger") all as
part of a going private transaction which would result in the Shareholders
becoming the sole shareholders of the surviving corporation
<PAGE>
(the "Surviving Corporation");
WHEREAS, the Shareholders have determined that it is in their best
interest and in the best interest of the Company (and, after the Merger, the
Surviving Corporation) to provide for the continuity of ownership and
maintenance of control of the Company (and after the Merger, the Surviving
Corporation) as set forth herein;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the parties hereto hereby
agree as follows:
I. COMMON STOCK
1. Stock Exchange. Upon the delivery by each of the Shareholders of stock
certificates representing that number of shares of the Class A Common Stock, par
value $.50 per share, of Concord and the Class B Common Stock, par value $.50
per share, of Concord, as is set forth below, the Company shall issue, or has
issued, to each of the Shareholders, and each of them hereby subscribes for and
agrees to purchase, or has subscribed for and purchased, the number of shares
set forth opposite his name:
================================================================================
Number of Company Shares Number of Concord Shares
----------------------------------------------------------------
Shareholder Class A Class B Class A Class B
- --------------------------------------------------------------------------------
AW 1,619,770 0 777,310 842,460
- --------------------------------------------------------------------------------
JW 120,000 0 60,000 60,000
- --------------------------------------------------------------------------------
DW 154,576 0 84,463 70,113
- --------------------------------------------------------------------------------
PW 70,113 84,463 84,463 70,113
- --------------------------------------------------------------------------------
JonW 70,113 84,463 84,463 70,113
- --------------------------------------------------------------------------------
EK 78,000 0 78,000 0
================================================================================
Each Shareholder acknowledges and agrees that at the effective time
of the Merger each share of Class A Common Stock, par value $.01 per share (the
"Class A Common
2
<PAGE>
Stock") of the Company issued and outstanding immediately prior to the Merger
shall be converted into and exchanged for one share of the Class A Common Stock,
par value $.50 per share, of the Surviving Corporation, and each share of the
Class B Common Stock, par value $.01 per share (the "Class B Common Stock," and
together with the Class A Common Stock, the "Common Stock"), of the Company
issued and outstanding immediately prior to the merger shall be converted into
and exchanged for one share of the Class B Common Stock, par value $.50 per
share, of the Surviving Corporation and all such shares of Class A and Class B
Common Stock of the Surviving Corporation shall be subject to, and the holders
of such shares and the Surviving Corporation shall be bound by, the terms and
provisions of this Agreement.
2. Ownership of the Company. The Shareholders and the Company intend that
the beneficial ownership of the Company immediately after execution of this
Agreement will be as follows:
================================================================================
Approximate
Number of Percentage
Shareholder Shares of Common Stock Ownership
----------- ---------------------- ------------
- --------------------------------------------------------------------------------
AW 1,619,770 71%
- --------------------------------------------------------------------------------
JW 120,000 5%
- --------------------------------------------------------------------------------
DW 154,576 7%
- --------------------------------------------------------------------------------
PW 154,576 7%
- --------------------------------------------------------------------------------
JonW 154,576 7%
- --------------------------------------------------------------------------------
EK 78,000 3%
- --------------------------------------------------------------------------------
Total 2,281,498 100%
================================================================================
3. Restricted Shares. The Shareholders acknowledge that the Common Stock
has not been registered in accordance with the Securities Act of 1933, as
amended (the "Securities
3
<PAGE>
Act"), and as such the Common Stock may not be sold or transferred and must be
held indefinitely, unless they are subsequently registered under the Act or an
exemption from registration is available. Each of the Shareholders understands
and acknowledges that the Company is under no obligation to register the Common
Stock or to comply with any exemption under the Act or to supply or file any
information which would facilitate sales of the Common Stock.
II. CROSS PURCHASE RIGHTS
1. Transfer of Shares. In addition to, and not in limitation of, the
restrictions on transfers of Common Stock issued to and owned by the
Shareholders (collectively, the "Shares") contained in Article I hereof, and in
order to ensure continuity of ownership and control of the Company, no
Shareholder shall have the right, without the written consent of the Company and
of the other Shareholders, to sell, assign, transfer, hypothecate or otherwise
dispose of any or all of his interests in the Shares, except as provided herein.
The restrictions provided herein shall not apply to (i) any sale, transfer,
assignment or pledge by one Shareholder to either another Shareholder or the
Company; (ii) any sale, transfer, assignment or pledge by a Shareholder to any
member of his immediate family or to any trust created for his sole benefit
and/or the benefit of one or more members of his immediate family; provided,
that the transferee shall become a party to this Agreement and be bound by this
Agreement and the Shares so sold, transferred, assigned or pledged shall, solely
for purposes of this Agreement, continue to be deemed owned by the Shareholder
making such sale, transfer, assignment or pledge; and provided further, that the
Company shall not have objected to such proposed sale, transfer, assignment or
pledge within thirty (30) days after receipt of written notice thereof; (iii)
any sale, transfer, assignment
4
<PAGE>
or pledge occurring subsequent to the closing of a firm commitment underwritten
public offering of the Company's Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of such Common Stock for the account of the Company having an
aggregate offering price to the public of not less than Five Million Dollars
($5,000,000); (iv) the pledge of Shares to secure the Company's and any of the
Shareholder's obligations under any financing arrangements entered into in
connection with the Merger and the related tender offer; or (v) any sale,
transfer or assignment in accordance with the remaining provisions of this
Article III hereof.
2. Right of First Refusal.
(a) A Shareholder desiring to sell, transfer, pledge, assign or
otherwise dispose of or encumber all or any of his Shares, other than in
accordance with Section I.1 above, shall at such time as he receives a legally
binding offer to consummate such transaction first deliver a written notice (the
"Offer Notice") to the Company, notifying the Company of his intention to sell
such Shares (the "Offered Shares") and specifying the number of Offered Shares,
the name of the person or persons to whom he proposes to sell (or if no
particular person is identified then the general class of persons to whom he
proposes to sell), and a price per share which shall be the minimum price at
which he proposes to effect the sale (the "Minimum Price"). The Offer Notice
shall offer to sell to the Company the Offered Shares at the Minimum Price and
on other terms and conditions, if any, not less favorable to the Company as
those contained in the legally binding offer from such other person or persons
(or class of persons). For purposes of this Section 2, the Shareholder desiring
to dispose of the Offered Shares shall be referred to as the "Offeror".
5
<PAGE>
(b) The Company may accept or reject the offer contained in the
Offer Notice, in whole or in part, in writing within twenty (20) days after the
date thereof. A failure to respond shall constitute a rejection of the Offer. In
the event the Company rejects the offer in whole or in part, the Offeror shall
promptly deliver a written notice to the other Shareholders (the "Offeree
Shareholders") offering to sell that portion of Offered Shares not accepted by
the Company to the Offeree Shareholders at the same price as offered to the
Company. Each of the Offeree Shareholders may accept or reject such offer in
whole or in part, within ten (10) days after receipt thereof. A failure to
respond shall constitute a rejection of the offer. If more than one Offeree
Shareholder desires to purchase the Offered Shares, then each Offeree
Shareholder shall have the right to purchase the Offered Shares in the
proportion that the number of Shares owned by such Offeree Shareholder bears to
the total number of Shares owned by all Offeree Shareholders desiring to
purchase the Offered Shares.
(c) In the event the Company and/or any of the Offeree Shareholders
elect to purchase any of the Offered Shares, the closing of the purchase and
sale of the Offered Shares shall take place at a time and place mutually agreed
upon by the Offeror and the Company and/or each purchasing Offeree Shareholder,
as the case may be, but in all events not later than thirty (30) days following
the date of acceptance of the offer. At the closing of such purchase and sale,
the Offeror shall deliver to the Company and/or each purchasing Offeree
Shareholder, as the case may be, the stock certificates evidencing the Offered
Shares (which shall be transferred free and clear of any liens or encumbrances)
together with duly endorsed stock powers, and the Company and/or each purchasing
Offeree Shareholder, as the case may be, shall deliver to the Offeror a
certified check in the amount of the purchase price for the Offered Shares.
6
<PAGE>
(d) In the event that the Company and the Offeree Shareholders fail
to accept the offer to sell the Offered Shares in its entirety, or as to any
portion of the Offered Shares, the Offeror shall be free to proceed to sell all
of the Offered Shares or such portion of the Offered Shares as to which the
Company and the Offeree Shareholders shall not have accepted the offer, to the
person or persons (or class of persons) and on the terms and conditions
specified in the Offer Notice, and at not less than the Minimum Price. If the
Offeror fails to complete his proposed sale within a period of three (3) months
after the earlier to occur of the date of rejection of the offer contained in
the Offer Notice by the Company and all Offeree Shareholders or the expiration
of the periods within which such offer could have been accepted, then, if the
Offered Shares have not been sold, they shall once again be subject to the
requirements of a prior offer pursuant to the provisions hereof.
(e) This Agreement shall apply to any person who acquires any Shares
from any Shareholder and such person shall be deemed a "Shareholder" for
purposes of this Agreement. It shall be a condition of any Shareholder's right
to sell, assign or otherwise transfer any Shares to any such person that he
shall have delivered to the Company and the other Shareholders a copy of this
Agreement executed by such person and that such person agree to abide by the
provisions of this Agreement.
3. Bankruptcy or Attachment. The occurrence of any of the following:
(a) the attachment of the Shares of any Shareholder by a judgment
creditor or by any person claiming a lien thereto which lien is not
removed or bonded in full within ninety (90) days thereof;
(b) the adjudication of bankruptcy of a Shareholder following the
filing of any
7
<PAGE>
involuntary petition against the Shareholder; and
(c) the filing of a petition in voluntary bankruptcy, the use of any
insolvency act of a general assignment or trust mortgage arrangement for
the benefit of creditors;
shall ipso facto be determined for all purposes to be and shall be,
an offer by said Shareholder to sell his Shares (or, in the case of subparagraph
(a), the Shares subject to attachment or lien) to the Company, or the other
Shareholders, in accordance with the terms of this Article III for a purchase
price equal to the fair market value of the Shares offered hereunder, giving due
consideration to all relevant factors. If the offering Shareholder and the
Company cannot agree on the fair market value of the Shares then the fair market
value shall be determined by arbitration in accordance with the following
provisions, which arbitration shall be final and binding upon the parties, their
successors and assigns, and the parties agree that the following provisions
constitute a binding arbitration clause under applicable law. Either the
offering Shareholder or the Company may initiate arbitration by delivery of a
demand therefor (the "Arbitration Demand") to the other party at any time after
the occurrence of an event described in subparagraphs (a) through (c) above. The
arbitration shall be conducted in the Borough of Manhattan, New York, New York
by one arbitrator (the "Arbitrator") selected by agreement of the offering
Shareholder and the Company not later than 10 days after delivery of the
Arbitration Demand or, failing such agreement, appointed pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, as amended
from time to time (the "AAA Rules"). The arbitration shall be conducted pursuant
to the Federal Arbitration Act and the New York Uniform Arbitration Act and such
procedures as the offering Shareholder and the Company may agree or, in the
absence of or failing such agreement, pursuant to the AAA Rules. The Arbitrator
shall
8
<PAGE>
complete all hearings not later than 90 days after selection or appointment, and
shall make a final determination not later than 30 days thereafter. The
Arbitrator shall apportion all costs and expenses of the arbitration as he deems
fair and reasonable.
4. Mandatory Repurchases by the Company.
(a) Repurchases upon Death. Upon the death of a Shareholder other
than AW or JW, the Company shall purchase, and the estate of the deceased
Shareholder shall sell, all of the Shares owned by the deceased Shareholder (the
"Decedent") at the time of his death, at a price determined in accordance with
subsection (e) below. The closing of such purchase and sale shall take place as
soon as reasonably practicable following the Decedent's death and the
appointment of an executor or fiduciary for the Decedent's estate (the
"Estate"). At the closing, the Estate shall deliver to the Company the stock
certificates evidencing the Shares owned by the Decedent at the time of his
death (which Shares shall be transferred free and clear of any liens or
encumbrances) together with duly endorsed stock powers, and the Company shall
deliver to the Estate a certified check in the amount of the purchase price for
the Shares.
(b) Weinstein Repurchase. Upon the occurrence of the earlier of (i)
the third anniversary of the date of this Agreement, or (ii) the death of the
later to die of AW and JW (the "Survivor"), and anytime thereafter, each of AW
and JW (or in the case of clause (ii) above, the estate of the Survivor (the
"Survivor's Estate")) may, at his or her option, offer to sell and sell and the
Company shall purchase in five equal annual installments one-fifth of the number
of Shares owned by AW and/or JW (or, if applicable, the Survivor's Estate) at a
price determined in accordance with subsection (e) below. The date the Company
receives notice of the exercise of
9
<PAGE>
such option and each of the first four anniversaries of such date shall be
referred to herein as a "Weinstein Repurchase Date." Notwithstanding the
foregoing, upon the occurrence of a Sale of the Knit Division (as defined below)
or a Sale of the Concord House Division (as defined below), the Company shall,
at the request of AW and/or JW (or, if applicable, the Survivor's Estate)
purchase all of the Shares held by AW and/or JW (or, if applicable, the
Survivor's Estate) on the date of such occurrence at a price determined in
accordance with subsection (e) below. The date on which the Sale of the Knit
Division or the Sale of the Concord House Division occurs shall be deemed to be
a "Weinstein Repurchase Date." For purposes of this Agreement, the term "Sale of
the Knit Division" shall mean the disposition by the Company of all or
substantially all of its interest in the operations of its knit division to a
third party which is not an affiliate of the Company or any Shareholder whether
effected through a single transaction or a series of transaction, and the term
"Sale of the Concord House Division" shall mean the disposition by the Company
of all or substantially all of its interest in the operations of its Concord
House division to a third party which is not an affiliate of the Company or any
Shareholder whether effected through a single transaction or a series of
transaction.
(c) Kramer Repurchase. Upon the earlier to occur of the date of (i)
termination of EK's employment with the Company for any reason; (ii) EK's
retirement from the Company; (iii) the disability of EK to perform the duties of
his employment with the Company which disability shall last at least six (6)
consecutive months; and (iv) the Sale of the Knit Division (such earlier date,
the "EK Repurchase Date"), the Company shall purchase and EK shall sell all of
the Shares owned by EK on the EK Repurchase Date at a price determined in
accordance with subsection (e) below.
10
<PAGE>
(d) Repurchase Closings. The Weinstein Repurchase Dates and the EK
Repurchase Date are referred to in this subsection collectively as the
"Repurchase Dates" and singly as a "Repurchase Date." The closing of each
purchase and sale pursuant to subsections (b) and (c) above shall take place as
soon as reasonably practicable following the applicable Repurchase Date. At the
closing, the selling Shareholder (or, if applicable, the Survivor's Estate)
shall deliver to the Company the stock certificate evidencing the Shares being
sold (which Shares shall be transferred free and clear of any liens or
encumbrances) together with duly endorsed stock powers, and the Company shall
deliver to the selling Shareholder (or, if applicable, the Survivor's Estate) a
certified check in the amount of the purchase price for the Shares.
(e) Purchase Price.
(i) The purchase price for any sale of Shares pursuant to
subsections (a) and (c) above shall be computed as of the date of death of
the Decedent in the case of a sale pursuant to subsection (a) above, and
as of the EK Repurchase Date in the case of a sale pursuant to subsection
(c) above (such dates referred to as the "Purchase Price Date"). The
purchase price shall be equal to the number of Shares purchased multiplied
by the book value of one Share as of the December 31st immediately
preceding the Purchase Price Date, increased or decreased, as the case may
be, by the per Share net income after taxes, or net loss, of the Company
from such December 31st to the end of the month immediately following the
Purchase Price Date.
(ii) The purchase price for any sale of Shares by AW and JW
(or, if applicable, the Survivor's Estate) pursuant to this Agreement
shall be equal to the number of Shares purchased multiplied by the book
value of one share of the Class A Common
11
<PAGE>
Stock of Concord as of December 31, 1998, increased or decreased, as the
case may be, by the per share net income after taxes, or net loss, of
Concord from December 31, 1998 to the end of the month immediately
preceding the date of the Merger.
(iii) The amount of net income after taxes, or net loss,
applicable to the calculations in subsections (e)(i) and (e)(ii) above
shall be computed from the books of the applicable company by such
company's regular independent accountants in accordance with regularly
accepted accounting principles consistently applied. Such accountants'
computations shall be conclusive and the amount so computed when added, or
subtracted, as the case may be, to or from the book value as of the
preceding December 31st shall be accepted as the purchase price for the
sale of shares in question and no other determination of such purchase
price shall be required or made.
(f) Insufficient Surplus.
If, at the time the Company is required to pay the purchase price
for the Shares of a Shareholder pursuant to this Agreement, the Company's
surplus is insufficient for such purposes, then
(i) the entire available surplus shall be used to purchase part of
the Shares of the selling Shareholder, or if more than one Shareholder is
selling, to purchase pro rata parts of the Shares of all selling
Shareholders; and
(ii) the Company and the Shareholders shall promptly take all
required action to reduce the stated capital of the Company to the extent
necessary for the redemption of the unpurchased Shares at the price
determined as provided above.
12
<PAGE>
In the event that, after the steps pursuant to clause (ii) above to increase
surplus have been taken, the Company is nevertheless without sufficient surplus
to pay the purchase price for all of the Shares of the selling Shareholder, then
the other Shareholders shall have the option to purchase all or part of the
Shares of the selling Shareholder(s) which are not purchased by the Company at
the same price. The option shall remain in force for a period of thirty (30)
days after it has been determined that the Company is unable to make the payment
and may be exercised by the other Shareholders by written notice delivered to
the selling Shareholder (or in the case of death, his Estate). The closing of a
purchase of Shares by the other Shareholders shall take place at the same time
and in the same manner as the purchase by the Company in accordance with this
Section 4. In the case of a transfer upon the death of a Shareholder, any Shares
of the Decedent which can not be sold to the Company or the other Shareholders
in accordance with this Section 4 may be transferred to any person by the last
will and testament of the Decedent duly admitted to probate, or pursuant to
applicable laws of intestacy, provided, however, that any such transferee of
Shares of the Decedent shall, as a condition to such transfer, be required to
execute a copy of, and agree to be bound by, this Agreement and any such
transferee shall be deemed a "Shareholder" for purposes of the Agreement.
5. Purchase of Company. In the event that there shall be made a bona fide
offer to purchase (the "Purchase Offer") the Company as a going concern (whether
effected by purchase of assets, purchase of stock or merger) by any entity
(whether or not affiliated with the Company or with either of the Shareholders),
and the Proposing Shareholder (as defined below) desires to accept such offer,
but one or more other Shareholders (the "Declining Shareholder(s)") do not
desire to accept such offer, then, in any such event, the Proposing Shareholder
shall so notify the
13
<PAGE>
Declining Shareholder(s), and shall, upon such notice be deemed to have given,
as of the date of such notice, an offer notice pursuant to Section 2 of this
Article II to the Declining Shareholder(s), the terms of such offer notice being
deemed to be the terms of the Purchase Offer, applied pro rata in accordance
with the number of Shares owned by each Shareholder. Accordingly, the Declining
Shareholder(s) shall thereupon have the right to purchase all but not some of
the Shares of the Proposing Shareholder(s) and all other Shareholders that
desired to accept the Purchase Offer (together with the Proposing Shareholder,
the "Accepting Shareholders") on the same terms and conditions as the Purchase
Offer, applied pro rata to the number of shares owned by each such Shareholder,
in accordance with the terms and conditions of Section 2 of this Article II,
which terms and conditions shall be deemed incorporated herein in their
entirety, including, without limitation, any exemptions and exceptions therein
specified. If more than one of the Declining Shareholders desires to purchase
the Shares of the Accepting Shareholders, then each such Declining Shareholder
shall have the right to purchase the Shares of the Accepting Shareholders in the
proportion that the number of shares owned by such Declining Shareholder bears
to the total number of Shares owned by all Declining Shareholders desiring to
purchase the Shares of the Accepting Shareholders. Notwithstanding the
foregoing, however, and for purposes of this Section 5 only, in the event that
the Declining Shareholder(s) decline to purchase all of the Accepting
Shareholders Shares on such terms and conditions, the Declining Shareholder
shall, upon rejection of such purchase or upon the expiration of the thirty-day
period referred to in Section 2 of this Article III, be deemed to have accepted
the Purchase Offer, and the Shareholders shall thereupon take such steps as may
be appropriate to consummate the Purchase Offer. For purposes of this Section 5,
"Proposing Shareholder" shall mean AW until
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his death and then, if JW survives AW, JW until her death, and then, if DW
survives AW and JW, DW until his death. The provisions of this Section 5 shall
not apply to the Merger.
III. REGISTRATION RIGHTS
1. Definitions
As used in this Article IV, the following terms shall have the
following meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of the Common Stock and any other stock
into which such shares may hereafter be converted, reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Initial Public Offering" means the first sale by the Company of
shares of its Common Stock to the public pursuant to an effective registration
statement under the Securities Act.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
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"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means shares of Common Stock which are
subject to the terms and provisions of this Agreement, provided, however, that
with respect to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (a) they have been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement relating thereto, or (b) to the extent that such
securities, in the opinion of counsel to the Company, are permitted to be
distributed pursuant to Rule 144, and may then be sold without regard to any
volume limitation (or if the volume limitation would permit distribution and
sale of all such securities in a single three-month period). In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Securities" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Agreement.
"Registration Expenses" means all expenses incident to the
performance of or compliance with Section III.2 by the Company and the Holders
of Registrable Securities
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exercising the rights granted in Section III.2, including, without limitation,
all registration and filing fees, including fees with respect to filings
required to be made with the National Association of Securities Dealers, Inc.,
fees and expenses of compliance with securities or blue sky laws, including,
without limitation, all word processing, duplicating and printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel and of all independent certified public accountants (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance).
"Registration Statement" means any registration statement,
contemplated by Section III.2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Piggyback Registration
(a) Right to Include Registrable Securities. The Company agrees that
if at any time after such time, if ever, as the Initial Public Offering is
completed it desires to register for
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sale any of its equity securities on Form S-1, S-2 or S-3 or any successor or
similar form(s) under the Securities Act pursuant to an Underwritten
Registration or Underwritten Offering (but not including registrations in
connection with an employee benefit plan, an offering by the Company to its
existing security holders, or a merger, acquisition or consolidation), it will,
each such time, give prompt written notice to all Holders of Registrable
Securities of such Holders' rights under this Section III.2. Upon the written
request of any such Holder (a "Requesting Holder") made no later than (30)
thirty days after any such notice has been given by the Company, the Company
will use its commercially reasonable efforts to effect the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the Requesting Holders thereof; provided, however, that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, do so by giving written notice of such determination to each
Requesting Holder of Registrable Securities.
(b) Priority in Piggyback Registrations. If the managing underwriter
of any underwritten offering that is the subject of this Section III.2 shall
inform the Company in writing of its belief that the number or type of
Registrable Securities and other securities of the Company requested to be
included in such registration would materially adversely affect such offering,
then the Company will include in such registration, to the extent of the number
and type which the Company is so advised can be sold in (or during the time of)
such offering, first, all securities proposed by the Company to be sold for its
own account, and second, the portion of Registrable Securities requested to be
included in such registration and any other securities of the Company
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<PAGE>
requested to be included in such registration which the Company has been advised
by the managing underwriter can be sold, drawn from them pro rata based on the
number each has requested to be included in such registration.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration of Registrable Securities requested pursuant to
this Section III.2. All other costs and expenses incurred by the Requesting
Holders in connection with such registration will be borne by the Requesting
Holders on the basis of the percentage that the Registrable Securities which are
being offered by each of them bears to the total number of Registrable
Securities sought to be registered pursuant to this Section III.2.
The obligation of the Company under this Section III.2 shall be limited to
two registration statements.
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall as expeditiously as reasonably possible:
(a) prepare and file with the Commission a Registration Statement
with respect to such securities, and use its commercially reasonable efforts to
cause such Registration Statement to become and remain effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed 90 days following the effective date;
(b) prepare and file with the Commission such amendments to such
Registration Statement and supplements to the Prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed 90 days following the effective date;
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(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the Registration Statement, preliminary
Prospectus, final prospectus and such other documents as such underwriters and
holders may reasonably request in order to facilitate the public offering of
such securities;
(d) use its commercially reasonable efforts to register or qualify
the securities covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as such participating Holders
may reasonably request in writing within twenty (20) days following the original
filing of such Registration Statement, except that the Company shall not for any
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified;
(e) notify the security Holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
Registration Statement has become effective or a supplement to any Prospectus
forming a part of such Registration Statement has been filed;
(f) prepare and promptly file with the Commission and promptly
notify such Holders of the filing of such amendment or supplement to such
Registration Statement or Prospectus as may be necessary to correct any
statements or omissions if, at the time when a Prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such Prospectus would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
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<PAGE>
(g) cause all such Registrable Securities to be listed on each
securities exchange and inter-dealer quotation system on which similar
securities issued by the Company are then listed and pay all fees and expenses
in connection therewith; and
(h) advise such Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to time,
indemnify and hold harmless each Holder, the officers, directors, agents,
brokers, investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses") (as determined by a court
of competent jurisdiction in a final judgment not subject to appeal or review)
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary
21
<PAGE>
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the extent, that
such untrue statements or omissions are based upon information regarding such
Holder furnished to the Company by or on behalf of such Holder for use therein,
which information was reasonably relied on by the Company for use therein. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information
as the Company reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, jointly and not severally, to indemnify
and hold harmless the Company, its directors, officers, agents and employees,
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising out of or relating to any untrue statement of a material fact contained
in the Registration Statement, any Prospectus, or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished by
22
<PAGE>
such Holder to the Company for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party. The Indemnifying Party
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<PAGE>
shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
(d) Contribution. If a claim for indemnification under Section
III.4(a) or 4(b) is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions provided in
this Section), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section III.4(c), any reasonable attorneys' or
other fees or expenses incurred by such party in connection with any
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<PAGE>
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party.
5. Rule 144
The Company agrees that if it hereafter becomes subject to the
reporting requirements of the Exchange Act it shall thereafter use its
commercially reasonable efforts to file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and to comply
with the requirements of Rule 144(c) with respect to current public information
about the Company.
6. Special Provisions.
(a) Information as to Sellers. Each seller of Registrable Securities
shall promptly furnish the Company with such information, undertakings and
powers of attorney as the Company may from time to time reasonably request in
order to enable it to perform its obligations hereunder.
(b) Requests for Registration. Each request for registration which
is made by a Holder of Registrable Securities pursuant to Section III.2 above
shall specify the name and address of the seller, the number of Registrable
Securities for which registration is sought, and the proposed plan of
distribution thereof.
(c) Registration Not Required in Certain Circumstances. Anything in
this Agreement contained to the contrary notwithstanding, the Company shall not
be required to register any Registrable Securities under the Securities Act, and
this Agreement will terminate automatically, when, as and if, in the written
opinion of counsel for the Company, said Registrable Securities may be sold
without the need for compliance with the registration
25
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provisions of the Securities Act.
IV. GENERAL PROVISIONS
1. Subchapter S Election. The Shareholders and the Company agree that as
soon as practicable after the Merger they shall execute and file all such
documents and to take such other actions as are necessary for the Company to be
treated for tax purposes as an S corporation pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended, and pursuant to such similar
provisions of the law of any state or local taxing jurisdiction in which the
Company or the Shareholders are subject to tax. Notwithstanding any provision of
this Agreement to the contrary, no party to this Agreement shall take any action
or make any transfer of Shares, without the prior written consent of the other
parties, which would result in the termination or revocation of such election,
and each of them shall take such actions as may be required, to continue such
election in effect from year to year.
2. Dividends. With respect to any taxable period of the Company during
which it is an S corporation, within thirty (30) days after the Company files
its federal income tax return, Form 1120S, for such taxable period, the Company
promptly shall declare and pay a dividend to all Shareholders in an amount equal
to the product of (i) the excess of the Company's income allocated to such
Shareholders during such taxable period over the amount of any dividends
declared by the Company and paid to such Shareholders during such taxable
period, multiplied by (ii) the sum of the maximum federal and state income tax
rates in effect for such taxable period (assuming a married individual residing
in the State of New York). The Company's obligation to declare and pay such a
dividend to the Shareholders in such an amount is subject to the restrictions
governing dividends under the General Corporations Law of Delaware and such
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other pertinent governmental restrictions as are now, or any hereafter become,
effective, and also subject to such reasonable terms and conditions as the Board
of the Company may determine. If the Company does not have sufficient funds to
permit it lawfully to declare and pay such dividend, the Shareholders and the
Company shall use reasonable efforts to create sufficient funds to permit the
payment of such dividend, whereupon the Company shall declare and pay such
dividend.
3. Preemptive Rights. If the Company proposes to issue any shares of its
capital stock, or any options, warrants or other rights to directly or
indirectly acquire its capital stock or any securities convertible into or
exchangeable for its capital stock, other than pursuant to a Permitted Issuance,
each Shareholder shall have the option to purchase a portion of such securities
sufficient to enable such Shareholder to maintain its percentage interest in the
Company's capital stock (on a fully-diluted basis assuming the conversion of all
convertible securities and exercise of all warrants and options) immediately
prior to such issuance. The Company shall give each Shareholder at least 30 days
prior written notice of any such proposed issuance, setting forth in reasonable
detail the proposed terms and conditions thereof, including without limitation
the identity of the proposed recipient (the "Issuance Notice"), and shall offer
to each Shareholder the opportunity to purchase such securities at the same
price, on the same terms, and at the same time as the securities are proposed to
be issued by the Company. A Shareholder may exercise his option to purchase by
delivery of a written notice to the Company within 15 days after delivery of the
Issuance Notice, which exercise shall be irrevocable. As used in this Section
IV. 3, "Permitted Issuance" shall mean any issuance of securities of the Company
(i) pursuant to any incentive compensation plan of the Company or otherwise as
27
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compensation to directors, employees or consultants to the Company or (ii) in
connection with an acquisition of another business by the Company.
4. Legend. All certificates representing Shares owned by the Shareholders,
or any transferee of the Shareholders, shall contain on the face thereof, the
following legends:
"The sale, transfer or encumbrance of
this certificate is subject a certain
Shareholders' Agreement dated July 29,
1999, a copy of which is on file at the
office of the issuer and will be
provided upon request by the registered
owner hereof. The Agreement, among other
things, restricts the transfer of the
Shares evidenced by this certificate and
provides for certain obligations to sell
and to purchase the Shares evidenced by
this certificate, for a designated
price. By accepting the Shares evidenced
by this certificate the holder agrees to
be bound by said Agreement."
"The Shares represented by this
Certificate have not been registered
under the Securities Act of 1933 (the
"Securities Act"). The holder by
acceptance hereof agrees that no
transfer or other disposition of these
Shares will be made or shall be
effective in the absence of an opinion
of counsel acceptable to the issuer that
no registration statement under the
Securities Act is necessary with respect
to the proposed transfer or
disposition."
No dividend shall be paid nor any distribution made on Shares sold, transferred,
pledged, assigned or encumbered in breach of this Agreement, nor shall any such
transfer be registered on the books of the Company.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
principles of conflict of laws except that Section IV.3 which grants preemptive
rights to the Shareholders shall be
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governed by the laws of the State of Delaware.
6. Notices. Notices to any party hereunder shall be deemed to be given
when sent by certified mail or registered mail, postage prepaid, return receipt
requested, to the address of such party set forth in the preamble hereof, or to
such other address as may be specified by notice to the other parties hereof.
7. Specific Performance. The parties hereto recognize that various of the
rights of the parties under this Agreement are unique and, accordingly, each of
the parties shall have, in addition to such other remedies as may be available
at law or in equity, the right to injunctive relief and specific performance.
Without limiting the generality of the foregoing, if any transfer of Shares is
made or attempted contrary to the provisions of this Agreement, the other
Shareholders, or the Company, as the case may be, shall have the right to
injunctive relief and specific performance to the extent permitted by law.
8. Entire Agreement. The parties hereto acknowledge that this Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
them as to such subject matter and there are no restrictions, agreements or
arrangements, whether oral or written, between any or all of the parties
relating to the subject matter hereof which are not fully expressed or referred
to herein.
9. Amendments. This Agreement may not be amended, nor shall any waiver,
change, modification, consent or discharge be effected, except by an instrument
in writing executed by or on behalf of the party or parties against whom
enforcement of such amendment, waiver, change, modifications, consent or
discharge is sought.
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10. Assignment. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto and the holders from
time to time of any shares of capital stock of the Company and of the Company's
successors and assigns.
11. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and the Shareholders have caused this
Agreement to be executed as of the date first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
CONCORD MERGER CORP.
/s/ Alvin Weinstein
By: /s/ Earl Kramer ---------------------------------
------------------------------------ Printed: Alvin Weinsten
------------------------
Printed: Earl Kramer
------------------------------- /s/ Joan Weinsten
--------------------------
Title: President Printed: Joan Weinstein
---------------------------------- ------------------------
/s/ David Weinstein
---------------------------------
Printed: David Weinstein
------------------------
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/s/ Peter Weinstein
---------------------------------
Printed: Peter Weinstein
------------------------
/s/ Jonathan Weinstein
---------------------------------
Printed: Jonathan Weinstein
------------------------
/s/ Earl Kramer
---------------------------------
Printed: Earl Kramer
------------------------
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