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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
STATEMENT ON
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
GENERAL HOST CORPORATION
(Name of Subject Company)
CYRUS ACQUISITION CORP.
(Bidder)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
------------------------
(CUSIP Number of Class of Securities)
DAVID P. SPALDING
CYRUS ACQUISITION CORP.
C/O THE CYPRESS GROUP L.L.C.
65 EAST 55TH STREET, 19TH FLOOR
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 705-0154
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
ROBERT E. SPATT, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$183,438,074 $36,688
</TABLE>
* Based on the offer to purchase all of the outstanding shares of Common Stock
(including the associated common stock purchase rights) of the Subject
Company at a purchase price of $5.50 cash per share, 24,413,686 shares
outstanding, 1,322,688 shares issuable upon the exercise of options
outstanding and 7,616,003 shares issuable upon the conversion of all the
Company's 8% Convertible Subordinated Notes Due 2002, in each case as
represented by the Company as of November 2, 1997.
** 1/50 of 1% of Transaction Valuation.
/ / CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
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CUSIP NO.
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<S> <C> <C>
1 NAMES OF REPORTING PERSONS: CYRUS ACQUISITION CORP.
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT / /
TO ITEM 2(e) OR 2(f)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,532,157*
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
6.3%*
10 TYPE OF REPORTING PERSON
CO
</TABLE>
* Beneficial ownership is based solely on the provisions of the Support
Agreement, pursuant to which among other things, Harris J. Ashton, Chairman
of the Board of Directors, Chief Executive Officer and President of the
Company, has agreed with the reporting person or its affiliates to tender
the shares shown as beneficially owned in the Offer and to vote such shares
in favor of the Merger, the Merger Agreement, or any of the other
transactions contemplated by the Merger Agreement and against, among other
things, any merger agreement or merger (other than the Merger Agreement and
the Merger), or any other takeover proposal or Acquisition Proposal or other
action which would in any manner impede, frustrate, prevent or nullify the
Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement, or would change in any manner the voting rights of
the Common Stock. Capitalized terms have the meanings assigned thereto
herein.
2
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This Tender Offer Statement on Schedule 14D-1 relates to the offer by Cyrus
Acquisition Corp., a New York corporation ("Purchaser"), to purchase all of the
outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of
General Host Corporation, a New York corporation (the "Company"), including the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement dated as of March 7, 1990 (as amended, the "Rights Agreement")
between the Company and ChaseMellon Shareholder Services, L.L.C., as successor
to Chemical Bank, as rights agent (the "Rights Agent"), at a purchase price of
$5.50 per Share (and associated Rights), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 25, 1997 (the "Offer to Purchase"), a copy of
which is attached hereto as Exhibit 11(a)(1), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, constitute the
"Offer"), a copy of which is attached hereto as Exhibit 11(a)(2).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is General Host Corporation. The
information set forth in Section 7 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is common stock, par value $1.00 per share, of the Company, and the
associated common stock purchase rights. The information set forth in the
Introduction (the "Introduction") of the Offer to Purchase is incorporated
herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser. The information set
forth in Section 8 ("Certain Information Concerning Purchaser and Cypress") of
the Offer to Purchase and in Schedule I thereto is incorporated herein by
reference.
(e) and (f) During the last five years, neither Purchaser nor, to the best
knowledge of Purchaser, any of the persons named in Section 8 of the Offer to
Purchase or listed in Schedule I thereto (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Cypress") of the Offer to Purchase is incorporated herein by
reference. Except as set forth in Section 8 of the Offer to Purchase, since
January 31, 1994, there have been no transactions which would be required to be
disclosed under this Item 3(a) between Purchaser or, to the best knowledge of
Purchaser, any of the persons named in Section 8 of the Offer to Purchase or
listed in Schedule I thereto and the Company or any of its executive officers,
directors or affiliates.
(b) The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Cypress"), Section 10 ("Background of the Offer; Contacts with the
Company"), Section 11 ("The Merger Agreement; the Support Agreement") and
Section 12 ("Purpose of the Offer; the Merger; Plans for the Company; Rights
Agreement") of the Offer to Purchase is incorporated herein by reference. Except
as set forth in Sections 8, 10, 11 and 12 of the Offer to Purchase, since
January 31, 1994, there have been no contacts, negotiations or transactions
which would be required to be disclosed under this
3
<PAGE>
Item 3(b) between Purchaser or, to the best knowledge of Purchaser, any of those
persons named in Section 8 of the Offer to Purchase or listed in Schedule I
thereto and the Company or its affiliates concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 9 ("Source and Amount of Funds") of
the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction, Section 6 ("Price
Range of Shares; Dividends"), Section 10 ("Background of the Offer; Contacts
with the Company"), Section 11 ("The Merger Agreement; the Support Agreement"),
Section 12 ("Purpose of the Offer; the Merger; Plans for the Company; Rights
Agreement") and Section 14 ("Effect of the Offer on the Market for the Shares,
NYSE Listing and Exchange Act Registration") of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning Purchaser and Cypress") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in the Introduction and
Section 8 of the Offer to Purchase, neither Purchaser nor, to the best knowledge
of Purchaser, any of the persons named in Section 8 of the Offer to Purchase or
listed in Schedule I thereto or any associate of Purchaser or any of the persons
so named or listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares.
(b) The information set forth in the Introduction and Section 11 ("The
Merger Agreement; the Support Agreement") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in the Introduction and
Section 11 of the Offer to Purchase, neither Purchaser nor, to the best
knowledge of Purchaser, any of the persons or entities referred to above or any
executive officer, director or subsidiary of any of the foregoing has effected
any transactions in the Shares during the past sixty days.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Section 10 ("Background of the Offer; Contacts
with the Company"), Section 11 ("The Merger Agreement; the Support Agreement"),
Section 12 ("Purpose of the Offer; the Merger; Plans for the Company; Rights
Agreement") and Section 17 ("Fees and Expenses") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in Sections 10, 11, 12 and
17 of the Offer to Purchase, neither Purchaser nor, to the best knowledge of
Purchaser, any of the persons named in Section 8 of the Offer to Purchase or
listed in Schedule I thereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loans or option arrangements, puts or calls, guarantees of loans,
guarantee agreements or any giving or withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
4
<PAGE>
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Cypress") is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("The Merger Agreement; the
Support Agreement") and Section 12 ("Purpose of the Offer; the Merger; Plans for
the Company; Rights Agreement") of the Offer to Purchase is incorporated herein
by reference.
(b)--(d) The information set forth in Section 16 ("Certain Legal Matters and
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated November 25, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(5)Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published on November 25, 1997.
(a)(8) Press Release issued by the Company and The Cypress Group L.L.C. on
November 24, 1997.
(c)(1) Agreement and Plan of Merger dated as of November 22, 1997 by and
between Purchaser and the Company.
(c)(2) Support Agreement dated as of November 22, 1997 between Purchaser and
Harris J. Ashton.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Commitment Letter dated November 21, 1997 to The Cypress Group L.L.C.
from The Chase Manhattan Bank, Chase Securities Inc. and Goldman
Sachs Credit Partners L.P.
5
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify the
information set forth in this Statement is true, complete and correct.
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<S> <C> <C>
CYRUS ACQUISITION CORP.
By: /s/ BAHRAM SHIRAZI
-----------------------------------------
Name: Bahram Shirazi
Title: Vice President
</TABLE>
Date: November 25, 1997
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------------------------- ---------
<C> <S> <C>
11(a)(1) Offer to Purchase, dated November 25, 1997...............................................
11(a)(2) Letter of Transmittal....................................................................
11(a)(3) Notice of Guaranteed Delivery............................................................
11(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.................................................................................
11(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.................................................................................
11(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9....
11(a)(7) Summary Advertisement as published on November 25, 1997..................................
11(a)(8) Press Release issued by the Company and The Cypress Group L.L.C. on November 24, 1997....
11(c)(1) Agreement and Plan of Merger dated as of November 22, 1997 by and between Purchaser and
the Company..............................................................................
11(c)(2) Support Agreement dated November 22, 1997 between Purchaser and Harris J. Ashton.........
11(g)(1) Commitment Letter dated November 21, 1997 to The Cypress Group L.L.C. from The Chase
Manhattan Bank, Chase Securities Inc. and Goldman Sachs Credit Partners L.P.
</TABLE>
7
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
AT
$5.50 NET PER SHARE
BY
CYRUS ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PURSUANT TO THE OFFER PRIOR TO THE EXPIRATION OF THE
OFFER SUCH NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE (THE
"COMMON STOCK"), OF GENERAL HOST CORPORATION (THE "COMPANY"), WHICH CONSTITUTES,
ON A FULLY-DILUTED BASIS (EXCLUDING THE DILUTIVE EFFECTS OF ANY OF THE COMPANY'S
8% CONVERTIBLE SUBORDINATED NOTES DUE 2002 WHICH REMAIN OUTSTANDING AND
UNCONVERTED AT THE EXPIRATION OF THE OFFER), MORE THAN TWO-THIRDS OF THE SHARES
OF COMMON STOCK OF THE COMPANY OUTSTANDING ON THE DATE OF PURCHASE, (2) THE
EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND (3) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN IN THE TENDER OFFER AND CONSENT
SOLICITATION BEING CONDUCTED BY THE COMPANY CONCURRENTLY HEREWITH (THE "DEBT
OFFER") CONSENTS REPRESENTING AT LEAST A MAJORITY IN PRINCIPAL AMOUNT OF ALL OF
THE COMPANY'S OUTSTANDING 11 1/2% SENIOR NOTES DUE 2002, ALL OTHER CONDITIONS TO
THE DEBT OFFER HAVING BEEN SATISFIED OR WAIVED AND THE AMENDMENT TO THE
INDENTURE GOVERNING SUCH SENIOR NOTES CONTEMPLATED BY THE DEBT OFFER HAVING BEEN
EXECUTED AND BECOMING OPERATIVE IMMEDIATELY FOLLOWING THE CONSUMMATION OF THE
DEBT OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE THE
INTRODUCTION AND SECTIONS 1 AND 15.
--------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES OF COMMON STOCK OF THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES TO PURCHASER PURSUANT TO THE OFFER.
--------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares (as defined herein) (and the associated common stock purchase rights (the
"Rights")) should either (1) complete and sign the enclosed Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, mail or deliver the Letter of Transmittal (or such
facsimile) and any other required documents to the Depositary (as defined
herein), and either deliver the certificates representing the tendered Shares
and, if separate, the certificates representing the associated Rights and any
other required documents to the Depositary or tender such Shares (and Rights, if
applicable) pursuant to the procedure for book-entry transfer set forth in
Section 3 or (2) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such shareholder.
Shareholders having Shares (and Rights, if applicable) registered in the name of
a broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if they
desire to tender Shares (and Rights, if applicable) so registered.
A shareholder who desires to tender Shares and Rights and whose certificates
representing such Shares (and Rights, if applicable) are not immediately
available, or who cannot deliver the certificates for Shares (and Rights, if
applicable) and all other required documents to reach the Depositary on or prior
to the Expiration Date (as defined herein), or who cannot comply with the
procedure for book-entry transfer on a timely basis, must tender such Shares
(and Rights, if applicable) by following the procedures for guaranteed delivery
set forth in Section 3.
Questions and requests for assistance may be directed to D. F. King & Co.,
Inc. (the "Information Agent") or to Chase Securities Inc. (the "Dealer
Manager") at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
also be obtained from the Information Agent or the Dealer Manager, or from
brokers, dealers, commercial banks or trust companies.
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
NOVEMBER 25, 1997
<PAGE>
TABLE OF CONTENTS
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PAGE
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<S> <C>
INTRODUCTION............................................................................................... 1
THE TENDER OFFER........................................................................................... 4
</TABLE>
<TABLE>
<C> <S> <C>
1. Terms of the Offer; Expiration Date........................................ 4
2. Acceptance for Payment and Payment for Shares.............................. 5
3. Procedure for Tendering Shares and Rights.................................. 6
4. Withdrawal Rights.......................................................... 9
5. Certain Federal Income Tax Consequences.................................... 10
6. Price Range Of Shares; Dividends........................................... 11
7. Certain Information Concerning the Company................................. 11
8. Certain Information Concerning Purchaser and Cypress....................... 14
9. Source and Amount of Funds................................................. 15
10. Background of the Offer; Contacts with the Company......................... 15
11. The Merger Agreement; the Support Agreement................................ 17
12. Purpose of the Offer; the Merger; Plans for the Company; Rights
Agreement................................................................ 30
13. Dividends and Distributions................................................ 34
14. Effect of the Offer on the Market for the Shares, NYSE Listing and Exchange
Act Registration......................................................... 35
15. Certain Conditions of the Offer............................................ 36
16. Certain Legal Matters and Regulatory Approvals............................. 38
17. Fees and Expenses.......................................................... 40
18. Miscellaneous.............................................................. 41
</TABLE>
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, MEMBERS OF CYPRESS
L.L.C. AND DIRECTORS AND EXECUTIVE OFFICERS OF ONWIST
SCHEDULE II -- ADDITIONAL INFORMATION REQUIRED BY THE NEW YORK SECURITY TAKEOVER
DISCLOSURE ACT
i
<PAGE>
To the Shareholders of
GENERAL HOST CORPORATION
INTRODUCTION
Cyrus Acquisition Corp., a New York corporation ("Purchaser"), hereby offers
to purchase all of the outstanding shares of Common Stock, par value $1.00 per
share (the "Shares"), of General Host Corporation, a New York corporation (the
"Company"), and the associated Common Stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of March 7, 1990 (as amended,
the "Rights Agreement"), between the Company and ChaseMellon Shareholder
Services, L.L.C., as successor to Chemical Bank, as Rights Agent (the "Rights
Agent"), at a purchase price of $5.50 per Share (and associated Rights), net to
the seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). The Rights Agreement is described in greater detail below in Section
12. Unless the context requires otherwise, all references in this Offer to
Purchase to Shares shall be deemed to refer also to the associated Rights, and
all references to Rights shall be deemed to include all benefits that may inure
to the shareholders of the Company or to holders of the Rights pursuant to the
Rights Agreement. In connection with the Merger Agreement (as defined below),
the Company has taken and will take all necessary action so that none of the
execution and delivery of the Merger Agreement or the Support Agreement (as
defined below), the making of the Offer, the acquisition of Shares pursuant to
the Offer and the Equity Contribution (as defined in Section 9) or the
consummation of the Merger (as defined below), the Offer, the Equity
Contribution or the other transactions contemplated by the Merger Agreement will
(i) cause any Rights issued pursuant to the Rights Agreement to become
exercisable, (ii) cause Purchaser or any of its Affiliates (as defined in the
Rights Agreement) or Associates (as defined in the Rights Agreement) to be an
Acquiring Person (as defined in the Rights Agreement) or (iii) give rise to a
Distribution Date or a Triggering Event (as each such term is defined in the
Rights Agreement). Unless and until a Distribution Date occurs, the Rights will
be transferred with and only with the Shares and, therefore, the surrender for
transfer of any of the certificates representing Shares (the "Share
Certificates"), including upon acceptance for payment of such Shares pursuant to
the Offer, will also constitute the surrender for transfer of the Rights
associated with the Shares represented by such Share Certificates. See Section
12.
Purchaser has been organized by The Cypress Group L.L.C. (together with its
affiliates, "Cypress") for the purpose of consummating the transactions
described herein. See Section 8.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares and Rights pursuant to the
Offer. Purchaser will pay all fees and expenses of Chase Securities Inc., which
is acting as Dealer Manager for the Offer, ChaseMellon Shareholder Services,
L.L.C., which is acting as the Depositary (the "Depositary"), and D. F. King &
Co., Inc., which is acting as the Information Agent, incurred in connection with
the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS") HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), HAS DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF THE SHARES, AND UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES TO PURCHASER
PURSUANT TO THE OFFER.
The Board of Directors has received an opinion dated November 21, 1997 of
Credit Suisse First Boston Corporation ("Credit Suisse First Boston"), financial
advisor to the Company, that, as of such
1
<PAGE>
date and based upon and subject to the matters set forth therein, the $5.50 per
Share cash consideration to be received by holders of Shares in the Offer and
the Merger was fair from a financial point of view to such holders. A copy of
the opinion of Credit Suisse First Boston is attached to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being distributed to the shareholders of the Company, and shareholders
are urged to read the opinion carefully in its entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PURSUANT TO THE OFFER PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN SECTION 1) SUCH NUMBER OF SHARES WHICH CONSTITUTES, ON A
FULLY-DILUTED BASIS (EXCLUDING THE DILUTIVE EFFECTS OF ANY OF THE COMPANY'S 8%
CONVERTIBLE SUBORDINATED NOTES DUE 2002 (THE "CONVERTIBLE NOTES") WHICH REMAIN
OUTSTANDING AND UNCONVERTED AT THE EXPIRATION DATE), MORE THAN TWO-THIRDS OF THE
SHARES ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"), (2) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT") (THE "HSR ACT
CONDITION") (SEE SECTIONS 1 AND 15), AND (3) THERE BEING VALIDLY TENDERED AND
NOT WITHDRAWN IN THE TENDER OFFER AND CONSENT SOLICITATION BEING CONDUCTED BY
THE COMPANY CONCURRENTLY HEREWITH (THE "DEBT OFFER") CONSENTS REPRESENTING AT
LEAST A MAJORITY IN PRINCIPAL AMOUNT OF ALL OF THE COMPANY'S OUTSTANDING 11 1/2%
SENIOR NOTES DUE 2002 (THE "SENIOR NOTES"), ALL OTHER CONDITIONS TO THE DEBT
OFFER HAVING BEEN SATISFIED OR WAIVED AND THE AMENDMENT TO THE INDENTURE
GOVERNING SUCH SENIOR NOTES (THE "SENIOR NOTE INDENTURE") CONTEMPLATED BY THE
DEBT OFFER HAVING BEEN EXECUTED AND BECOMING OPERATIVE IMMEDIATELY FOLLOWING THE
CONSUMMATION OF THE DEBT OFFER (THE "DEBT OFFER CONDITION"). THE OFFER IS ALSO
SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15. IF
PURCHASER PURCHASES AT LEAST THAT NUMBER OF SHARES NEEDED TO SATISFY THE MINIMUM
CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF
ANY OTHER SHAREHOLDER OF THE COMPANY. SEE SECTION 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 22, 1997 (the "Merger Agreement"), between Purchaser and the
Company. The Merger Agreement provides, among other things, for the making of
the Offer by Purchaser, and further provides that, following the completion of
the Offer, upon the terms and subject to the conditions of the Merger Agreement,
and in accordance with the New York Business Corporation Law (the "NYBCL"),
Purchaser will be merged with and into the Company (the "Merger"). Following the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Purchaser will cease. See
Section 11.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Company or any direct or indirect subsidiary of the Company
and Shares owned by Purchaser, which shall be cancelled, and other than Shares,
if any (collectively, "Dissenting Shares"), held by shareholders who have
properly exercised and perfected appraisal rights under Sections 623 and 910 of
the NYBCL) will, by virtue of the Merger and without any action on the part of
the holders of the Shares, be converted into the right to receive $5.50 in cash,
payable to the holder thereof, without interest, upon surrender of the
certificate formerly representing such Share, less any required withholding
taxes (the "Merger Consideration"). Immediately following the Merger, Cypress
will own all the outstanding capital stock of the Surviving Corporation.
As described above, the Offer is subject to, among other things, the Debt
Offer Condition. Pursuant to the Merger Agreement, the Company is conducting the
Debt Offer concurrently herewith. See Section 11. The Debt Offer is conditioned
upon, among other things, the receipt of valid tenders (together with consents
to the amendments to the Senior Note Indenture described in the Debt Offer) of
at least a majority in principal amount of all the outstanding Notes and the
consummation of the Financing (as defined in Section 11) to be provided to the
Company to fund, among other things, the tender and consent consideration in the
Debt Offer. Cypress has received a commitment letter from The Chase
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Manhattan Bank, Chase Securities Inc. and Goldman Sachs Credit Partners L.P.
with respect to the aggregate $220 million Financing to be provided to the
Company, which commitment remains subject to customary conditions, including the
negotiation, execution and delivery of definitive documentation with respect
thereto.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
The Company has represented to Purchaser that as of the close of business on
November 2, 1997, there were 24,413,686 Shares issued and outstanding and
1,322,688 Shares issuable upon the exercise of outstanding stock options. Based
upon the foregoing, Purchaser believes that 17,157,583 Shares constitutes
two-thirds of the outstanding Shares on a fully-diluted basis (excluding the
dilutive effects of any Convertible Notes which remain outstanding and
unconverted at the Expiration Date).
Since the Convertible Notes can be converted into Shares at a conversion
price of $8.53466 per Share, a price significantly in excess of the price per
share to be paid in the Offer and the Merger, it is not expected that any of the
Convertible Notes would be so converted. However, if all of the currently
outstanding Convertible Notes were so converted into Shares prior to the
Expiration Date, the Company has represented to Purchaser that an additional
7,616,003 Shares would be outstanding. In such an event, based upon the
foregoing, Purchaser believes that 22,234,918 Shares would constitute two-thirds
of the outstanding Shares on a fully-diluted basis.
Pursuant to the Merger Agreement, the record date for any shareholders
meeting required to approve the Merger is to be the time immediately following
the consummation of the Offer so that Purchaser is the holder of record for
purposes of such vote of the Shares acquired in the Offer which Shares will
constitute in excess of two-thirds of the issued and outstanding Shares of
record at such record date assuming the Minimum Condition was satisfied. In
addition, if following the consummation of the Offer the number of outstanding
Shares increases, including as a result of the conversion of any Convertible
Notes, the Merger Agreement permits Purchaser to purchase from the Company at a
price per share equal to the cash price paid in the Offer and the Merger
additional Shares as may be needed to maintain ownership of at least two-thirds
of the outstanding Shares. As a result, if the Minimum Condition is satisfied
and Purchaser acquires Shares pursuant to the Offer, it is expected that
Purchaser will have the power to approve the Merger Agreement without the
affirmative vote of any other shareholder. See Section 11.
Simultaneously with the execution of the Merger Agreement and as a condition
to the willingness of Purchaser to proceed with the Offer and the Merger, Harris
J. Ashton, Chairman, Chief Executive Officer and President of the Company (the
"Supporting Shareholder"), entered into a Support Agreement (the "Support
Agreement") with Purchaser, pursuant to which, among other things, the
Supporting Shareholder agreed to tender his Shares to Purchaser pursuant to the
Offer, and, so long as the Offer is continuing, to vote his Shares in favor of
the Merger, the Merger Agreement, or any of the other transactions contemplated
by the Merger Agreement and against any competing transaction. As of the date of
the Support Agreement, the Supporting Shareholder held 1,532,157 Shares,
representing approximately 6.3% of the currently outstanding Shares, and had the
right to receive an additional 540,000 Shares, representing approximately an
additional 2.2%, through the exercise of options. See Section 11.
The Company has stated that, to the best knowledge of the Company, each
director and executive officer of the Company intends to tender his/her Shares
pursuant to the Offer, subject to personal tax and other considerations,
including the short-swing profit recovery provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Directors and
executive officers of the Company hold approximately 16% of the currently
outstanding Shares.
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THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered on or prior to the Expiration
Date and not properly withdrawn as permitted by Section 4. The term "Expiration
Date" means 12:00 Midnight, New York City time, on Tuesday, December 23, 1997,
unless and until Purchaser, in its sole discretion (but subject to the terms and
conditions of the Merger Agreement), shall have extended the period during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by Purchaser, shall
expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition, the HSR Act Condition, the Debt Offer Condition and certain
other conditions. See Section 15, which sets forth in full the conditions to the
Offer. Subject to the provisions of the Merger Agreement and the applicable
rules and regulations of the Securities and Exchange Commission (the
"Commission"), Purchaser reserves the right, in its sole discretion, to waive
any or all conditions to the Offer (other than the Minimum Condition) and to
modify the terms of the Offer. Subject to the applicable rules and regulations
of the Commission, if by the Expiration Date any or all of the conditions to the
Offer have not been satisfied, Purchaser reserves the right (but shall not be
obligated) to (i) terminate the Offer and return all tendered Shares to
tendering shareholders, (ii) waive such unsatisfied conditions and purchase all
Shares validly tendered or (iii) extend the Offer and, subject to the terms of
the Offer (including the rights of shareholders to withdraw their Shares),
retain the Shares which have been tendered until the termination of the Offer,
as extended.
Under the terms of the Merger Agreement, Purchaser has expressly reserved
the right, in its sole discretion, to make any other changes in the terms and
conditions of the Offer, PROVIDED that Purchaser will not, without the prior
written consent of the Company, make any change which decreases the price per
Share payable in the Offer, changes the form of consideration payable in the
Offer (other than by adding consideration), reduces the maximum number of Shares
to be purchased in the Offer, or imposes conditions to the Offer in addition to
those set forth in the Merger Agreement which are adverse to holders of the
Shares. Under the Merger Agreement Purchaser has the right, in its sole
discretion, to extend the Offer from time to time for up to an aggregate of 20
business days, notwithstanding the prior satisfaction of the conditions to the
Offer, or as specified in the previous paragraph. Subject to the applicable
rules and regulations of the Commission and the provisions of the Merger
Agreement described above in this paragraph, Purchaser expressly reserves the
right, in its sole discretion, at any time and from time to time, and regardless
of whether or not any of the events set forth in Section 15 shall have occurred,
to (i) extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares, by giving oral
or written notice of such extension to the Depositary or (ii) amend the Offer in
any respect by giving oral or written notice of such amendment to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the right of a
tendering shareholder to withdraw such shareholder's Shares.
Any extension, delay, termination, waiver or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made in accordance with Rule
14e-1(d) under the Securities Exchange Act of 1934, as amended, no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which Purchaser may
choose to make any public announcement, except as provided by applicable law
(including Rules 14d-4(c) and 14d-6(d) under the
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Exchange Act, which require that material changes be promptly disseminated to
holders of Shares), Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, Purchaser will disseminate additional
tender offer material and extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
offer, other than a change in price or a change in the percentage of securities
sought, will depend upon the facts and circumstances, including the materiality,
of the changes. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought, a minimum ten
business day period from the day of such change is generally required to allow
for adequate dissemination to shareholders. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday, or a federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and
other relevant materials will be mailed by Purchaser to record holders of Shares
and furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), Purchaser will
accept for payment and will pay for all Shares validly tendered and not properly
withdrawn on or prior to the Expiration Date as soon as practicable after the
later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of
the conditions of the Offer set forth in Section 15, including without
limitation the Minimum Condition, the HSR Act Condition and the Debt Offer
Condition. In addition, subject to applicable rules of the Commission, Purchaser
expressly reserves the right to delay acceptance for payment of or payment for
Shares pending receipt of any other regulatory approvals specified in Section
16. Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Share Certificates and, if applicable, certificates evidencing the Rights
("Rights Certificates"), or timely confirmation (a "Book-Entry Confirmation") of
a book-entry transfer of such Shares and, if applicable, Rights into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below) in connection with a book-entry transfer,
and (iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares and, if applicable, Rights that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
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<PAGE>
Prior to a Distribution Date, a valid tender of Shares will also constitute
a tender of the associated Rights. If Rights Certificates have been distributed
to holders of Shares, such holders are required to tender, or make book-entry
transfer of, Rights Certificates representing the Rights associated with the
Shares being tendered in order to effect a valid tender of such Shares. See
Section 12.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to shareholders whose Shares have been accepted for
payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES
BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT. If, for any reason whatsoever, acceptance for payment of or
payment for any Shares tendered pursuant to the Offer is delayed or Purchaser is
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then without prejudice to Purchaser's rights set forth herein, the Depositary
may nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Shares and such Shares may not be withdrawn except
to the extent that the tendering shareholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering shareholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), in each
case with the related Rights Certificates, if any, as promptly as practicable
following the expiration, termination or withdrawal of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES AND RIGHTS.
VALID TENDERS. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date and either (i) Share Certificates and, if applicable, Rights Certificates
evidencing tendered Shares and Rights must be received by the Depositary at such
address or such Shares and Rights must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, in each case on or prior to the Expiration Date or
(ii) the guaranteed delivery procedures described below must be complied with.
RIGHTS CERTIFICATES. Prior to a Distribution Date, a valid tender of Shares
will also constitute a tender of the associated Rights. If a Distribution Date
has occurred and Rights Certificates have been distributed to such holders prior
to the date of tender pursuant to the Offer, Rights Certificates representing
the Rights associated with the Shares being tendered must be delivered to the
Depositary or, if available, a Book-Entry Confirmation must be received by the
Depositary with respect thereto, in order for such Shares to be validly
tendered. If a Distribution Date has occurred and Rights Certificates have not
been
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distributed prior to the time Shares are tendered pursuant to the Offer, Rights
may be tendered prior to a shareholder receiving Rights Certificates by use of
the guaranteed delivery procedures described below. A tender of Shares without
Rights Certificates as set forth above constitutes an agreement by the tendering
shareholder to deliver Rights Certificates representing a number of Rights equal
to the number of Shares tendered pursuant to the Offer to the Depositary within
three business days after the date Rights Certificates are distributed. See
Section 1.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facilities for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of any
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
such Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with. If a Distribution Date occurs,
to the extent that the Rights become eligible for book-entry transfer under
procedures established by a particular Book-Entry Transfer Facility, the
Depositary will make a request to establish an account with respect to the
Rights at such Book-Entry Transfer Facility as soon as practicable. If book-
entry delivery of Rights is available, the foregoing book-entry transfer
procedure will also apply to Rights. However, no assurance can be given that
book-entry delivery of Rights will be available. If book-entry delivery is not
available and if separate Rights Certificates have been issued, a tendering
shareholder is not relieved of delivery requirements hereunder and thus will be
required to tender Rights by means of actual physical delivery of Rights
Certificates to the Depositary or pursuant to the guaranteed delivery procedures
set forth below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND, IF APPLICABLE, RIGHTS
CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program or the Stock Exchange Medallion Program (each
of the foregoing being referred to as an "Eligible Institution"), except in
cases where Shares are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instructions 1 and 5 of the Letter
of Transmittal.
If the Share Certificates and, if applicable, Rights Certificates are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or Share Certificates and, if
applicable, Rights Certificates not accepted for payment or not tendered are to
be returned, to a person other than the registered holder, the Share
Certificates and, if applicable, Rights Certificates must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name of
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the registered holder appears on such certificates, with the signatures on such
certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5
of the Letter of Transmittal.
If Share Certificates and, if applicable, Rights Certificates are forwarded
separately to the Depositary, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) must accompany each such Delivery.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares and Rights
pursuant to the Offer and such shareholder's Share Certificates and, if
applicable, Rights Certificates are not immediately available, or such
shareholder cannot deliver the Share Certificates and, if applicable, Rights
Certificates and all other required documents to reach the Depositary on or
prior to the Expiration Date, or such shareholder cannot complete the procedure
for delivery by book-entry transfer on a timely basis, such Shares and Rights
may nevertheless be tendered, provided that all of the following conditions are
satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by Purchaser is received
by the Depositary as provided below on or prior to the Expiration Date; and
(iii) the Share Certificates and, if applicable, Rights Certificates (or
a Book-Entry Confirmation) representing all tendered Shares and Rights in
proper form for transfer, together with the Letter of Transmittal (or a
facsimile thereof) properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal are
received by the Depositary within three New York Stock Exchange ("NYSE")
trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution and a representation that the
shareholder owns the Shares and Rights tendered within the meaning of, and that
the tender of the Shares and Rights effected thereby complies with, Rule 14e-4
under the Exchange Act, each in the form set forth in such Notice of Guaranteed
Delivery.
Notwithstanding any other provision hereof, payment for Shares and Rights
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of Share Certificates and, if applicable,
Rights Certificates, for, or of Book-Entry Confirmation with respect to, such
Shares and Rights, a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), together with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal. Accordingly, payment might not
be made to all tendering shareholders at the same time and will depend upon when
Share Certificates and, if applicable, Rights Certificates or Book-Entry
Confirmations with respect to such Shares and Rights are received into the
Depositary's account at a Book-Entry Transfer Facility.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
shareholder irrevocably appoints designees of Purchaser and each of them as such
shareholder's attorneys-in-fact and proxies, with full power of substitution, in
the manner set forth in the Letter of Transmittal, to the full extent of such
shareholder's rights with respect to the Shares tendered by such shareholder and
accepted for payment by Purchaser (and with respect to any and all other Shares
or other securities issued or issuable in respect of such Shares on or after the
date hereof). All such powers of attorney and proxies shall be considered
irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, Purchaser
accepts such Shares for payment. Upon such acceptance for payment, all prior
powers of attorney and proxies given by such shareholder with respect to such
Shares (and such other Shares and other securities) will be revoked without
further action, and
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no subsequent powers of attorney and proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be deemed
effective). The designees of Purchaser will, with respect to the Shares (and
such other Shares and other securities) for which such appointment is effective,
be empowered to exercise all voting and other rights of such shareholder as they
in their sole discretion may deem proper at any annual or special meeting of the
Company's shareholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. Purchaser reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's payment for such Shares, Purchaser must be able to exercise
full voting rights with respect to such Shares and other securities, including
voting at any meeting of shareholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding. Purchaser reserves the absolute right
to reject any and all tenders determined by it not to be in proper form or the
acceptance for payment of which may in the opinion of its counsel be unlawful.
Purchaser also reserves the absolute right to waive any of the conditions of the
Offer (subject to the provisions of the Merger Agreement) or any defect or
irregularity in any tender of Shares of any particular shareholder whether or
not similar defects or irregularities are waived in the case of other
shareholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of Purchaser, any
of its affiliates or assigns, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the payor of such
cash with such shareholder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify, under penalties of perjury, that such TIN is
correct and that such shareholder is not subject to backup withholding. If a
shareholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such shareholder and payment of cash to such shareholder pursuant
to the Offer may be subject to backup withholding of 31%. All shareholders
surrendering Shares pursuant to the Offer should complete and sign the
substitute Form W-9 included in the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain shareholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
OTHER REQUIREMENTS. Purchaser's acceptance for payment of Shares tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering shareholder and Purchaser upon the terms and
subject to the conditions of the Offer, including the tendering shareholder's
representation and warranty that the shareholder is the holder of the Shares and
Rights within the meaning of, and that the tender of the Shares complies with,
Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also be withdrawn at any
time after January 24, 1998 (or such later date as may apply in case the Offer
is extended).
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If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to purchase Shares validly tendered pursuant to the Offer
for any reason, then without prejudice to Purchaser's rights under the Offer,
the Depositary may nevertheless, on behalf of Purchaser, retain tendered Shares
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
Any such delay in acceptance for payment will be accompanied by an extension of
the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates or, if applicable, Rights Certificates to be
withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. A withdrawal of Shares or Rights shall also
constitute a withdrawal of the associated Rights or Shares, as applicable.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, any of its
affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences
set forth below is for general information only and is based on the law as
currently in effect. The tax treatment of each shareholder will depend in part
upon such shareholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, shareholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, for Federal income tax
purposes, a shareholder will recognize gain or loss in an amount equal to the
difference between the cash received by the shareholder pursuant to the Offer or
the Merger and the shareholder's adjusted tax basis in the Shares and the
associated Rights tendered by the shareholder and purchased pursuant to the
Offer or the Merger. For Federal income tax purposes, such gain or loss will be
a capital gain or loss if the Shares are a capital asset in the hands of the
shareholder, and a long-term capital gain or loss if the
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<PAGE>
shareholder's holding period is more than one year as of the date Purchaser
accepts such Shares for payment pursuant to the Offer or the effective date of
the Merger, as the case may be. There are limitations on the deductibility of
capital losses. Long-term capital gains of individuals are eligible for reduced
rates of taxation, with additional rate reductions applicable to gains from
capital assets held for more than 18 months. INDIVIDUALS SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE TAX TREATMENT OF CAPITAL GAINS AND LOSSES.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on the
NYSE under the symbol "GH". The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on the NYSE as reported by
IDD Information Services/Tradeline, a subsidiary of Dow Jones & Co., Inc. The
Company did not pay cash dividends on the Shares during the periods described
below.
<TABLE>
<CAPTION>
SALES PRICE*
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
Fiscal Year Ended January 28, 1996:
First Quarter.............................................................................. $ 6.349 $ 4.211
Second Quarter............................................................................. $ 6.916 $ 5.102
Third Quarter.............................................................................. $ 6.122 $ 4.308
Fourth Quarter............................................................................. $ 4.535 $ 3.288
Fiscal Year Ended January 26, 1997:
First Quarter.............................................................................. $ 4.082 $ 3.214
Second Quarter............................................................................. $ 3.571 $ 2.262
Third Quarter.............................................................................. $ 2.857 $ 2.262
Fourth Quarter............................................................................. $ 3.690 $ 2.381
Fiscal Year Ending January 25, 1998:
First Quarter.............................................................................. $ 3.929 $ 2.976
Second Quarter............................................................................. $ 4.625 $ 2.875
Third Quarter.............................................................................. $ 4.125 $ 2.812
Fourth Quarter (through November 21, 1997)................................................. $ 3.750 $ 3.188
</TABLE>
- ------------------------
* Five percent stock dividends were paid on April 5, 1996 and April 4, 1997,
and the prices presented in this table have been adjusted for the
aforementioned stock dividends for all periods presented.
On November 21, 1997, the last full trading day prior to announcement of the
Offer, the closing sale price per Share reported on the NYSE was $3 7/16. On
November 24, 1997, the last full trading day before commencement of the Offer,
the closing sale price per Share reported on the NYSE was $5 5/16 . SHAREHOLDERS
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Rights are currently attached to the outstanding Shares and may not be
traded separately. If a Distribution Date occurs, the Rights could begin trading
separately from the Shares. See Section 12. IN SUCH EVENT, SHAREHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION, IF ANY, FOR THE RIGHTS. Holders of
Shares are required to tender the Rights associated with each Share tendered in
order to effect a valid tender of such Share. Accordingly, if a Distribution
Date occurs, shareholders who sell their Rights separately from their Shares and
do not otherwise acquire Rights may not be able to satisfy the requirements of
the Offer for a valid tender of Shares.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The summary information
concerning the Company in this Section 7 and elsewhere in this Offer to Purchase
is derived from the 1995 Annual Report, the 1996 Annual Report, the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended August 11, 1996 and
August 10, 1997, other publicly available information and other information
provided by the Company. The summary information set forth below is qualified in
its entirety by reference to the publicly available reports of the Company
(which may be obtained and inspected as
11
<PAGE>
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although Purchaser does not have any
knowledge that would indicate that any statements contained herein based upon
such reports are untrue, Purchaser does not assume any responsibility for the
accuracy or completeness of the information contained in such reports, or for
any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are
unknown to Purchaser.
GENERAL. The Company is a New York corporation with its principal executive
offices located at One Station Place, P.O. Box 10045 Stamford, CT 06904.
The Company, through a wholly-owned subsidiary, operates a chain of
specialty retail stores devoted to the sale of lawn and garden products, crafts,
Christmas merchandise and pet food and supplies.
FINANCIAL INFORMATION. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years which were derived from
the 1996 Annual Report and the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended August 11, 1996 and August 10, 1997. More comprehensive
financial information is included in the reports (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by the Company with the Commission, and the following
financial data are qualified in their entirety by reference to such reports and
other documents including the financial information and related notes contained
therein. Such reports and other documents may be examined and copies thereof may
be obtained from the offices of the Commission and the NYSE in the manner set
forth below.
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<PAGE>
GENERAL HOST CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWENTY-EIGHT
WEEKS ENDED
FISCAL YEAR ENDED JANUARY ---------------------------
---------------------------------- AUGUST 10, AUGUST 11,
1997 1996 1995 1997 1996
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales..................................................... $530,752 $593,270 $567,987 $ 302,697 $ 298,217
Income (loss) from continuing operations before income
taxes.................................................... $(10,740) $ (4,964) $ 4,073 $ 3,325 $ 3,711
Income (loss) from continuing operations.................. $(10,740) $ (4,339)(1) $ 8,585(2)(3) $ 3,325 $ 3,451
Net income (loss)......................................... $(10,740) $ (7,339) $ 8,585 $ 3,325 $ 3,451
Income (loss) per share from continuing operations(4)..... $ (.44) $ (.18)(1) $ .35(2)(3)
Net income (loss) per share(4)............................ $ (.44) $ (.30) $ .35 $ .14 $ .14
Cash dividends per share(5)............................... $ 0 $ 0 $ 0 $ 0 $ 0
Average shares outstanding(4)............................. 24,414 24,416 24,411 24,414 24,414
Total current assets...................................... $139,986 $131,303 $182,871 $ 159,981 $ 143,248
Total year-end assets..................................... $386,422 $395,785 $464,858 $ 394,188 $ 397,532
Total current liabilities................................. $ 86,717 $ 86,109 $109,422 $ 91,154 $ 79,915
Long-term debt, including current portion................. $195,015 $191,872 $234,005 $ 193,792 $ 195,952
Shareholders' equity...................................... $ 99,495 $110,228 $117,650 $ 103,440 $ 113,679
</TABLE>
- ------------------------
(1) Includes $600 of income tax reserves no longer required.
(2) Includes a net gain of $3,612 from the sale of the Company's investment in
Sunbelt Nursery Group, Inc.
(3) Includes $1,000 of income tax reserves no longer required.
(4) Share and per share data have been restated to reflect the 5% stock
dividends distributed in April of each year.
(5) In lieu of a cash dividend a 5% stock dividend was distributed in April of
each year.
THIRD QUARTER 1997. In connection with the negotiations relating to the
Merger Agreement (see Section 10), the Company provided Cypress certain
preliminary sales and earnings results for the third quarter ended November 2,
1997, including: preliminary sales of $82,481,000; preliminary pre-tax loss of
$17,800,000, and preliminary net loss per Share of $.73. In providing this
information to Cypress, the Company cautioned Cypress that the disclosed results
were preliminary in nature and that actual third-quarter sales and earnings
results, due to be completed and released in mid-December 1997, may differ.
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their compensation, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's shareholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street,
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<PAGE>
N.W., Washington, D.C. 20549. In addition, such material should also be
available for inspection at the library of the NYSE, 20 Broad Street, New York,
New York 10005. Except as otherwise noted in this Offer to Purchase, all of the
information with respect to the Company set forth in this Offer to Purchase has
been derived from publicly available information or from the Company.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND CYPRESS.
PURCHASER. Purchaser is a newly formed New York corporation organized at
the direction of Cypress in connection with the Offer and the Merger. The
address of Purchaser is c/o The Cypress Group L.L.C., 65 East 55th Street, 19th
Floor, New York, New York 10022.
CYPRESS. Cypress manages a private equity fund with more than $1 billion in
commitments. It is anticipated that Cypress will invest in the common stock of
Purchaser through Cypress Merchant Banking Partners L.P. ("CMBP L.P.") and
Cypress Offshore Partners L.P. ("Cypress Offshore"). CMBP L.P. is a Delaware
limited partnership formed in 1994 to invest in securities of entities selected
by its general partner. Cypress Offshore is a Cayman Islands limited partnership
formed in 1995 to invest in securities of entities selected by its investment
general partner. Cypress Associates L.P., a Delaware limited partnership, is the
sole general partner of CMBP L.P. and the investment general partner of Cypress
Offshore. The Cypress Group L.L.C. ("Cypress L.L.C."), a Delaware limited
liability company, is the sole general partner of Cypress Associates L.P., and
Onwist Ltd. ("Onwist"), a Cayman Islands limited liability company, is the
administrative general partner of Cypress Offshore.
The business of Cypress L.L.C. consists of performing the functions of, and
serving as, the general partner of Cypress Associates L.P. and a related
partnership. The address of Cypress L.L.C. is 65 East 55th Street, 19th Floor,
New York, New York 10022.
The business of Onwist consists of performing the functions of, and serving
as, the administrative general partner of Cypress Offshore Partners L.P. and the
general partner of a related partnership. The address of Onwist is P.O. Box 1043
George Town, Grand Cayman, Cayman Islands.
The name, citizenship, business address, present principal occupation or
employment and five year employment history of each of the directors and
executive officers of Purchaser and Cypress are set forth on Schedule I hereto.
By virtue of the Support Agreement, Purchaser may be deemed to have the
right to acquire, or the power to vote or direct the vote of, and therefore to
beneficially own, the 1,532,157 Shares held by the Supporting Shareholder and
subject to the Support Agreement, representing approximately 6.3% of the
currently outstanding Shares.
Except as described in this Offer to Purchase and in Schedule I, none of
Purchaser, Cypress, nor, to the best knowledge of Purchaser and Cypress, any of
the persons listed on Schedule I hereto, or any associate or majority-owned
subsidiary of Purchaser, Cypress or any of the persons so listed, beneficially
owns or has a right to acquire directly or indirectly any Shares, and none of
Purchaser, Cypress nor, to the best knowledge of Purchaser and Cypress, any of
the persons or entities referred to above, or any of the respective executive
officers, directors or subsidiaries of any of the foregoing, has effected any
transactions in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither Purchaser nor Cypress
nor, to the best knowledge of Purchaser and Cypress, any of the persons listed
on Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including but not limited to contracts, arrangements, understanding or
relationships concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, neither Purchaser nor Cypress nor, to the best
knowledge of Purchaser and Cypress, any of the persons listed on Schedule I
hereto, has had since January 31, 1994 any business relationships or
transactions with the Company or any of its executive officers, directors or
affiliates that are required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as set forth in this Offer to
Purchase, since January 31, 1994 there have been no contacts,
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<PAGE>
negotiations or transactions between any of Cypress, Purchaser or, to the best
knowledge of Purchaser and Cypress, any of the persons listed on Schedule I
hereto, on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS. Purchaser will require approximately $165
million to (i) purchase the Shares (assuming all outstanding options were
exercised) pursuant to the Offer and the Merger, (ii) pay fees and expenses to
be incurred in connection with the completion of the Offer and the Merger and
(iii) purchase additional Shares from the Company as required by the terms of
the Financing (the "Equity Contribution"; see Section 11). All of the funds
required to finance the foregoing will be furnished to Purchaser by sales of its
capital stock to Cypress.
Since the Convertible Notes can be converted into Shares at a conversion
price of $8.53466 per Share, a price significantly in excess of the price per
share to be paid in the Offer and the Merger, it is not expected that any of the
Convertible Notes would be so converted. However, if all of the currently
outstanding Convertible Notes were so converted into Shares, Purchaser would
require approximately $42 million more to purchase such Shares. If required,
such funds would be loaned to Purchaser by Cypress.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In early February
1997, Cypress requested a meeting with Harris J. Ashton, the Company's Chairman,
Chief Executive Officer and President, to discuss a possible transaction with
the Company. On February 26, 1997, representatives of Cypress met with Mr.
Ashton and expressed a preliminary interest in exploring a possible transaction.
On March 25, Cypress entered into a confidentiality agreement with the Company
and was thereafter provided certain financial and operating information by the
Company.
On April 10, 1997, Mr. Ashton met with representatives of Cypress at which
meeting Cypress reconfirmed its interest in engaging in a potential transaction
involving the acquisition of the Company. Mr. Ashton indicated that after the
Company's release of first-quarter results in mid-June he would be willing to
discuss a possible transaction depending on Cypress' valuation of the Company.
Following the April 10 meeting, the Company and Cypress had intermittent
contacts regarding a possible transaction.
On July 2, 1997, after having conducted preliminary discussions with and
reviewing information regarding the Company, Cypress expressed an interest in
acquiring all or a controlling interest of the Company's main operating
subsidiary, Frank's Nursery & Crafts, Inc. ("Frank's"). No firm proposal was
made by Cypress at that time. The Company subsequently informed Cypress that it
had determined a transaction involving Frank's would have significant adverse
tax consequences.
On July 11, 1997, the Company engaged Credit Suisse First Boston Corporation
("Credit Suisse First Boston") as its exclusive financial advisor with respect
to the Company's continuing review of strategic and financial planning matters,
including the possible sale of the Company or Frank's.
Over the next several months, Cypress conducted additional due diligence on
the business, operations and financial performance of the Company, which
included meetings with the Company's management in Detroit, Michigan and other
locations.
In late September, before having completed due diligence, Cypress indicated
to representatives of the Company that based on information it had received and
reviewed to date, it would be interested in discussing a potential transaction
involving the acquisition of the Company for a per share price of at least
$5.00. After considering such expression of interest, the Company responded that
it believed a higher price was justified but that it would continue to discuss a
potential transaction with Cypress.
In October and early November of 1997, the Company and Cypress continued
discussions regarding a possible transaction, including a meeting at the
Company's headquarters in Stamford, Connecticut between Mr. Ashton and James A.
Stern, Chairman of Cypress L.L.C., David Spalding, Vice Chairman of Cypress
L.L.C., and Bahram Shirazi, a principal of Cypress L.L.C., and at which Cypress
proposed a cash acquisition at $5.00 per share. After the October 27 meeting,
the parties began to discuss the
15
<PAGE>
possibility of Cypress permitting shareholders who elected to do so to retain a
minority equity interest in the Company following a transaction.
On November 5, 1997, Cypress submitted a written proposal to acquire the
Company in a tender offer for all of the outstanding shares of the Company at
$5.50 per share in cash to be followed by a merger pursuant to which
shareholders would be given the election to retain up to 10% of the outstanding
shares. Cypress' proposal was subject to certain conditions, including, among
other things, a successful tender offer and consent solicitation for a majority
of the outstanding Senior Notes. Cypress' proposal outlined, among other things,
the structure and timing of a proposed transaction, the form of consideration to
be received by shareholders and Cypress' financing commitments necessary to
finance the Offer and the Merger and included a commitment letter with respect
to the senior bank financing which would be used to finance the debt tender
offer and refinance the Company's other existing debt.
On November 6, 1997, the Company's Board met in executive session to discuss
the progress of discussions with Cypress.
Beginning on November 7, 1997, Cypress and its legal advisors commenced
negotiations with the Company's legal and financial advisors with respect to the
terms of a possible merger agreement. On November 8, Cypress' legal counsel
distributed draft documentation to the Company's legal counsel.
Discussions continued during the week of November 9.
On November 14, 1997, Cypress informed the Company and Credit Suisse First
Boston that it needed time to evaluate any further proposal in light of
preliminary information Cypress had requested and received from the Company that
day regarding results for the Company's third fiscal quarter (see Section 7).
On November 15, 1997, the Company's Board held a special meeting to discuss
the proposed transaction with Cypress.
During the week of November 16, 1997, representatives of the Company and the
Company's legal and financial advisors continued negotiations with
representatives of Cypress and Cypress' legal advisors concerning the terms and
conditions of a proposed merger agreement.
On November 19, Cypress informed the Company and Credit Suisse First Boston
that, in light of the preliminary third-quarter information (see Section 7), it
would be interested in making a proposal to acquire all outstanding shares of
the Company for $5.25 cash per share. On November 20, after further discussions,
Cypress agreed to increase its proposal to $5.50 per share.
On November 21, 1997, the Company's Board held a special meeting to review,
with the advice and assistance of the Company's financial and legal advisors,
the proposed terms and conditions of the proposed Merger Agreement. At such
meeting, Credit Suisse First Boston provided an oral opinion (which was
subsequently confirmed in writing) that, as of such date and based upon and
subject to the matters discussed with the Company's Board, the cash
consideration to be received by the holders of the Company Common Stock in the
Offer and the Merger was fair from a financial point of view to such holders.
Following the Company's Board's review of the terms of the Offer and the Merger,
the Company's Board unanimously determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are fair
to and in the best interests of the Company's shareholders, approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, authorized the execution and delivery of the Merger Agreement,
recommended that the Company's shareholders accept the Offer and tender their
Shares pursuant to the Offer, and recommended that the Company's shareholders
approve and adopt the Merger Agreement. The Company's Board also approved
postponing the Distribution Date (as defined in the Rights Agreement) until
December 31, 1997 and to amend the Rights Agreement to make the Rights Agreement
inapplicable to the transactions contemplated by the Merger Agreement.
16
<PAGE>
On November 22, 1997, the Company and Purchaser executed the Merger
Agreement. On November 24, 1997, the Company and Cypress issued a press release
announcing the execution of the Merger Agreement.
11. THE MERGER AGREEMENT; THE SUPPORT AGREEMENT. The following is a summary
of the Merger Agreement and the Support Agreement, which summary is qualified in
its entirety by reference to the copies thereof filed as exhibits to the Tender
Offer Statement on Schedule 14D-1.
THE MERGER AGREEMENT
THE OFFER. Under the terms of the Merger Agreement, provided that the
Merger Agreement shall not have been terminated in accordance with its terms and
no event shall have occurred and no circumstance shall exist which would result
in a failure to satisfy any of the conditions or events set forth in Section 15
hereof (the "Offer Conditions"), Purchaser was required, as soon as reasonably
practicable after the date of the Merger Agreement (and in any event within five
business days from the date of public announcement of the execution thereof), to
commence the Offer. The Merger Agreement further provides that the obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer shall be
subject to the satisfaction of the Offer Conditions. Under the terms of the
Merger Agreement, Purchaser expressly reserves the right, in its sole
discretion, to waive any such condition (other than the Minimum Condition) and
make any other changes in the terms and conditions of the Offer, PROVIDED that,
unless previously approved by the Company in writing, no change may be made
which decreases the price per Share payable in the Offer, changes the form of
consideration payable in the Offer (other than by adding consideration), reduces
the maximum number of Shares to be purchased in the Offer, or imposes conditions
to the Offer in addition to those set forth in Section 15 hereof which are
adverse to holders of the Shares. The initial expiration date of the Offer shall
be 20 business days following (and inclusive of) the date of commencement. Under
the terms of the Merger Agreement, Purchaser covenants and agrees that, subject
to the terms and conditions of the Merger Agreement, and subject to the Offer
Conditions, Purchaser will accept for payment and pay for Shares as soon as it
is permitted to do so under applicable law, PROVIDED that Purchaser has the
right, in its sole discretion, to extend the Offer from time to time for up to
an aggregate of 20 business days, notwithstanding the prior satisfaction of the
Offer Conditions. Under the terms of the Merger Agreement, Purchaser and the
Company have agreed that the Offer Conditions are for the benefit of Purchaser
and may be asserted by Purchaser regardless of the circumstances giving rise to
any such condition (including any action or inaction by Purchaser) or, except
with respect to the Minimum Condition, may be waived by Purchaser, in whole or
in part at any time and from time to time, in its sole discretion.
COMPANY BOARD REPRESENTATION. The Merger Agreement provides that,
immediately upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser (including Shares as to which any such
person has the right to vote or direct the voting) bears to the total number of
Shares then outstanding, and the Company shall, at such time, take all action
necessary to cause Purchaser's designees to be so elected, including by securing
the resignations of incumbent directors. In addition, Purchaser shall determine
for the approval of the Board of Directors the classes into which such directors
are placed, so long as such placement does not violate or conflict with the
Company's certificate of incorporation (the "Certificate of Incorporation") or
by-laws (the "By-Laws") or the NYBCL and the Company shall cause Purchaser's
designees to be so placed. The Merger Agreement provides that the Company will
use its reasonable best efforts to cause persons designated by Purchaser to
constitute the same percentage as is on the board of (i) each committee of the
Board of Directors, (ii) each board of directors of each subsidiary of the
Company and (iii) each committee of each such board, in each case only to the
extent permitted by law and the rules of the NYSE to the extent applicable. The
Merger Agreement provides that the
17
<PAGE>
Company's obligations to appoint designees to its Board of Directors shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and that the Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under the provisions described in the preceding paragraph.
The Merger Agreement provides that following the election or appointment of
Purchaser's designees pursuant to the provisions described in the preceding
paragraph and prior to the Effective Time, so long as at least one director of
the Company then in office is neither designated by Purchaser nor an employee of
the Company (a "Disinterested Director"), any amendment of the Merger Agreement
or, to the extent material, the Certificate of Incorporation or By-Laws of the
Company, any termination of the Merger Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of Purchaser or waiver of any of the Company's rights thereunder, and
any other consent or action by the Board of Directors thereunder, will require
the concurrence of a majority of the Disinterested Directors or, if there is
only one Disinterested Director, of such Disinterested Director. The Merger
Agreement further provides that the Company shall use its best efforts to insure
that at least one Disinterested Director remains on the Board of Directors prior
to the Effective Time.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and accordance with the NYBCL, at the Effective Time,
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation.
The Merger Agreement provides that at the Effective Time and without any
further action on the part of the Company and Purchaser, the Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended to add the provision set forth in the Merger Agreement
permitting shareholder action by written consent (which provision shall not be
effective until certain amendments to the NYBCL become effective on February 23,
1998), and, as so amended, until thereafter further amended (subject to the
terms of the Merger Agreement) as provided therein and under the NYBCL, shall be
the certificate of incorporation of the Surviving Corporation following the
Merger. At the Effective Time, and without any further action on the part of the
Company and Purchaser, the By-Laws shall be the by-laws of the Surviving
Corporation and thereafter may (subject to the terms of the Merger Agreement) be
amended or repealed in accordance with their terms or the Certificate of
Incorporation of the Surviving Corporation and as provided by law. The Merger
Agreement further provides that 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 (as the case may be) and qualified.
The Merger Agreement provides that 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:
(i) each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation;
(ii) each Share held in the treasury of the Company and each Share owned
by Purchaser or any direct or indirect subsidiary of the Company, in each
case immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be made
with respect thereto;
(iii) each issued and outstanding Share (other than shares cancelled
pursuant to the preceding paragraph and any Dissenting Shares) shall be
converted into the right to receive $5.50 in cash or any higher price that
may be paid pursuant to the Offer, payable to the holder thereof, without
interest, upon surrender of the certificate formerly representing such
Share, less any required withholding taxes; and
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(iv) immediately following the Effective Time, the Surviving Corporation
shall execute and deliver to the trustee under the Indenture, dated as of
February 28, 1992, between the Company and United States Trust Company of
New York, as trustee (the "Convertible Notes Indenture"), executed in
connection with the issuance by the Company of the Convertible Notes, a
supplement to such Convertible Notes Indenture providing that each
Convertible Note remaining outstanding shall, after the Effective Time, be
convertible into an amount in cash equal to the product of (x) the number of
Shares into which such Convertible Note was convertible immediately prior to
the Effective Time times (y) the Merger Consideration.
The Merger Agreement provides that Dissenting Shares shall not be converted
into the right to receive the Merger Consideration, but shall instead entitle
the holder thereof to receive that consideration determined pursuant to Sections
623 and 910 of the NYBCL; PROVIDED, HOWEVER, that if a holder of Dissenting
Shares shall have failed to perfect or shall have effectively withdrawn or lost
his, her or its right to appraisal and payment under the NYBCL, such holder's
Dissenting Shares shall thereupon be deemed to have been converted, at the
Effective Time, into the right to receive the Merger Consideration, without any
interest thereon.
The Merger Agreement further provides that the Company shall give Purchaser
(i) prompt notice of any demands for appraisal pursuant to Sections 623 and 910
of the NYBCL received by the Company, withdrawals of such demands, and any other
instruments served pursuant to the NYBCL and received by the Company and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to demands for appraisal under the NYBCL. In addition, the Company shall not,
except with the prior written consent of Purchaser, make any payment with
respect to any such demands for appraisal or offer to settle or settle any such
demands.
The Merger Agreement provides that prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide that
each outstanding stock option heretofore granted under any Company Plan (as
defined in the Merger Agreement) (each "Option"), whether or not then vested or
exercisable, shall, at and after the Effective Time, be exercisable solely for,
and shall entitle each holder thereof solely to, a payment in cash from the
Company (subject to any applicable withholding taxes, the "Cash Payment"), upon
exercise, equal to the product of (x) the total number of Shares subject or
related to such Option, whether or not then vested or exercisable, and (y) the
excess, if any, of the Merger Consideration over the exercise price or purchase
price, as the case may be, per Share subject or related to such Option, each
such Cash Payment to be paid to each holder of an outstanding Option upon
exercise; PROVIDED, HOWEVER, that with respect to any person subject to Section
16 of the Exchange Act, any such amount shall be paid as soon as practicable
after the first date payment can be made without liability to such Person under
Section 16(b) of the Exchange Act. As provided in the Merger Agreement, the
Company Plans (and any other plan, program or arrangement) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time. The Merger
Agreement further provides that the Company will take all commercially
reasonable steps to ensure that none of the Company or any of its subsidiaries
is or will be bound by any Options, other options, warrants, rights or
agreements which would entitle any person, other than the current shareholders
of Purchaser or its affiliates, to own any capital stock of the Surviving
Corporation or any of its subsidiaries or, except as otherwise provided in the
Merger Agreement, to receive any payment in respect thereof and to cause or
request the holders of the Options to agree to an automatic exercise thereof at
the Effective Time.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's and its subsidiaries' organization and qualification, subsidiaries,
certificate of incorporation and by-laws, capitalization, authority relative to
the Merger Agreement, absence of conflicts with governing instruments or other
agreements, required filings and consents, compliance, filings with the
Commission and information contained in documents relating to the Offer,
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the Debt Offer and the Merger, financial statements, absence of certain changes
or events, absence of litigation, employee benefit plans, tax matters,
environmental matters, material contracts, permits, properties, intellectual
property, management information systems, affiliate transactions, approvals and
vote required to consummate the Merger, brokers and finders, and the Rights
Agreement.
In addition, the Merger Agreement contains representations and warranties of
Purchaser concerning Purchaser's corporate organization, certificate of
incorporation and by-laws, authority relative to the Merger Agreement, absence
of conflicts with governing instruments or other agreements, required filings
and consents, filings with the Commission and information contained in documents
relating to the Offer, the Debt Offer and the Merger, debt financing, equity
financing, and brokers and finders.
AGREEMENTS OF THE COMPANY AND PURCHASER. The Merger Agreement contains
certain covenants and agreements of the parties thereto, including the
following:
CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. Under the terms of
the Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to such time as Purchaser's
designees shall constitute a majority of the Company's Board of Directors,
except as specifically contemplated by the Merger Agreement and unless Purchaser
shall otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable laws; and
the Company and its subsidiaries shall each use its commercially reasonable
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. The Merger Agreement further
provides, by way of amplification and not limitation, that except as
specifically contemplated thereby, neither the Company nor any of its
Significant Subsidiaries (as defined in the Merger Agreement) (or, in the case
of clause (j) below, its subsidiaries) shall, during such period, directly or
indirectly do, or commit to do, any of the following without the prior written
consent of Purchaser:
(a) amend or otherwise change its certificate of incorporation or
by-laws or equivalent organizational documents or, except as expressly
contemplated by the Merger Agreement, amend the Rights Agreement;
(b) issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, (A)
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including but not limited to
stock appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except for (i) the issuance of up to 1,322,688 Shares issuable
in accordance with the terms of Options outstanding as of November 2, 1997,
and (ii) the issuance of up to 7,616,003 Shares issuable in accordance with
the terms of Convertible Notes outstanding as of November 2, 1997) or (B)
any assets of the Company or any of its subsidiaries, except for (x) assets
(excluding real property) sold, leased, pledged or otherwise encumbered in
the ordinary course of business and in a manner consistent with past
practice and (y) sale/leaseback transactions on commercially reasonably
terms and in an aggregate amount not in excess of $15 million, so long as
such transactions are not consummated prior to January 15, 1998 and so long
as such transactions can be abandoned by the Company at any time prior to
consummation without the payment or incurrence of material cost, expense or
fees;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
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(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) other than with respect to borrowings necessary to
effect the Debt Offer, incur any indebtedness for borrowed money (other than
(x) up to an aggregate principal amount of $10 million at any one time
outstanding and incurred in the ordinary course of business or (y) pursuant
to the Financing), or issue any debt securities, or enter into any
sale/leaseback transaction other than as described in clause (b) above, or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans, advances
or capital contributions to, or investments in, any other person; (iii)
enter into any contract or agreement other than in the ordinary course of
business consistent with past practice; (iv) authorize any single capital
expenditure (or series of capital expenditures) which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$250,000 for the Company and its subsidiaries taken as a whole; or (v) enter
into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in the provisions described in this
paragraph (e); PROVIDED that the Company and its subsidiaries may obtain
commitments for up to $25 million of financing in replacement for any
existing commitments so long as no material fees are incurred in respect
thereof on or prior to the initial expiration date of the Offer and so long
as any such commitments may be terminated by the Company at any time without
the payment or incurrence of material cost, expense or fees;
(f) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of the
Merger Agreement, increase the compensation or fringe benefits of any of its
directors, officers or employees, other than increases in salary or wages of
employees of the Company or its subsidiaries who are not officers of the
Company in the ordinary course of business in accordance with past practice,
or grant any severance or termination pay not currently required to be paid
under existing severance plans or enter into any employment, consulting or
severance agreement or arrangement with any present or former director,
officer or other employee of the Company or any of its subsidiaries, or
establish, adopt, enter into or amend or terminate any collective bargaining
agreement or Company Plan, including, but not limited to, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees, or make any loans to any employees,
officers or directors (other than advances in respect of reimbursable
expenses) or cancel or forgive any such existing loans;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) make or change any tax election, file any amended tax return, or
settle or compromise any material federal, state, local or foreign tax
liability;
(i) settle or compromise any pending or threatened suit, action or
claim for an amount in excess of $25,000 or which relates to the
transactions contemplated by the Merger Agreement;
(j) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries other than the
Merger and other than with respect to an inactive subsidiary so long as
neither the Company nor its Significant Subsidiaries (as defined in
Regulation S-X promulgated by the Commission) incurs or assumes any
liabilities or obligations in connection therewith or as a result thereof;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities; or
(l) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in the provisions described in
paragraphs (a) through (k) or any action which would make any of the
representations or warranties of the Company contained in the Merger
Agreement untrue
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and incorrect as of the date when made if such action had then been taken,
or would result in any of the Offer Conditions not being satisfied.
NO SOLICITATION OF TRANSACTIONS. Under the terms of the Merger Agreement,
the Company has agreed that it shall not, and shall cause its subsidiaries and
its and its subsidiaries' officers, directors, employees, representatives,
agents, advisors and affiliates not to, solicit, initiate or encourage inquiries
or proposals with respect to, or engage in any negotiations concerning, or
provide any confidential information to, or have any discussions with, or enter
into an agreement with, any person relating to any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving the
Company or any of its subsidiaries or any proposal or offer to acquire in any
manner a greater than 20% equity interest in, or more than 20% of the assets of,
the Company or any of its subsidiaries, other than the Merger, the Offer and the
other transactions contemplated by the Merger Agreement (any of the foregoing,
an "Acquisition Proposal"); PROVIDED, that the Company may (i) at any time prior
to the consummation of the Offer, if the Company is not otherwise in violation
of the provisions described in this paragraph, furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a
written proposal for an Acquisition Proposal if and so long as the Board of
Directors of the Company determines in good faith by a majority vote, based upon
advice of its outside legal counsel, that failing to take such action would
reasonably be expected to constitute a breach of the fiduciary duties of the
Board; and (ii) take a position with respect to the Acquisition Proposal, or
amend or withdraw such position, in compliance with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to the Acquisition Proposal.
Under the terms of the Merger Agreement, the Company has also agreed immediately
to cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of the Merger Agreement with any parties other than
Purchaser and its affiliates with respect to any of the foregoing. The Merger
Agreement provides that the Company shall promptly (and in any event within 24
hours) advise Purchaser following the receipt by it of any Acquisition Proposal
or any inquiry or request relating thereto and the substance thereof (including
the identity of the person making such Acquisition Proposal and a copy of any
written proposal), and, if consistent with its fiduciary duties, advise
Purchaser of any developments with respect to such Acquisition Proposal, inquiry
or request promptly upon the occurrence thereof, including the Company's
entering into discussions or negotiations with respect thereto. Under the terms
of the Merger Agreement, the Company has agreed not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement to
which the Company is a party. The Company and Purchaser have agreed that any
violation of the restrictions set forth in the provisions described in this
paragraph by any officer, director, employee, representative, agent, advisor or
affiliate of the Company or any subsidiary shall be deemed to be a breach of the
provisions described in this paragraph by the Company.
SHAREHOLDERS MEETING. The Merger Agreement provides that the Company,
acting through its Board of Directors, shall, if required to approve the Merger
in accordance with applicable law and the Certificate of Incorporation and
By-Laws, (i) duly call, give notice of, convene and hold a meeting of its
shareholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on the Merger Agreement, the Merger and
the other transactions contemplated by the Merger Agreement (the "Shareholders
Meeting") and (ii) use its reasonable best efforts to obtain the necessary
approval of the Merger Agreement and the Merger by its shareholders.
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The Merger Agreement further provides that the Board of Directors of the
Company shall set the record date for the Shareholders Meeting to occur
immediately following the consummation of the Offer and the Equity Contribution
so that Purchaser is the holder of record for purposes of such Shareholders
Meeting of the Shares acquired in the Offer and the Equity Contribution, which
Shares shall constitute in excess of two-thirds of the issued and outstanding
Shares of record at such record date. Under the terms of the Merger Agreement,
in the event that it becomes necessary to delay the date of the Shareholders
Meeting, the Company shall use its reasonable best efforts to ensure that any
such delay does not frustrate the purpose of the immediately preceding sentence,
including by issuing Shares in accordance with the Merger Agreement immediately
prior to setting any new record date for the Shareholders Meeting as described
below.
The Merger Agreement provides that in the event that Purchaser shall acquire
at least 90% of the outstanding Shares, the Company agrees, at the request of
Purchaser, subject to the conditions of the Merger Agreement, to take 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 shareholders, in accordance with Section 905 of the NYBCL.
PROXY STATEMENT. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement, the Company shall prepare and file
with the Commission under the Exchange Act and the rules and regulations
promulgated thereunder, and shall use its reasonable best efforts to have
cleared by the Commission as promptly as practicable after such filing, the
proxy statement with respect to the Shareholders Meeting (the "Proxy
Statement"). The Company and Purchaser each agrees to correct any information
provided by it for use in the Proxy Statement which shall have become false or
misleading.
FILINGS; OTHER ACTIONS. The Merger Agreement provides that, upon the terms
and subject to the conditions thereof, each of the Company and Purchaser 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, including under applicable laws and regulations, to consummate and
make effective the Merger and the other transactions contemplated by the Merger
Agreement, including but not limited to (i) cooperation in the preparation and
filing of the Schedule 14D-1, the Schedule 14D-9, the Proxy Statement or any
required filings under the HSR Act and any amendments to any thereof, (ii) using
its reasonable best efforts to make and cooperate in making all required
regulatory filings and applications and to obtain and cooperate in obtaining all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and third parties as are necessary or
advisable for the consummation of the Merger and the other transactions
contemplated by the Merger Agreement and to fulfill the conditions to the Offer,
the Merger, the Debt Offer, and the Financing and (iii) using its reasonable
best efforts to oppose, defend against, remove and appeal any injunction, order,
decree or ruling restraining, enjoining or otherwise prohibiting the Offer, the
Merger or any of the other transactions contemplated by the Merger Agreement.
The Merger Agreement further provides that 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 the
Surviving Corporation and Purchaser shall use their reasonable best efforts to
take all such necessary action.
DEBT OFFER. The Merger Agreement required the Company to, as soon as
reasonably practicable after the date of the Merger Agreement (and in any event
within five business days from the date of public announcement of the execution
thereof), commence the Debt Offer. The Merger Agreement further provides that
Purchaser shall be entitled to be involved in and shall cooperate with the
Company in the Company's preparation of the documents to be sent to the holders
of the Senior Notes in connection with the Debt Offer (the "Debt Offer
Documents"). Pursuant to the Merger Agreement, the Company shall waive any of
the conditions to the Debt Offer and make any other changes in the terms and
conditions of the Debt Offer as may be reasonably requested by Purchaser, and
the Company shall not,
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without Purchaser's prior written consent, waive any condition to the Debt Offer
or make any changes to the terms and conditions of the Debt Offer. Under the
terms of the Merger Agreement, Purchaser has agreed to act in a commercially
reasonable manner in determining whether or not to give such consent. Under the
terms of the Merger Agreement, each of Purchaser and the Company has agreed
promptly to correct any information provided by it for use in the Debt Offer
Documents that shall have become false or misleading in any material respect,
and the Company has further agreed to take all steps necessary to cause the Debt
Offer Documents as so corrected to be disseminated to holders of Senior Notes.
Under the terms of the Merger Agreement, provided the Company is able to obtain
the Financing to consummate the Debt Offer, and the other conditions of the Debt
Offer are met or, at the sole discretion of Purchaser, waived, the Company shall
accept for payment and pay for the Senior Notes validly tendered and not
withdrawn pursuant to the Debt Offer simultaneously with the consummation of the
Offer.
FINANCING. Under the terms of the Merger Agreement, the Company agrees to
provide, and will cause its subsidiaries and its and their respective officers,
employees, representatives and agents to provide, cooperation in connection with
the arrangement and closing of the financing described in a commitment letter
dated November 21, 1997 from The Chase Manhattan Bank, Chase Securities Inc. and
Goldman Sachs Credit Partners L.P. to, and accepted and agreed by, The Cypress
Group L.L.C., including the term sheet attached thereto, or any other financing
on terms and conditions not significantly less favorable to or otherwise
reasonably acceptable to the Company and arranged or approved by Purchaser or
its affiliates (the "Financing"), to be consummated contemporaneous with or at
or after consummation of the Offer or the Effective Time in respect of the
transactions contemplated by the Merger Agreement, including without limitation,
the negotiation and execution of loan documents, the preparation of disclosure
schedules, the preparation of offering memoranda, private placement memoranda or
other similar documents, participation in meetings, due diligence sessions and
road shows (consistent with such individuals' responsibilities for the ongoing
operations of the Company), the execution and delivery, with effectiveness no
earlier than consummation of the Offer, of any pledge and security documents,
other definitive financing documents, or other requested certificates or
documents as reasonably may be requested by Purchaser. The Merger Agreement
further provides that in connection with the obtaining of any such financing,
the Company agrees to request opinions of the Company's legal counsel and
"comfort letters" of the Company's accountants reasonably required in connection
with such financing and, at the request of Purchaser, following the consummation
of the Offer, to call for prepayment or redemption, or to prepay, redeem and/or
renegotiate, as the case may be, any then existing indebtedness of the Company
to the extent financing is available therefor.
ACCESS TO INFORMATION; CONFIDENTIALITY. The Merger Agreement provides that,
from the date of the execution thereof to the Effective Time, the Company shall,
and shall cause its subsidiaries, officers, directors, employees, auditors and
other agents to, afford the officers, employees, auditors and other agents of
Purchaser and its affiliates, and financing sources who shall agree to be bound
by the provisions described in this paragraph as though a party to the Merger
Agreement, access at all reasonable times (i) to its officers, employees,
agents, properties, offices, stores and other facilities and to all books and
records, and shall furnish such persons with all financial, operating and other
data and information as they may from time to time request, (ii) the Company's
and its subsidiaries' vendors and (iii) the Company's and its subsidiaries'
management information systems and other consultants. The documents and
information provided pursuant to the provisions described in this paragraph
shall be subject to the provisions of the confidentiality agreement between the
Company and Cypress.
NOTIFICATION OF CERTAIN MATTERS. The Merger Agreement provides that the
Company shall give prompt notice to Purchaser, and Purchaser shall give prompt
notice to the Company, of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate and (ii) any failure of the Company or Purchaser, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it thereunder; PROVIDED, HOWEVER, that the
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delivery of any such notice shall not limit or otherwise affect the remedies
available thereunder to the party receiving such notice.
BENEFITS MATTERS. The Merger Agreement provides that, at and after the
Effective Time, the Surviving Corporation shall promptly pay or provide when due
all compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date of the Merger Agreement for all employees (and former
employees) and directors (and former directors) of the Company and previously
disclosed to Purchaser. Under the terms of the Merger Agreement, each of
Purchaser and the Company has agreed that the Surviving Corporation shall pay
promptly or provide when due all compensation and benefits accrued or incurred
prior to the Effective Time and required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect and disclosed to Purchaser as of the date of the Merger
Agreement, or pursuant to any applicable collective bargaining agreement.
The Merger Agreement provides that the Company and its subsidiaries, and the
Surviving Corporation, its subsidiaries and its successors and assigns, will
honor all director retirement benefits, and all employment or severance
agreements with any employee or former employee of the Company or any of its
subsidiaries, in existence on the date of the Merger Agreement which were
disclosed to Purchaser and a full and complete copy (or, in the case of oral
agreements, written summary) of which was provided to Purchaser prior to the
date of the Merger Agreement.
The Merger Agreement also provides that from the Effective Time until the
first anniversary of the Effective Time, the Surviving Corporation, its
subsidiaries, successors and assigns shall provide employees and former
employees of the Company and its subsidiaries (and directors and former
directors of the Company) with benefit and compensation plans, programs,
policies or arrangements (including, without limitation, annual and long-term
incentive plans, retirement plans, life insurance, medical, dental and other
similar employee welfare benefit plans) no less favorable (subject to the
following proviso) in the aggregate as to each employee, former employee,
director or former director than those provided at the date of the Merger
Agreement to similarly situated persons by the Company and its subsidiaries
pursuant to plans, programs, policies and arrangements which were disclosed to
Purchaser and a full and complete copy (or, in the case of oral agreements,
written summary) of which was provided to Purchaser prior to the date of the
Merger Agreement; provided, however, that the provision described by this
sentence shall not require the Surviving Corporation or its subsidiaries,
successors and assigns to provide any plan, program or arrangement providing for
the issuance or grant of any interest or right in respect of the capital stock
of the Surviving Corporation or any of its subsidiaries. The Merger Agreement
further provides that Purchaser acknowledges that the purchase of Shares
pursuant to the Offer will constitute a change in control of the Company (to the
extent such concept is applicable) for the purposes of all agreements,
contracts, plans, programs, policies or arrangements of the Company which were
disclosed to Purchaser.
Under the terms of the Merger Agreement, Purchaser acknowledges the
obligations of the Company and the Surviving Corporation and their subsidiaries,
successors and assigns set forth in the benefits provisions described above. The
Merger Agreement further provides that nothing in such provisions shall require
the continued employment of any person or prevent the Company and/or the
Surviving Corporation (or its subsidiaries) from taking any action or refraining
from taking any action which the Company (or its subsidiaries), prior to the
Effective Time, could have taken or refrained from taking.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the certificate of incorporation and the by-laws of the
Surviving Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the By-Laws on the date of the Merger
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six
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years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who prior to the purchase of Shares in the
Offer were directors, officers or employees of the Company unless such
modification is required by law.
The Merger Agreement provides that the Surviving Corporation shall use its
reasonable best efforts to maintain in effect for six years from the Effective
Time the policies of the directors' and officers' liability insurance maintained
by the Company at the time of the execution of the Merger Agreement with respect
to matters occurring prior to the Effective Time (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less advantageous to
the covered officers and directors) to the extent available; provided, however,
that in no event shall the Surviving Corporation be required to expend more than
an amount per year equal to 200% of the annual premiums paid by the Company
(which annual premium the Company represents and warrants to be not more than
$230,000) at the time of the execution of the Merger Agreement to maintain or
procure insurance coverage pursuant to the provisions of the Merger Agreement
described in this sentence, but in such case shall purchase as much coverage as
possible for such amount.
EQUITY CONTRIBUTION. The Merger Agreement provides that, simultaneously
with the consummation of the Offer, Purchaser will make an Equity Contribution
to the Company, as required by the terms of the Financing, pursuant to which the
Company will sell to Purchaser, and Purchaser will purchase from the Company, an
aggregate number of Shares specified by Purchaser up to 5,586,314 Shares
(including from treasury or through new issuance) at a price per Share equal to
the Merger Consideration, such Shares to be validly issued, fully paid and
nonassessable, approved for listing on the NYSE and issued and sold free of
preemptive (or similar) rights and any liens, claims or similar encumbrances.
ANTI-DILUTION. The Merger Agreement provides that the Company will as
promptly as practicable notify Purchaser if it issues any Shares, whether upon
the exercise, exchange or conversion of securities exercisable or exchangeable
for or convertible into Shares or otherwise. If the Offer is consummated, the
Company agrees that if, at the time of closing of the Offer and the Equity
Contribution or at any time thereafter until the later of (a) the Effective Time
of the Merger and (b) two years from the closing of the Offer and the Equity
Contribution, the number of Shares held by Purchaser shall not represent at
least two-thirds of the outstanding Shares as a result of the issuance of Shares
by the Company, whether upon the exercise, exchange or conversion of Options,
Convertible Notes or other securities exercisable or exchangeable for or
convertible into Shares or otherwise, the Company will sell (including from
treasury or through new issuance) to Purchaser, upon notice from Purchaser, at a
price per share equal to the Merger Consideration, in cash, such number of
validly issued, fully paid and non-assessable Shares (which shares shall be
approved for listing on the NYSE if the Shares are then so listed and issued and
sold free of preemptive (or similar) rights and any liens, claims or similar
encumbrances) as may be necessary so that the percentage of outstanding Shares
held by Purchaser represents at least two-thirds of the outstanding Shares.
SUPPORT AGREEMENT. Under the terms of the Merger Agreement, the Company has
agreed not to take any action, and to direct its directors, officers, employees,
transfer agent, other agents, and representatives not to take any action, which
would permit or facilitate a transfer of record ownership of Shares held by the
Supporting Shareholder in violation of the Support Agreement.
CONDITIONS TO THE MERGER. Purchaser and the Company to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) if required by the NYBCL, the Merger Agreement shall
have been approved by the affirmative vote of the shareholders of the Company
owning of record at least two-thirds of the outstanding Shares entitled to vote
thereon; (b) no temporary restraining order, preliminary or permanent injunction
or other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Merger or any of the other transactions contemplated by the Merger Agreement and
which is in effect at
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the Effective Time, provided, however, that, in the case of any such decree,
injunction or other order, each of the Company and Purchaser 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 decree, injunction or other
order that may be entered; (c) no statute, rule, regulation, executive order,
decree, or other order of any kind (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any United States
or state court or governmental authority which prohibits or enjoins the
consummation of the Merger; (d) any waiting period applicable to the Merger
under the HSR Act shall have terminated or expired; and (e) Purchaser shall have
accepted for payment and paid for the Shares tendered pursuant to the Offer.
TERMINATION; FEES AND EXPENSES. The Merger Agreement provides that it may
be terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent of Purchaser and the Company;
(b) by Purchaser or the Company if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States shall have issued a final injunction, order, decree or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting
the Offer, the Merger or any of the other transactions contemplated by the
Merger Agreement and such order, decree, ruling or other action is or shall
have become final and nonappealable;
(c) by Purchaser or the Company if due to an occurrence or circumstance
which would result in a failure of the Offer Conditions to be capable of
satisfaction, (i) Purchaser shall have terminated the Offer, (ii) the Offer
shall have expired without Purchaser having accepted Shares for payment
pursuant thereto, or (iii) Purchaser shall not have accepted Shares for
payment pursuant to the Offer in accordance with the terms thereof, unless
such failure has been caused by or results from the breach by the party
seeking termination of any of its representations, covenants or agreements
contained in the Merger Agreement;
(d) by Purchaser or the Company prior to the purchase of the Shares
pursuant to the Offer (PROVIDED that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in the Merger Agreement) if there shall have been a material
breach of any of the covenants or agreements or any of the representations
or warranties set forth in the Merger Agreement on the part of the other
party, which breach is not cured within five business days following written
notice given by the terminating party to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the date on which
the Offer expires; or
(e) by either Purchaser or the Company prior to the purchase of Shares
pursuant to the Offer if the Board of Directors of the Company shall
reasonably determine in good faith by a majority vote that an Acquisition
Proposal is more favorable to the Company's shareholders in the aggregate
and from a financial point of view than the transactions contemplated by the
Merger Agreement (including any adjustment to the terms and conditions of
such transactions proposed by Purchaser in response to such Acquisition
Proposal) and shall reasonably determine in good faith by a majority vote,
based upon advice of its outside legal counsel, that failing to accept such
Acquisition Proposal would reasonably be expected to constitute a breach of
the fiduciary duties of the Board and the Company shall have delivered to
Purchaser a written notice of the determination by the Company's Board of
Directors to terminate this Agreement pursuant to the provisions described
in this paragraph setting forth a summary of all material terms of such
Acquisition Proposal; PROVIDED, HOWEVER, that the Company may not terminate
the Merger Agreement pursuant to the provisions described in this paragraph
unless (i) five business days shall have elapsed after delivery to Purchaser
of the notice referred to above, (ii) at the end of such five business day
period the Company's Board of
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Directors shall continue to believe that such Acquisition Proposal is more
favorable to the Company's shareholders in the aggregate and from a
financial point of view than the transactions contemplated by the Merger
Agreement (including any adjustment to the terms and conditions of such
transactions proposed by Purchaser in response to such Acquisition
Proposal), and (iii) simultaneously with such termination the Company shall
enter into a definitive acquisition, merger or similar agreement to effect
such Acquisition Proposal and shall make payment of the full reimbursement
required by the provisions described below; or
(f) by Purchaser prior to the purchase of Shares pursuant to the Offer,
if (i) the Board shall have withdrawn or modified (including by amendment of
the Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall
have recommended another Acquisition Proposal, offer or transaction; or (ii)
the Minimum Condition shall not have been satisfied by the expiration date
of the Offer and on or prior to such date (A) any person (other than
Purchaser or its affiliates) shall have made a public announcement or
proposal, or a communication to the Company which becomes publicly known,
with respect to an Acquisition Proposal which is superior from a financial
point of view to the Offer and the Merger or (B) any person (including the
Company or any of its affiliates or subsidiaries), other than Purchaser or
any of its affiliates, shall have become the beneficial owner of 20% or more
of the Shares.
The Merger Agreement further provides that in the event of the termination
thereof pursuant to its terms, the Merger Agreement shall forthwith become void
and there shall be no liability on the part of any party thereto except as set
forth in therein; provided, however, that nothing therein shall relieve any
party from liability for any breach thereof.
The Merger Agreement provides that if Purchaser terminates the Merger
Agreement pursuant to the provisions described in paragraph (e) above, or clause
(i) or (ii)(B) of paragraph (f) above, or if the Company terminates the Merger
Agreement pursuant to the provisions described in paragraph (e) above or in
circumstances that would have permitted Purchaser to terminate pursuant to the
provisions described in paragraph (e) above, or clause (i) or (ii)(B) of
paragraph (f) above, then:
(i) The Company shall reimburse Purchaser and its affiliates for all
reasonable out-of-pocket fees and expenses actually incurred by any of them
or on their behalf in connection with the Offer and the Merger and the
negotiation, preparation, diligence in respect of and consummation of all
the transactions contemplated by the Merger Agreement (including, without
limitation, fees and disbursements payable to financing sources, investment
bankers, counsel to Purchaser or its affiliates or any of the foregoing, and
accountants) up to an aggregate maximum reimbursement of $750,000. The
Company shall pay the amounts requested within one business day of such
requests (accompanied by a submission of statements therefor); and
(ii) If (x) such termination is pursuant to the provisions described in
clause (ii)(B) of paragraph (f) above or in circumstances that would have
permitted Purchaser to terminate pursuant to the provisions described in
clause (ii)(B) of paragraph (f) above or (y) within 12 months of such
termination the Company consummates a transaction contemplated by the
definition of "Acquisition Proposal", then in each case the Company shall
pay to or as directed by Purchaser, within one business day following such
termination, in the case of clause (x) above, or within one business day
following consummation of such transaction, in the case of clause (y) above,
a fee, in cash, of $3 million, PROVIDED, HOWEVER, that the Company in no
event shall be obligated to pay more than one such fee with respect to all
such terminations and transactions.
The Merger Agreement further provides that, except as otherwise specifically
provided therein, each party shall bear its own expenses in connection with the
Merger Agreement and the transactions contemplated thereby.
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SUPPORT AGREEMENT
Simultaneously with the execution of the Merger Agreement and as a condition
to the willingness of Purchaser to proceed with the Offer and the Merger,
Purchaser entered into a Support Agreement (the "Support Agreement") with the
Supporting Shareholder, pursuant to which, among other things, the Supporting
Shareholder agreed to validly tender (and not withdraw) his Shares to Purchaser
pursuant to the Offer. As of the date of the Support Agreement, the Supporting
Shareholder held 1,532,157 Shares (such Shares, together with any other Shares
acquired by the Supporting Shareholder after the date of the Support Agreement
and during the term of the Support Agreement whether upon the exercise of
options, warrants or rights, the conversion or exchange of convertible or
exchangeable securities, or by means of purchase, dividend, distribution or
otherwise, being collectively referred to herein as the "Subject Shares"),
representing approximately 6.3% of the currently outstanding Shares, and had the
right to receive an additional 540,000 Shares, representing approximately an
additional 2.2%, through the exercise of options.
Under the terms of the Support Agreement, the Supporting Shareholder has
also agreed as follows:
(a) at any meeting of shareholders of the Company held prior to the
consummation of the Offer and called to vote upon the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or at any adjournment thereof or in any other circumstances in
which a vote, consent or other approval with respect to the Merger, the
Merger Agreement or any of the other transactions contemplated by the Merger
Agreement is sought, the Supporting Shareholder shall vote (or cause to be
voted) the Subject Shares in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement;
(b) at any meeting of shareholders of the Company or at any adjournment
thereof or in any other circumstances in which the Supporting Shareholder's
vote, consent or other approval is sought and which meeting is held or other
action is taken prior to the consummation of the Offer, the Supporting
Shareholder shall vote (or cause to be voted) the Subject Shares against (i)
any merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of all or substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding-up of
or by the Company or any other takeover proposal or Acquisition Proposal (as
such term is defined in the Merger Agreement) or (ii) any amendment of the
Company's certificate of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement, or would change in
any manner the voting rights of the Common Stock. Pursuant to the terms of
the Support Agreement, the Supporting Shareholder further agrees not to
commit or agree to take any action inconsistent with the foregoing;
(c) the Supporting Shareholder has granted to, and appointed Purchaser
and any designee of Purchaser, each of them individually, Shareholder's
irrevocable (until the termination of this Agreement) proxy and
attorney-in-fact (with full power of substitution) to vote the Subject
Shares of Shareholder as indicated in paragraphs (a) and (b) above;
(d) the Supporting Shareholder has agreed not to (i) sell, transfer,
pledge, assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), or enter into any contract, option or other arrangement
(including any profit-sharing arrangement) with respect to the Transfer of,
the Subject Shares to any person other than pursuant to the terms of the
Merger and the Offer or (ii) enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, in connection with, directly or
indirectly, any Acquisition Proposal, and agrees not to commit or agree to
take any of the foregoing actions; PROVIDED that the Supporting Shareholder
shall be permitted to make limited
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Transfers to family members and for estate planning purposes so long as the
transferee executes an agreement to be bound by the terms of the Support
Agreement, or terms substantially identical thereto; and
(e) Until the termination of the Support Agreement, the Supporting
Shareholder will comply with the provisions of the Merger Agreement
pertaining to Acquisition Proposals to the extent applicable to the
Supporting Shareholder in his capacity as a director or officer of the
Company; PROVIDED, that nothing in the provisions described in this
paragraph (e) shall prohibit Shareholder from taking any actions that the
Company is permitted to take in accordance with such provisions of the
Merger Agreement pertaining to Acquisition Proposals.
The Support Agreement shall terminate on the date on which the Merger
Agreement is terminated in accordance with its terms.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY; RIGHTS
AGREEMENT.
PURPOSE. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. The Offer is being made pursuant to the Merger
Agreement. As promptly as practicable following consummation of the Offer and
after satisfaction or waiver of all conditions to the Merger set forth in the
Merger Agreement, Purchaser intends to acquire the remaining equity interest in
the Company not acquired in the Offer by consummating the Merger.
VOTE REQUIRED TO APPROVE THE MERGER. The Board of Directors of the Company
has unanimously approved the Merger Agreement in accordance with the NYBCL. If
required for approval of the Merger, the Company has agreed, in accordance with
and subject to the NYBCL, to duly convene a meeting of its shareholders as
promptly as practicable following the purchase of Shares pursuant to the Offer
for the purpose of considering and taking action on the Merger Agreement. If
shareholder approval is required, the Merger Agreement must be approved by the
vote of the holders of two-thirds of the Shares outstanding on the record date
set for such vote. Pursuant to the Merger Agreement, such record date is to be
the time immediately following the consummation of the Offer and the Equity
Contribution so that Purchaser is the holder of record for purposes of such vote
of the Shares acquired in the Offer and the Equity Contribution, which Shares
will constitute in excess of two-thirds of the issued and outstanding Shares of
record at such record date assuming the Minimum Condition was satisfied. In
addition, the Merger Agreement provides that if, at the time of closing of the
Offer and the Equity Contribution or thereafter, the number of Shares held by
Purchaser shall not represent at least two-thirds of the outstanding Shares as a
result of the issuance of Shares by the Company (whether upon the exercise,
exchange or conversion of options, Convertible Notes or other securities
exercisable or exchangeable for or convertible into Shares or otherwise), the
Company will sell to Purchaser, upon notice from Purchaser, at a price per share
equal to the cash price paid in the Offer and the Merger, such number of Shares
as may be necessary so that the percentage of outstanding Shares held by
Purchaser represents at least two-thirds of the outstanding Shares. As a result,
if the Minimum Condition is satisfied and Purchaser acquires Shares pursuant to
the Offer, it is expected that Purchaser will have the power to approve the
Merger Agreement without the affirmative vote of any other shareholder.
The Company's Certificate of Incorporation requires the affirmative vote or
consent of the holders of 80% of the Shares in order to approve certain
corporate transactions, including the Merger and the Support Agreement, between
the Company and another corporation which is the beneficial owner of 5% or more
of the Shares (the "Supermajority Voting Requirement"). The Supermajority Voting
Requirement does not apply, however, if the Company's Board of Directors has
approved a memorandum of understanding with such other corporation with respect
to such transaction prior to the time that such other corporation becomes a
beneficial owner of more than 5% of the Shares. The Company has represented that
the Board of Directors of the Company has unanimously approved the Merger
Agreement and the Support Agreement as a "memorandum of understanding" with
Purchaser pursuant to
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such provisions, and that such action is sufficient to render the Supermajority
Voting Requirement inapplicable to the Merger Agreement, the Support Agreement,
the Offer, the Merger, the Equity Contribution, and the other transactions
contemplated by the Merger Agreement.
APPRAISAL RIGHTS. Holders of Shares do not have appraisal rights as a
result of the Offer; however, holders of Shares will have certain rights
pursuant to the provisions of the NYBCL, including Sections 623 and 910, upon
consummation of the Merger, including the right to dissent and demand appraisal
of any Dissenting Shares held by such holders. Under the NYBCL, dissenting
shareholders who have filed with the Company a written notice of election to
dissent and who otherwise comply with the applicable procedures set forth in the
NYBCL will be entitled to receive a judicial determination of the fair value of
the Shares and to receive payment of such fair value in cash, together with a
fair rate of interest, if any. Any such judicial determination of the fair value
of the Shares could be based upon factors other than, or in addition to, the
price per Share to be paid in the Merger or the market value of the Shares. The
value so determined could be more or less than the price per Share paid in the
Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF SHAREHOLDERS DOES NOT PURPORT TO BE A
COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO
EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESENTATION AND EXERCISE OF
APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
NYBCL.
The foregoing description of certain provisions of the NYBCL is not
necessarily complete and is qualified in its entirety by reference to the NYBCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which Purchaser seeks to acquire any remaining
Shares. Rule 13e-3 should not be applicable to the Merger if the Merger is
consummated within one year after the expiration or termination of the Offer and
the price paid in the Merger is not less than the per Share price paid pursuant
to the Offer. However, in the event that Purchaser is deemed to have acquired
control of the Company pursuant to the Offer and if the Merger is consummated
more than one year after completion of the Offer or an alternative acquisition
transaction is effected whereby shareholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, Purchaser may
be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
shareholders in the Merger or such alternative transaction be filed with the
Commission and disclosed to shareholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14. If such registration were terminated,
Rule 13e-3 would be inapplicable to any such future Merger or such alternative
transaction.
PLANS FOR THE COMPANY. If Purchaser obtains control of the Company pursuant
to the Offer, Purchaser expects to conduct a detailed review of the Company and
its businesses, assets, corporate structure, capitalization, operations,
properties, policies, management and personnel and to consider what changes
would be desirable in light of the circumstances that then exist. Such changes
could include changes in the Company's businesses, corporate structure,
certificate of incorporation, by-laws, capitalization, board of directors,
management or dividend policy. Purchaser expects that Joseph R. Baczko, a former
President and Chief Operating Officer of Blockbuster Entertainment, would
replace Mr. Ashton as Chairman, Chief Executive Officer and President of the
Company and would assume similar responsibilities at Frank's immediately
following consummation of the Offer.
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Except as described in this Offer to Purchase, Purchaser has no present
plans or proposals that would relate to or result in an extraordinary corporate
transaction such as a merger, reorganization or liquidation involving the
Company or any of its subsidiaries or a sale or other transfer of a material
amount of assets of the Company or any of its subsidiaries, any material change
in the capitalization or dividend policy of the Company or any other material
change in the Company's corporate structure or business or the composition of
its Board of Directors or management.
RIGHTS AGREEMENT. The following discussion, including the summary of
certain aspects of the Rights, is based in part on information contained in the
Company's Registration Statement on Form 8-A dated March 23, 1995 (the "Form
8-A"), does not purport to be complete and is qualified by reference to such
information and to the Rights Agreement, which was filed as an exhibit to such
Form 8-A. The Form 8-A is incorporated herein by reference. Although Purchaser
does not have any knowledge that would indicate that any statements contained
herein based upon such documents are untrue, Purchaser does not assume any
responsibility for the accuracy or completeness of the information contained in
such documents, or for any failure by the Company to disclose events that may
have occurred and may affect the significance or accuracy of any such
information but which are unknown to Purchaser.
On February 22, 1990, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock to
shareholders of record at the close of business on March 7, 1990. Such dividend
distribution replaced the rights distributed pursuant to a previous rights
agreement (the "Previous Rights Agreement"), which expired as of the close of
business on March 7, 1990. The Rights were scheduled to expire on March 7, 1995,
but on March 1, 1995, the Company's Board of Directors extended the expiration
date for five years, to March 7, 2000. The Rights Agreement provides that each
Right entitles the registered holder, upon the occurrence of certain events, to
purchase from the Company one share of Common Stock at a purchase price of $60
per Share, subject to adjustment (the "Purchase Price"). The description and
terms of the Rights are set forth in the Rights Agreement.
The Rights Agreement provides that the Rights will initially be represented
by the Share Certificates and no separate Rights Certificates will be
distributed until a Distribution Date. The Rights Agreement further provides
that until a Distribution Date, (x) the Rights will be evidenced by the Share
Certificates and will be transferred only with such Share Certificates, (y) new
Share Certificates issued after March 7, 1990 will contain a legend
incorporating the new Rights Agreement by reference and (z) the surrender for
transfer of any certificate for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. The Rights Agreement further provides that stock certificates
legended pursuant to the Previous Rights Agreement shall represent Rights
granted pursuant to the present Rights Agreement.
The Rights Agreement provides that unless a later date is determined by
action of the Board of Directors, a Distribution Date will occur on the close of
business on the tenth business day after the first to occur of:
(i) the commencement of a tender offer or exchange offer that would, if
completed, result in a person or group of affiliated or associated persons
beneficially owning 20% or more of the outstanding shares of Common Stock;
(ii) a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 20% or more of the outstanding
shares of Common Stock;
(iii) the consolidation or merger of any entity with or into the Company
where the Company is the surviving corporation, and the Common Stock remains
unchanged;
(iv) the transfer, by the beneficial owner of 20% or more of the
outstanding shares of Common Stock or by a person who would, as a result of
such transaction, become the beneficial owner of
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20% or more of the outstanding shares of Common Stock, of any assets to the
Company in exchange for shares of equity securities of the Company;
(v) the consolidation or merger of any entity with or into the Company
where the Company is the surviving corporation and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common
Stock are changed into or exchanged for securities of any other entity, or
cash or other property;
(vi) the consolidation or merger of the Company with or into another
entity where the Company is not the surviving corporation; or
(vii) the sale or transfer by the Company of assets or earning power
aggregating more than 50% of the assets or earning power of the Company.
The Rights Agreement provides that the Rights are not exercisable until a
Distribution Date (unless a later date is determined by action of the Board of
Directors) and will expire at the close of business on March 7, 2000, unless
earlier redeemed by the Company as described below.
The Rights Agreement provides that as soon as practicable after a
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Stock as of the close of business on a Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.
Except as otherwise provided in the Rights Agreement or determined by the Board
of Directors, only shares of Common Stock issued prior to a Distribution Date
will be issued with Rights.
The Rights Agreement provides that unless such transaction is approved in
advance by the Board of Directors, upon the occurrence of any of the events
listed in clauses (ii), (iii) or (iv) above, each holder of a Right (except
Rights voided as set forth below) will thereafter have the right to receive,
upon exercise, Common Stock (or, in certain circumstances, other securities of
the Company or other consideration) at 50% of the then-market price (the
"Flip-In").
The Rights Agreement provides that unless such transaction is approved in
advance by the Board of Directors, upon the occurrence of any of the events
listed in clauses (v), (vi) or (vii) above, each holder of a Right (except
Rights voided as set forth below) will thereafter have the right to receive,
upon exercise, common stock of the acquiring company at 50% of the then market
price (the "Flip-Over").
The Rights Agreement provides that, to the extent permitted by applicable
law, upon the occurrence of any of the events set forth in clauses (ii) through
(vii) above, all Rights beneficially owned by any Acquiring Person will be null
and void, and therefore the Acquiring Person and any transferee of the Acquiring
Person will not be able to purchase shares at a 50% discount.
The Rights Agreement provides that the Purchase Price payable, and the
number of shares of Common Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Common Stock, (ii) if holders of the Common Stock
are granted certain rights or warrants to subscribe for Common Stock or
convertible securities at less than the current market price of the Common
Stock, or (iii) upon the distribution to holders of the Common Stock of
evidences of indebtedness or assets (excluding regular quarterly cash
dividends).
The Rights Agreement further provides that, at any time, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors) (the "Redemption Price"). Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the $.01
redemption price.
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The Rights Agreement provides that, until a Right is exercised, the holder
thereof, as such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends.
While the distribution of the Rights was not taxable to shareholders or to
the Company, shareholders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exercisable for Common Stock
(or other consideration) of the Company or for common stock of the acquiring
company as set forth above.
The Rights Agreement provides that the Board of Directors of the Company may
supplement or amend any provision of the Rights Agreement; PROVIDED, HOWEVER
that after the date upon which the Rights are first exercisable, no supplement
or amendment shall be made which changes the redemption price, the final
expiration date of the Rights, the Purchase Price or the number of shares of
Common Stock for which a Right is exercisable. The Rights Agreement further
provides that the Board of Directors of the Company may, at any time, delay a
Distribution Date and/or the date upon which the Rights first become
exercisable.
Each share of Common Stock of the Company outstanding and each share held in
treasury at the close of business on March 7, 1990 received one Right. So long
as the Rights are attached to the Common Stock, one additional Right (as such
number may be adjusted pursuant to the provisions of the Rights Agreement) shall
be deemed to be delivered for each share of Common Stock issued by the Company
subsequent to March 7, 1990.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner which causes the Rights to become discount Rights unless the offer
is approved in advance by the Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors since the Board of Directors may, at its option, redeem all but not
less than all the then outstanding Rights at the Redemption Price.
On November 21, 1997, the Board of Directors adopted resolutions pertaining
to the Rights Agreement (i) delaying the Distribution Date solely in connection
with the Offer, the Merger, the Equity Contribution and the other transactions
contemplated by the Merger Agreement and the Support Agreement until December
31, 1997 or such other date as the Board may resolve, (ii) approving the Offer,
the Merger, the Equity Contribution, the Support Agreement and the transactions
contemplated by the Merger Agreement, pursuant to which Purchaser will become a
beneficial owner of Shares in excess of 20% of the Shares outstanding, so that
(x) Purchaser will not become an Acquiring Person as a result of the
transactions contemplated by the Merger Agreement; and (y) the Flip-In and
Flip-Over provisions described above shall not apply to any such transactions or
agreements; and (iii) authorizing and directing officers of the Company to, if
they deem it necessary in order to consummate the transactions contemplated by
the Merger Agreement and the Support Agreement, amend the Rights Agreement to
provide that none of the execution of the Merger Agreement or the Support
Agreement, the making of the Offer, the acquisition of Shares pursuant to the
Offer, the Equity Contribution, the consummation of the Merger or the other
transactions contemplated by the Merger Agreement will (a) cause any Rights
issued to become exercisable, (b) cause Purchaser or any of its affiliates or
associates to become an Acquiring Person or (c) give rise to a Distribution Date
or a Flip-In, Flip-Over or other Triggering Event (as defined in the Rights
Agreement).
13. DIVIDENDS AND DISTRIBUTIONS. As described more fully in Section 11,
pursuant to the Merger Agreement, the Company has covenanted and agreed that,
during the period from the date of the Merger Agreement to such time as
Purchaser's designees shall constitute a majority of the Company's Board of
Directors, except as expressly contemplated by the Merger Agreement, the Company
will not, without the prior written consent of Purchaser, among other things,
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock. If the Company
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<PAGE>
should, however, on or after the date of the Merger Agreement take any such
action, or disclose that it has done so, then without prejudice to Purchaser's
rights under Section 15, Purchaser reserves the right to make such adjustments
to the purchase price and other terms of the Offer as it deems appropriate to
reflect such action.
Similarly, as described more fully in Section 11, pursuant to the Merger
Agreement, the Company has covenanted and agreed that, during the period from
the date of the Merger Agreement to such time as Purchaser's designees shall
constitute a majority of the Company's Board of Directors, except as expressly
contemplated by the Merger Agreement, the Company will not, without the prior
written consent of Purchaser, among other things, declare, set aside, make or
pay any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock. If on or after the date of
the Merger Agreement, the Company should nonetheless declare or pay any cash or
stock dividend or other distribution on, or issue any right with respect to, the
Shares that is payable or distributable to shareholders of record on a date
prior to the transfer to the name of Purchaser or the nominee or transferee of
Purchaser on the Company's stock transfer records of such Shares that are
purchased pursuant to the Offer, then without prejudice to Purchaser's rights
under Section 15, (i) the purchase price payable per Share by Purchaser pursuant
to the Offer will be reduced to the extent any such dividend or distribution is
payable in cash and (ii) any non-cash dividend, distribution (including
additional Shares) or right received and held by a tendering shareholder shall
be required to be promptly remitted and transferred by the tendering shareholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance or appropriate assurance
thereof, Purchaser will, subject to applicable law, be entitled to all rights
and privileges as owner of any such non-cash dividend, distribution or right and
may withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by Purchaser in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NYSE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will reduce
the number of holders of Shares. This could adversely affect the liquidity and
market value of the remaining Shares held by the public. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer meet
the requirements of the NYSE for continued listing. The NYSE would normally give
consideration to suspending or removing from the list a security of a company
when (i) the number of shareholders is less than 1,200 or (ii) the number of
publicly-held shares is less than 600,000, and the aggregate market value of
publicly held shares subject to adjustment is less than $8 million. For purposes
of (i) above, the number of beneficial holders of stock held in the name of NYSE
member organizations will be considered in addition to the holders of record.
For purposes of (ii) above, the shares held by officers, directors, or their
immediate families and other concentrated holdings of 10% or more are excluded
in calculating the number of publicly held shares. If as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NYSE for continued listing the market for the Shares
could be adversely affected.
In the event that the Shares no longer meet the requirements of the NYSE for
continued listing, it is possible that such Shares would continue to trade on
other securities exchanges or in the over-the-counter market and that price
quotations would be reported by such exchanges or through other sources.
However, the extent of the public market for the Shares and the availability of
such quotations would depend upon such factors as the number of shareholders
and/or the aggregate market value of the Shares remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act as described
below and other factors. Purchaser cannot predict whether the reduction in the
number of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of the Shares.
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<PAGE>
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to holders of the Shares and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of the
securities pursuant to Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act").
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for
any Shares tendered pursuant to the Offer, and may postpone the acceptance for
payment or, subject to the restriction referred to above, payment for any Shares
tendered pursuant to the Offer, and may amend or terminate the Offer as to any
Shares not then paid for if, prior to the expiration of the Offer, (i) any of
the Minimum Condition, the HSR Act Condition or the Debt Offer Condition has not
been met, or (ii) at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment of Shares, any of the following events have
occurred:
(a) there shall have been instituted or pending any action or proceeding
brought by any governmental authority before any federal or state court, or
any order or preliminary or permanent injunction entered in any action or
proceeding before any federal or state court or governmental, administrative
or regulatory authority or agency, or any other action taken, or statute,
rule, regulation, legislation, interpretation, judgment or order enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or to the Offer or the Merger, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency
which could reasonably be expected to have the effect of: (i) making
illegal, materially delaying or otherwise directly or indirectly restraining
or prohibiting or making materially more costly the making of the Offer, the
acceptance for payment of, or payment for, some of or all the Shares by
Purchaser or any of its affiliates, or the consummation of any of the
transactions contemplated by the Merger Agreement or materially delaying the
Merger; (ii) prohibiting or materially limiting the ownership or operation
by the Company or any of its Significant Subsidiaries or Purchaser or any of
Purchaser's affiliates of all or any material portion of the business or
assets of the Company or any of its Significant Subsidiaries, or compelling
Purchaser or any of its affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company or any of its
Significant Subsidiaries or Purchaser or any of its affiliates, as a result
of the transactions contemplated by the Offer or the Merger Agreement; (iii)
imposing or confirming limitations on the ability of Purchaser or any of its
affiliates effectively to acquire or hold or to exercise full rights of
ownership of Shares, including without limitation the right to vote any
Shares acquired or owned by Purchaser or any of its affiliates on all
matters properly presented to the shareholders of the Company, including
without limitation the adoption and approval of the Merger Agreement and the
Merger or the right to vote any shares of capital stock of any subsidiary
directly or indirectly owned by the Company; or (iv) requiring divestiture
by Purchaser or any of its affiliates of any Shares;
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<PAGE>
(b) there shall have occurred, after the date of the Merger Agreement,
an event that has had a material adverse effect on the business, operations,
assets, liabilities, properties, financial condition, or results of
operations of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect");
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or in
the Nasdaq National Market for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference not relating to monetary conditions), (ii) a decline of at
least 25% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date of the Merger Agreement, or a
material disruption of or material adverse change in financial, banking or
capital market conditions that could materially adversely affect syndication
of loan facilities, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iv) any
limitation (whether or not mandatory) by any domestic government or
governmental, administrative or regulatory authority or agency on, or any
other event that could reasonably be expected to materially adversely affect
the extension of credit by banks or other lending institutions, (v) a
commencement of a war or armed hostilities or other national or
international calamity having a Material Adverse Effect or materially
adversely affecting (or materially delaying) the consummation of the Offer
or any of the other transactions contemplated by the Merger Agreement or
(vi) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
(d) (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 more than 15.0% of the outstanding Shares has been acquired by any
corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than Purchaser or any of its
affiliates, or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Purchaser the approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Acquisition Proposal or any
other acquisition of Shares other than the Offer and the Merger or (B) any
such corporation, partnership, person or other entity or group shall have
entered into a definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Proposal;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct, or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of such
determination;
(f) 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;
(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(h) all consents and approvals of and notices to or filings with
governmental authorities and third parties required in connection with the
transactions contemplated by the Merger Agreement shall not have been
obtained or made other than those the absence of which, individually or in
the aggregate, would not have a Material Adverse Effect or prevent or
materially delay consummation of any of the transactions contemplated by the
Merger Agreement.
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<PAGE>
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 (subject in each case to the terms of the
Merger Agreement). 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. Any determination by Purchaser concerning the events
described in this Section 15 will be final and binding upon all parties.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Except as set forth below, based on its examination of publicly
available filings by the Company with the Commission and other publicly
available information concerning, and representations and statements by, the
Company, Purchaser is not aware of any licenses or other regulatory permits that
appear to be material to the business of the Company and its subsidiaries, taken
as a whole, that might be adversely affected by Purchaser's acquisition of
Shares (and the indirect acquisition of the stock of the Company's subsidiaries)
as contemplated herein, or of any filings, approvals or other actions by or with
any domestic (federal or state), foreign or supranational governmental authority
or administrative or regulatory agency that would be required prior to the
acquisition of Shares (or the indirect acquisition of the stock of the Company's
subsidiaries) by Purchaser pursuant to the Offer as contemplated herein. Should
any such approval or other action be required, it is Purchaser's present
intention to seek such approval or action. There can be no assurance that any
such approval or other action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company or Purchaser or that certain parts of the businesses of the Company or
Purchaser might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken, any of which could cause Purchaser to elect (subject to the terms of the
Merger Agreement) to terminate the Offer without the purchase of the Shares
thereunder.
STATE TAKEOVER LAWS. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. In 1982, the Supreme
Court of the United States, in EDGAR V. MITE CORP., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to certain
other state takeover statutes. However, in 1987, in CTS CORP. V. DYNAMICS CORP.
OF AMERICA, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and in particular those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining shareholders, provided that such laws were
applicable only under certain conditions. Subsequently, in TLX ACQUISITION CORP.
V. TELEX CORP., a federal district court in Oklahoma ruled that the Oklahoma
statutes were unconstitutional insofar as they applied to corporations
incorporated outside Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in GRAND
METROPOLITAN PLC V. BUTTERWORTH that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
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The Company is incorporated in New York. Section 912 of the NYBCL generally
prohibits such a New York corporation from engaging in certain "business
combinations" (defined to include mergers and consolidations) with an
"interested shareholder" (defined generally as any person that beneficially owns
20% or more of the outstanding voting securities of the corporation) for a
period of five years after the date the person became an interested shareholder
unless, before such date, the board of directors of the corporations approved
either the business combination or the purchase of 20% or more of the
corporation's voting securities by the interested shareholder or certain other
statutory conditions have been met. On November 21, 1997, the Company's Board of
Directors unanimously approved the acquisition of beneficial ownership of Shares
contemplated by the Offer, the Merger, the Equity Contribution, the Merger
Agreement and the Support Agreement for purposes of Section 912. Accordingly,
Section 912 is inapplicable to, and will not prevent consummation of, the
Merger.
New York has also adopted the New York Security Takeover Disclosure Act, as
amended (the "NYSTDA"), which purports to apply to any tender offer to purchase
any equity security of a "target company" (which is defined to mean a
corporation organized under the laws of the State of New York which has its
principal executive offices or significant business operations located within
the State of New York) if, after the tender offer, the offeror would be a
beneficial owner of more than 5% of any class of the issued and outstanding
equity securities of such target company. If applicable, the NYSTDA requires an
offeror to file with the Attorney General of the State of New York and deliver
to the target company a registration statement as soon as practicable on the
date of commencement of the tender offer. The NYSTDA also permits among other
things, an investigation and public hearing to review the adequacy of the
required disclosure. Purchaser has filed a registration statement with the
Attorney General of the State of New York, and has included in Schedule II to
this Offer to Purchase certain additional information required to be disclosed
by the NYSTDA.
Except as described herein, Purchaser has not attempted to comply with any
state takeover statutes in connection with the Offer. Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 15.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied.
Purchaser intends, as soon as reasonably practicable following the date
hereof, to file with the FTC and the Antitrust Division a Premerger Notification
and Report Form in connection with the purchase of Shares pursuant to the Offer.
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting
period following the filing by Purchaser, unless both the Antitrust Division and
the FTC terminate the waiting period prior thereto. If, within such 15-calendar
day waiting period, either the Antitrust Division or the FTC requests additional
information or documentary material from Purchaser, the waiting period would be
extended for an additional 10 calendar days following substantial compliance by
Purchaser with such request. Thereafter, the waiting period could be extended
only by court order. If the acquisition of Shares is delayed pursuant to a
request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not
(except as otherwise provided in the Merger Agreement), be extended and in any
event the purchase of and payment for Shares will be deferred until 10 days
after the request is substantially complied with, unless the waiting period is
sooner terminated by the FTC and the Antitrust Division. See Section 2. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the
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rules promulgated thereunder, except by court order. Any such extension of the
waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase by
Purchaser of Shares pursuant to the Offer, either of the FTC and the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of the Company or its
subsidiaries. Private parties and state attorneys general may also bring legal
action under federal or state antitrust laws under certain circumstances.
Based upon an examination of publicly available information and information
provided by the Company relating to the businesses in which the Company and its
subsidiaries are engaged, Purchaser believes that the acquisition of Shares
pursuant to the Offer would not violate the antitrust laws. There can be no
assurance, however, that a challenge to the Offer on antitrust grounds will not
be made or, if such challenge is made, what the outcome will be. See Section 15
for certain conditions to the Offer, including conditions with respect to
litigation and certain government actions.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Chase Securities Inc. is acting as Dealer Manager in
connection with the Offer. As compensation for its services as Dealer Manager,
Chase Securities Inc. will receive a fee of approximately $250,000 if the Offer
is consummated. Purchaser will also reimburse Chase Securities Inc. for
reasonable out-of-pocket expenses including reasonable attorney's fees and has
also agreed to indemnify Chase Securities Inc. against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
Federal securities laws. In addition, Chase Securities Inc. is serving as
Arranger and its affiliate, The Chase Manhattan Bank, is serving as
Administrative Agent in connection with the Financing, pursuant to which they
will receive customary fees.
Purchaser has retained D. F. King & Co., Inc. to act as the Information
Agent and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee shareholders to forward the Offer materials
to beneficial owners. The Information Agent and the Depositary will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for reasonable out-of-pocket expenses. Purchaser has also
agreed to indemnify the Information Agent and the Depositary against certain
liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws.
Purchaser will not pay any fees or commissions to any broker or dealer or
any other person for soliciting tenders of Shares pursuant to the Offer (other
than to the Dealer Manager, the Information Agent and the Depositary). Brokers,
dealers, commercial banks and trust companies will, upon request, be reimbursed
by Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering materials to their customers.
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18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase
and the related Letter of Transmittal and is being made to all holders of
Shares. Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with any such state statute. If after such
good faith effort, Purchaser cannot comply with such state statute, the Offer
will not be made to nor will tenders be accepted from or on behalf of the
holders of Shares in such state. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of Purchaser by the Dealer
Manager or one or more registered brokers or dealers that are licensed under the
laws of such jurisdiction.
Purchaser has filed with the Commission a Schedule 14D-1 (including
exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer. Such statement and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained from the offices of the Commission (except that they will not be
available at the regional offices of the Commission) in the manner set forth in
Section 8 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED.
CYRUS ACQUISITION CORP.
November 25, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER,
MEMBERS OF CYPRESS L.L.C. AND
DIRECTORS AND EXECUTIVE OFFICERS OF ONWIST
1. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The name, present
principal occupation or employment and five-year employment history of each
director and executive officer of Purchaser are set forth below. All directors
and executive officers listed below are citizens of the United States. The
business address of Mr. Stern, Mr. Spalding and Mr. Shirazi is 65 East 55th
Street, 19th Floor, New York, NY 10022.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
POSITION EMPLOYMENT HISTORY
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
James A. Stern.......................................... Chairman of Cypress L.L.C. since May 1994. Prior to May
Director 1994, Mr. Stern was a Managing Director with Lehman
Brothers where he was the head of the Merchant Banking
Group.
David P. Spalding....................................... Vice Chairman of Cypress L.L.C. since May 1994. Prior to
President and Director May 1994, Mr. Spalding was a Managing Director with
Lehman Brothers where he worked in the Merchant Banking
Group.
Bahram Shirazi.......................................... Principal of Cypress L.L.C. since May 1994. Prior to May
Vice President, Treasurer, 1994, Mr. Shirazi was a Vice President with Lehman
Secretary and Director Brothers where he worked in the Merchant Banking Group.
</TABLE>
2. MEMBERS OF CYPRESS L.L.C. The name, present principal occupation or
employment and five-year employment history of each member of Cypress L.L.C. are
set forth below. All persons listed below are citizens of the United States. The
business address of each of the persons listed below is 65 East 55th Street,
19th Floor, New York, New York 10022.
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
James A. Stern.......................................... Chairman of Cypress L.L.C. since May 1994. Prior to May
1994, Mr. Stern was a Managing Director with Lehman
Brothers where he was the head of the Merchant Banking
Group.
Jeffrey P. Hughes....................................... Vice Chairman of Cypress L.L.C. since May 1994. Prior to
May 1994, Mr. Hughes was a Managing Director with Lehman
Brothers where he worked in the Merchant Banking Group.
James L. Singleton...................................... Vice Chairman of Cypress L.L.C. since May 1994. Prior to
May 1994, Mr. Singleton was a Managing Director with
Lehman Brothers where he worked in the Merchant Banking
Group.
David P. Spalding....................................... Vice Chairman of Cypress L.L.C. since May 1994. Prior to
May 1994, Mr. Spalding was a Managing Director with
Lehman Brothers where he worked in the Merchant Banking
Group.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF ONWIST. The name, present principal
occupation or employment and five-year employment history of each director of
Onwist are set forth below. Mr. Douglas and Mr. Smith are citizens of Bermuda.
Mr. Spalding is a citizen of the United States. The business address of Mr.
Douglas and Mr. Smith is c/o Bank of Bermuda (Cayman) Limited, P.O. Box 513
G.T., British American Tower, Third Floor, Georgetown, Grand Cayman, Cayman
Islands, B.W.I. The business address of Mr. Spalding is 65 East 55th Street,
19th Floor, New York, New York 10022.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Luis A. Douglas......................................... Senior Executive Vice President, Corporate Clients of
The Bank of Bermuda Limited since March 1997. Prior to
March 1997, Mr. Douglas was Executive Vice President,
Corporate Trust of The Bank of Bermuda Limited.
David T. Smith.......................................... Senior Vice President, Corporate Trust of The Bank of
Bermuda Limited Since March 1997. Prior to March 1997,
Mr. Smith was a Vice President of The Bank of Bermuda
Limited.
David P. Spalding....................................... Vice Chairman of Cypress L.L.C. since May 1994. Prior to
May 1994, Mr. Spalding was a Managing Director with
Lehman Brothers where he worked in the Merchant Banking
Group.
</TABLE>
I-2
<PAGE>
SCHEDULE II
ADDITIONAL INFORMATION REQUIRED BY THE
NEW YORK SECURITY TAKEOVER DISCLOSURE ACT
Purchaser was incorporated on November 12, 1997. Purchaser has not engaged
in any business since its incorporation or organization other than that incident
to its incorporation or organization and in connection with the Offer, the
Merger, and the other transactions contemplated by the Merger Agreement.
Accordingly, Purchaser has not engaged in any significant community activities,
nor has Purchaser made any significant charitable, cultural, educational or
civic contributions.
Except for the directors and executive officers of Purchaser set forth in
Schedule I, Purchaser has no employees. Accordingly, Purchaser has no existing
pension plans, profit-sharing plans, savings plans, has not provided any
educational opportunities or relocation adjustments to its employees, and has
had no labor or employment-related claims or disputes.
Purchaser has no present plans or proposals to material changes in the
Company's business, corporate structure, management, personnel or activities
which would have a substantial impact on residents of the State of New York.
Except as set forth in this Schedule II, all information regarding Purchaser
and the Company and the Offer required to be disclosed pursuant to the NYSTDA is
set forth in this Offer to Purchase and is incorporated by reference in the
Registration Statement filed pursuant to the NYSTDA.
II-1
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
FACSIMILE:
(201) 329-8936
CONFIRM FACSIMILE BY TELEPHONE ONLY:
(201) 296-4860
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop--Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
</TABLE>
Any questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent. You may also contact your broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
ALL OTHERS CALL TOLL FREE (800) 714-3311
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
Call Collect (212) 270-3939
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 25, 1997
BY
CYRUS ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
FACSIMILE:
(201) 329-8936
Confirm Facsimile by Telephone Only:
(201) 296-4860
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop -- Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates for Shares or Rights (as such terms are defined below) are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if tenders of Shares or Rights are to be made by
book-entry transfer into the account of ChaseMellon Shareholder Services,
L.L.C., as Depositary (the "Depositary"), at The Depository Trust Company
("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a
"Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below). Shareholders who tender Shares or Rights by
book-entry transfer are referred to herein as "Book-Entry Shareholders".
Holders of Shares will be required to tender the Rights associated with each
Share tendered in order to effect a valid tender of such Share. Unless and until
a Distribution Date (as defined in the Offer to Purchase) occurs, a tender of
Shares will also constitute a tender of the associated Rights. See Section 3 of
the Offer to Purchase. If a Distribution Date has occurred, and certificates
representing Rights (the "Rights Certificates") have been distributed to holders
of Shares, such holders will be required to tender Rights Certificates
representing the Rights associated with the Shares being tendered in order to
effect a valid tender of such Shares. A shareholder who desires to tender Shares
and Rights and whose certificates representing such Shares (the "Share
Certificates") and, if applicable, Rights Certificates are not immediately
available, or who cannot deliver the Share Certificates or, if applicable,
Rights Certificates and all other required documents to reach the Depositary on
or prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), or who cannot comply with the procedure for book-entry transfer on a
timely basis, must tender such Shares (and Rights, if applicable) by following
the procedures for guaranteed delivery set forth in Section 3 of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARES CERTIFICATE(S) AND SHARE(S)
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
Total Number
Share of Shares Number of
Certificate Represented By Shares
Number(s)* Certificate(s)* Tendered**
<S> <C> <C> <C>
Total Shares................
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to
have been tendered. See Instruction 4.
</TABLE>
/ / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Check box of Book-Entry Transfer Facility (check one):
/ / The Depository Trust Company / / The Philadelphia Depository Trust
Company
Account Number __________________ Transaction Code Number _________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility (check one):
/ / The Depository Trust Company / / The Philadelphia Depository Trust
Company
Account Number __________________ Transaction Code Number _________________
2
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF RIGHTS TENDERED
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON RIGHT(S) CERTIFICATE(S) AND RIGHT(S)
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
Total Number
Rights of Rights Number of
Certificate Represented By Rights
Number(s)* Certificate(s)* Tendered**
<S> <C> <C> <C>
Total Rights................
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, all Rights represented by certificates delivered to the Depositary will be deemed to
have been tendered. See Instruction 4.
</TABLE>
/ / CHECK HERE IF RIGHTS ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER RIGHTS BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Check box of Book-Entry Transfer Facility (check one):
/ / The Depository Trust Company / / The Philadelphia Depository Trust
Company
Account Number __________________ Transaction Code Number _________________
/ / CHECK HERE IF RIGHTS ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility (check one):
/ / The Depository Trust Company / / The Philadelphia Depository Trust
Company
Account Number __________________ Transaction Code Number _________________
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Cyrus Acquisition Corp., a New York
corporation ("Purchaser"), the above-described shares of Common Stock, par value
$1.00 per share (the "Shares"), of General Host Corporation, a New York
corporation (the "Company"), and the associated common stock purchase rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of March 7,
1990 (as amended, the "Rights Agreement"), between the Company and ChaseMellon
Shareholder Services, L.L.C., as successor to Chemical Bank, as Rights Agent
(the "Rights Agent"), at a purchase price of $5.50 per Share (and associated
Rights), net to the seller in cash without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 25,
1997 (the "Offer to Purchase") and in this Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"). Unless the context
requires otherwise, all references to Shares shall be deemed to refer also to
the associated Rights, and all references to Rights shall be deemed to include
all benefits that may inure to the shareholders of the Company or to holders of
the Rights pursuant to the Rights Agreement. The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, receipt of which is hereby
acknowledged.
Prior to the occurrence of a Distribution Date (as defined in the Offer to
Purchase), a valid tender of Shares will constitute a tender of the associated
Rights. The undersigned understands that if a Distribution Date has occurred and
certificates representing Rights (the "Rights Certificates") have been
distributed to holders prior to the date of tender of the Shares and Rights
tendered herewith pursuant to the Offer, Rights Certificates representing the
Rights associated with the Shares being tendered herewith must be delivered to
the Depositary (as defined below) or, if available, a Book-Entry Confirmation
(as defined herein) must be received by the Depositary with respect thereto in
order for such Shares tendered herewith to be validly tendered. If the
Distribution Date has occurred and Rights Certificates have not been distributed
prior to the time Shares are tendered herewith pursuant to the Offer, the
undersigned agrees to deliver Rights Certificates representing the Rights
associated with the Shares tendered herewith to ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") within three business days after the date
such Rights Certificates are distributed. A tender of Shares without Rights
Certificates constitutes an agreement by the tendering shareholder to deliver
Rights Certificates representing the Rights associated with the Shares tendered
pursuant to the Offer to the Depositary within three business days after the
date such Rights Certificates are distributed. The undersigned understands that
if a Distribution Date occurs prior to the Expiration Date, Purchaser reserves
the Right to require that the Depositary receive such Rights Certificates or a
Book-Entry Confirmation with respect to such Rights prior to accepting Shares
for payment. In that event, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of, or Book-Entry Confirmation with respect to, among other things, Rights
Certificates, if Rights Certificates have been distributed to holders of Shares.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all dividends, distributions (including additional Shares) or
rights declared, paid or issued with respect to the tendered Shares on or after
the date hereof and payable or distributable to the undersigned on a date prior
to the transfer to the name of Purchaser or nominee or transferee of Purchaser
on the Company's stock transfer records of the Shares tendered herewith
(collectively, a "Distribution"), and appoints the Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such Shares
(and any Distribution) with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest in the tendered
Shares) to (a) deliver such Share Certificates (as defined herein) (and any
Distribution) or transfer ownership of such Shares (and any Distribution) on the
account books maintained by a Book-Entry Transfer Facility, together in either
case with appropriate evidences of transfer, to the Depositary for the account
of Purchaser, (b) present such Shares (and any Distribution) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any Distribution), all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of Purchaser and each of them
as such shareholder's proxy, with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by
4
<PAGE>
such shareholder and accepted for payment by Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date hereof. Such proxy shall be deemed to be irrevocable
and coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, Purchaser accepts such Shares for
payment. Upon such acceptance for payment, all prior proxies given by such
shareholder with respect to such Shares (and such other Shares and other
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consents executed (and, if given or
executed, will not be deemed effective). The designees of Purchaser will be,
with respect to the Shares (and such other Shares and other securities),
empowered to exercise all voting and other rights of such shareholder as they in
their sole discretion may deem proper at any annual or special meeting of the
Company's shareholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. Purchaser reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's payment for such Shares, Purchaser must be able to exercise
full voting rights with respect to such Shares and other securities, including
voting at any meeting of shareholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distribution) tendered hereby and (b) when the Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title to the Shares (and any Distribution), free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of the Shares tendered
hereby (and any Distribution). In addition, the undersigned shall promptly remit
and transfer to the Depositary for the account of Purchaser any and all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer; and pending such remittance or
appropriate assurance thereof, Purchaser will be, subject to applicable law,
entitled to all rights and privileges as owner of any such Distribution and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Tenders of
Shares made pursuant to the Offer are irrevocable, except that Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
(as defined in the Offer to Purchase) and, unless theretofore accepted for
payment by Purchaser pursuant to the Offer, may also be withdrawn at any time
after January 24, 1998 (or such later date as may apply in case the Offer is
extended). See Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares and Rights not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered" and "Description of Rights Tendered", respectively. Similarly, unless
otherwise indicated herein under "Special Delivery Instructions", please mail
the check for the purchase price and/or any certificate(s) for Shares and Rights
not tendered or not accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered" and "Description of Rights Tendered",
respectively. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or any certificate(s) for Shares and Rights not tendered or
accepted for payment in the name of, and deliver such check and/or such
certificates to, the person or persons so indicated. Unless otherwise indicated
herein under "Special Payment Instructions", please credit any Shares and Rights
tendered herewith by book-entry transfer that are not accepted for payment by
crediting the account at the Book-Entry Transfer Facility (as defined herein)
designated above. The undersigned recognizes that Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares or Rights
from the name(s) of the registered holder(s) thereof if Purchaser does not
accept for payment any of the Shares or Rights so tendered.
5
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for To be completed ONLY if certificate(s) for
Shares and Rights not tendered or not accepted Shares and Rights not tendered or not accepted
for payment and/or the check for the purchase for payment and/or the check for the purchase
price of Shares and Rights accepted for payment price of Shares and Rights accepted for payment
are to be issued in the name of someone other are to be sent to someone other than the
than the undersigned or if Shares or Rights undersigned or to the undersigned at an address
tendered by book-entry transfer which are not other than that shown above.
accepted for payment are to be returned by
credit to an account maintained at a Book-Entry
Transfer Facility.
Issue: / / check / / certificates to: Issue: / / check / / certificates to:
Name Name
(Please Print) (Please Print)
Address Address
(Include Zip Code)
(Tax Id. or Social Security No.)
(See Substitute Form W-9)
(Include Zip Code)
(Tax Id. or Social Security No.)
(See Substitute Form W-9)
/ / Credit Shares and rights tendered by
book-entry transfer that are not accepted
for payment to (Check one):
/ / DTC / / PDTC
(DTC or PDTC Account No.)
</TABLE>
6
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
SIGN
HERE
X < --
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
Dated: __________________________________________________________________, 199__
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or Rights Certificate(s) or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s) ________________________________________________________________________
(Please Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security Number ___________________________________
COMPLETE SUBSTITUTE FORM W-9
Guarantee of Signature(s)
(See Instructions 1 and 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Name of Firm ___________________________________________________________________
(Please Print)
Address ________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated ____________________________________________________________________ 199__
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares and Rights (which term, for purposes of this
document, shall include any participant in a Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of Shares and/or
Rights) tendered herewith, unless such holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" above, or (b) if such Shares and/or Rights are tendered for the
account of a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program or the Stock Exchange Medallion Program (each
of the foregoing being referred to as an "Eligible Institution"). In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
shareholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made pursuant to the procedure
for tender by book-entry transfer set forth in Section 3 of the Offer to
Purchase. Share Certificates evidencing tendered Shares, or timely confirmation
(a "Book-Entry Confirmation") of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility, as well as this Letter
of Transmittal (or a facsimile hereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message in connection with
a book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase) and, if a Distribution Date occurs, Rights Certificates evidencing
tendered Rights, or timely confirmation of a book-entry transfer of Rights into
the Depositary's account at a Book-Entry Transfer Facility, if available
(together with, if Rights are forwarded separately from Shares, a properly
completed and duly executed Letter of Transmittal (or a facsimile hereof), with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal), must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date or, if later, within three business
days after the date such Rights Certificates are distributed. Shareholders whose
Share Certificates or Rights Certificates are not immediately available
(including Rights Certificates that have not yet been distributed by the
Company) or who cannot deliver their Share Certificates or Rights Certificates
and all other required documents to the Depositary prior to the Expiration Date
or who cannot complete the procedure for delivery by book-entry transfer on a
timely basis may tender their Shares and Rights by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date; (iii) the Share Certificates (or a
Book-Entry Confirmation) representing all tendered Shares, in proper form for
transfer, in each case together with the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry delivery, an Agent's Message) and
any other documents required by this Letter of Transmittal, must be received by
the Depositary within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery; and (iv) the Rights
Certificates, if issued, representing the appropriate number of Rights or a
Book-Entry Confirmation, if available, in each case together with a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof), with
any required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Depositary within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, or if
later, three business days after Rights Certificates are distributed to
shareholders, all as provided in Section 3 of the Offer to Purchase. If Share
Certificates and Rights Certificates are forwarded
8
<PAGE>
separately to the Depositary, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery. Prior to a Distribution Date, a
valid tender of Shares will constitute a tender of the associated Rights.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES OR
RIGHTS CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH
ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares and Rights will be purchased. All tendering shareholders, by
execution of this Letter of Transmittal (or a facsimile hereof), waive any right
to receive any notice of the acceptance of their Shares and Rights for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and Rights and any other
required information should be listed on a separate signed schedule attached
hereto.
4. PARTIAL TENDERS. (Not Applicable to Book-Entry Shareholders) If fewer
than all the Shares evidenced by any Share Certificates submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered". If fewer than all the Rights evidenced by
any Rights Certificates submitted are to be tendered, fill in the number of
Rights which are to be tendered in the box entitled "Number of Rights Tendered".
In such cases, new Share Certificates or Rights Certificates, as the case may
be, for the Shares or Rights that were evidenced by your old Share Certificates
or Rights Certificates, but were not tendered by you, will be sent to you,
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
Share Certificates and all Rights represented by Rights Certificates delivered
to the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares and Rights tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares and Rights are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares and Rights listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment is to be made to or
certificates for Shares or Rights not tendered or not purchased are to be issued
in the name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
9
<PAGE>
If Rights Certificates have been distributed to holders of Shares, such
holders are required to tender Rights Certificate(s) representing the Rights
associated with the Shares tendered in order to effect a valid tender of such
Shares. It is necessary that shareholders follow all signature requirements of
this Instruction 5 with respect to the Rights in order to tender such Rights.
Prior to a Distribution Date, a valid tender of Shares will constitute a tender
of the associated Rights.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of Shares and Rights to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
and Rights not tendered or accepted for payment are to be registered in the name
of, any person other than the registered holder(s), or if tendered
certificate(s) are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder(s) or such person) payable on account
of the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes or an exemption therefrom, is
submitted.
Except as otherwise provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the certificate(s) listed in this
Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares and Rights not tendered or not
accepted for payment are to be issued or returned to, a person other than the
signer of this Letter of Transmittal or if a check and/or such certificates are
to be returned to a person other than the person(s) signing this Letter of
Transmittal or to an address other than that shown in this Letter of
Transmittal, the appropriate boxes on this Letter of Transmittal must be
completed. A Book-Entry Shareholder may request that Shares and/or Rights not
accepted for payment be credited to such account maintained at a Book-Entry
Transfer Facility as such Book-Entry Shareholder may designate under "Special
Payment Instructions". If no such instructions are given, such Shares or Rights
not accepted for payment will be returned by crediting the account at the
Book-Entry Transfer Facility designated above.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger
Agreement (as defined in the Offer to Purchase), the conditions of the Offer
(other than the Minimum Condition (as defined in the Offer to Purchase)) may be
waived by Purchaser in whole or in part at any time and from time to time in its
sole discretion.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a shareholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such shareholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
shareholder or other payee to a $50 penalty. In addition, payments that are made
to such shareholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
10
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Manager or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares or, if a Distribution Date occurs, Rights has been lost, destroyed or
stolen, the shareholder should promptly notify the Depositary. The shareholder
will then be instructed as to the steps that must be taken in order to replace
the certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER, OR THE NOTICE OF GUARANTEED
DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY
PRIOR TO THE EXPIRATION DATE.
11
<PAGE>
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
SUBSTITUTE IN THE BOX AT RIGHT AND CERTIFY OR
FORM W-9 BY SIGNING AND DATING BELOW: Employer Identification Number
------------------------
PART 2--Certification--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding or (b) I have not been notified by
DEPARTMENT OF THE TREASURY the Internal Revenue Service (the "IRS") that I am subject to
INTERNAL REVENUE SERVICE backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I
PAYEE'S REQUEST FOR am no longer subject to backup Taxpayer withholding.
TAXPAPYER IDENTIFICATION CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if
NUMBER ("TIN") you have been notified by the IRS that you are currently subject
to backup withholding because of under-reporting interest or
dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject
to backup withholding, do not cross out such item (2).
Signature PART 3--
SIGN HERE --> Date , 199 Awaiting TIN / /
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature _____________________________ Date ____________________________, 199__
12
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
ALL OTHERS CALL TOLL FREE (800) 714-3311
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
(Call Collect) (212) 270-3939
November 25, 1997
13
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) or the
associated common stock purchase rights (the "Rights") are not immediately
available or the certificates for Shares or Rights and all other required
documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase) or if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This instrument may be delivered by hand
or transmitted by facsimile transmission or mailed to the Depositary.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
FACSIMILE:
(201) 329-8936
CONFIRM FACSIMILE BY TELEPHONE ONLY:
(201) 296-4860
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop--Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to Cyrus Acquisition Corp., a New York
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated November 25, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer"), receipt of which is hereby acknowledged, the number of
shares indicated below of Common Stock, par value $1.00 per share (the
"Shares"), of General Host Corporation, a New York corporation, and the
associated Rights, pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Signature(s) Address(es)
Name(s) of Record Holders
Zip Code
Area Code and Tel. No(s)
Please Type or Print
Number of Shares and Rights Check one box if Shares and Rights will be
tendered by book-entry transfer)
Certificate Nos. (If Available) / / The Depository Trust Company
/ / The Philadelphia Depository Trust Company
Account Number
Dated , 199
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program or the Stock Exchange Medallion
Program, (a) represents that the above named person(s) "own(s)" the Shares and
Rights tendered hereby within the meaning of Rule 14e-4 under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender
of Shares and Rights complies with Rule 14e-4, (c) guarantees to deliver to the
Depositary either the certificates evidencing all tendered Shares, in proper
form for transfer, or to deliver Shares pursuant to the procedure for book-entry
transfer into the Depositary's account at The Depository Trust Company or The
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"),
in either case together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three New York
Stock Exchange trading days after the date hereof and (d) guarantees, if a
Distribution Date (as defined in the Offer to Purchase) occurs, to deliver
certificates representing the Rights ("Rights Certificates") in proper form for
transfer, or to deliver such Rights pursuant to the procedure for book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility,
together with, if Rights are forwarded separately, the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed with any required
signature guarantees or an Agent's Message (as defined in the Offer to Purchase)
in the case of a book-entry delivery, and any other required documents, all
within the later of (i) three New York Stock Exchange trading days after the
date hereof and (ii) three business days after the date the Rights Certificates
are distributed to holders of Shares.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Name
Address Please Type or Print
Title:
Zip Code
Dated: , 199
Area Code and Tel No.
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR, IF A DISTRIBUTION DATE OCCURS,
RIGHTS WITH THIS NOTICE. CERTIFICATES FOR SHARES OR IF A DISTRIBUTION
DATE OCCURS, RIGHTS SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
AT
$5.50 NET PER SHARE
BY
CYRUS ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
November 25, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Cyrus Acquisition Corp., a New York corporation
("Purchaser"), to act as dealer manager (the "Dealer Manager") in connection
with Purchaser's offer to purchase for cash all the outstanding shares of Common
Stock, par value $1.00 per share (the "Shares"), of General Host Corporation, a
New York corporation (the "Company"), and the associated common stock purchase
rights ("the Rights") issued pursuant to the Rights Agreement, dated as of March
7, 1990, as amended, between the Company and ChaseMellon Shareholder Services,
L.L.C., as successor to Chemical Bank, as Rights Agent (the "Rights Agent"), at
a purchase price of $5.50 per Share (and associated Rights), net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 25, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, as amended from
time to time, together constitute the "Offer") enclosed herewith. Holders of
Shares will be required to tender the Rights associated with each Share tendered
in order to effect a valid tender of such Share. If a Distribution Date (as
defined in the Offer to Purchase) has not occurred prior to the time Shares are
tendered pursuant to the Offer, a tender of Shares will constitute a tender of
the associated Rights. If a Distribution Date has occurred and the certificates
representing such Rights ("Rights Certificates") have been distributed by the
Company to holders of Shares, such holders of Shares will be required to tender
Rights Certificates representing the Rights associated with the Shares being
tendered in order to effect valid tender of such Shares. Holders of Shares and
Rights whose certificates for such Shares (the "Share Certificates") and, if
applicable, Rights Certificates are not immediately available or who cannot
deliver their Share Certificates and, if applicable, Rights Certificates and all
other required documents to the Depositary (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares and Rights according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. As used herein, unless the context otherwise
requires, the term "Shares" includes the associated Rights. Please furnish
copies of the enclosed materials to those of your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee. Enclosed
herewith for your information and forwarding to your clients are copies of the
following documents:
<PAGE>
1. The Offer to Purchase, dated November 25, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if Share Certificates or, if applicable, Rights Certificates are not
immediately available or if such certificates and all other required
documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C.
(the "Depositary") by the Expiration Date or if the procedure for book-entry
transfer cannot be completed by the Expiration Date.
4. The Letter to Shareholders of the Company from the Chairman, Chief
Executive Officer and President of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, which includes the
recommendation of the Board of Directors of the Company that shareholders
accept the Offer and tender their Shares to Purchaser pursuant to the Offer.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE
OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn pursuant to the Offer prior to the Expiration Date
such number of Shares which constitutes, on a fully-diluted basis (excluding the
dilutive effects of any of the Company's 8% Convertible Subordinated Notes Due
2002 which remain outstanding and unconverted at the Expiration Date), more than
two-thirds of the Shares on the date of purchase, (2) the expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and (3) there being validly
tendered and not withdrawn in the tender offer and consent solicitation being
conducted by the Company concurrently with the Offer (the "Debt Offer") consents
representing at least a majority in principal amount of all of the Company's
outstanding 11 1/2% Senior Notes Due 2002 (the "Senior Notes"), all other
conditions to the Debt Offer having been satisfied or waived and the amendment
to the indenture governing such Senior Notes contemplated by the Debt Offer
having been executed and becoming operative immediately following the
consummation of the Debt Offer.
The Board of Directors of the Company (the "Board of Directors") has
unanimously approved the Merger Agreement (as defined below) and the
transactions contemplated thereby, including the Offer and the Merger (as
defined below), has determined that terms of the Offer and the Merger are fair
to, and in the best interests of, the holders of the Shares, and unanimously
recommends that the holders of Shares accept the Offer and tender their Shares
to Purchaser pursuant to the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 22, 1997 (the "Merger Agreement"), by and between Purchaser and
the Company. The Merger Agreement provides, among other things, for the making
of the Offer by Purchaser, and further provides that, following the completion
of the Offer, upon the terms and subject to the conditions of the Merger
Agreement, and in accordance with the New York Business Corporation Law,
Purchaser will be merged with and into the Company (the "Merger"). Following the
Merger, the Company will continue as the surviving corporation, and the separate
corporate existence of Purchaser will cease.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and other required documents should be
2
<PAGE>
sent to the Depositary, and (ii) either Share Certificates and, if applicable,
Rights Certificates, representing the tendered Shares and, if applicable,
tendered Rights should be delivered to the Depositary, or such Shares and Rights
should be tendered by book-entry transfer into the Depositary's account
maintained at one of the Book-Entry Transfer Facilities (as described in the
Offer to Purchase), all in accordance with the instructions set forth in the
Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or, if applicable, Rights Certificates or other
required documents on or prior to the Expiration Date or to comply with the
book-entry transfer procedures on a timely basis, a tender may be effected by
following the guaranteed delivery procedures specified in Section 3 of the Offer
to Purchase.
Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and D. F. King &
Co., Inc. (the "Information Agent") (as described in the Offer to Purchase)) for
soliciting tenders of Shares pursuant to the Offer. Purchaser will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. Purchaser
will pay or cause to be paid any stock transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Inquiries you may have with respect to the Offer should be addressed to the
Information Agent or the undersigned, at the respective addresses and telephone
numbers set forth on the back cover of the Offer to Purchase. Additional copies
of the enclosed materials may be obtained from the Information Agent.
Very truly yours,
CHASE SECURITIES INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEALER MANAGER, THE COMPANY, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
AT
$5.50 NET PER SHARE
BY
CYRUS ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated November 25,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal relating
to an offer by Cyrus Acquisition Corp., a New York corporation ("Purchaser"), to
purchase all of the outstanding shares of Common Stock, par value $1.00 per
share (the "Shares"), of General Host Corporation, a New York corporation (the
"Company"), and the associated common stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of March 7, 1990 (as amended,
the "Rights Agreement"), between the Company and ChaseMellon Shareholder
Services, L.L.C., as successor to Chemical Bank, as Rights Agent, at a purchase
price of $5.50 per Share (and associated Rights), net to the seller in cash
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"). Unless the context
requires otherwise, all references to "Shares" shall be deemed to refer also to
the associated Rights, and all references to Rights shall be deemed to include
all benefits that may inure to the shareholders of the Company or to the holders
of the Rights pursuant to the Rights Agreement. Holders of Shares and Rights
whose certificates for such Shares (the "Share Certificates") and, if
applicable, for such Rights (the "Rights Certificates") are not immediately
available or who cannot deliver their Share Certificates and, if applicable,
Rights Certificates and all other required documents to ChaseMellon Shareholder
Services, L.L.C., the Depositary, prior to the Expiration Date (as defined in
the Offer to Purchase), or who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer to Purchase. Your
attention is directed to the following:
1. The tender price is $5.50 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
<PAGE>
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below), has
determined that the terms of the Offer and the Merger are fair to, and in
the best interests of, the holders of Shares, and unanimously recommends
that holders of Shares accept the Offer and tender their Shares to Purchaser
pursuant to the Offer.
4. The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of November 22, 1997 (the "Merger Agreement") by and between
Purchaser and the Company. The Merger Agreement provides, among other
things, that, subject to the terms and conditions of the Merger Agreement,
subsequent to the consummation of the Offer, Purchaser will merge with and
into the Company.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, December 23, 1997, unless the Offer is extended.
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
7. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn pursuant to the Offer prior to the
Expiration Date such number of Shares which constitutes, on a fully-diluted
basis (excluding the dilutive effects of any of the Company's 8% Convertible
Subordinated Notes Due 2002 which remain outstanding and unconverted at the
Expiration Date), more than two-thirds of the Shares on the date of
purchase, (2) the expiration or termination of any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and (3) there being validly tendered and not withdrawn in the tender offer
and consent solicitation being conducted by the Company concurrently with
the Offer (the "Debt Offer") consents representing at least a majority in
principal amount of all of the Company's outstanding 11 1/2% Senior Notes
Due 2002 (the "Senior Notes"), all other conditions to the Debt Offer having
been satisfied or waived and the amendment to the indenture governing such
Senior Notes contemplated by the Debt Offer having been executed and
becoming operative immediately following the consummation of the Debt Offer.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. Purchaser is
not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with any such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to, nor will tenders be accepted from or on behalf of, the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Chase Securities
Inc., the Dealer Manager for the Offer, or one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
BY
CYRUS ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated November 25, 1997 (the "Offer to Purchase") and the related
Letter of Transmittal pursuant to an offer by Cyrus Acquisition Corp., a New
York corporation, to purchase all outstanding shares of Common Stock, par value
$1.00 per share (the "Shares"), of General Host Corporation, a New York
corporation, and the associated common stock purchase rights (the "Rights"), at
a purchase price of $5.50 per Share, net to the seller in cash without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase and the related Letter of Transmittal.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares which are held by you for the
account of the undersigned), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
<TABLE>
<S> <C>
Number of Shares (and Rights) SIGN HERE
to be Tendered*
Shares (and Rights) ---------------------------------------------
Dated , 199
---------------------------------------------
Signature(s)
---------------------------------------------
Please Print Name(s)
---------------------------------------------
Address
---------------------------------------------
Area Code and Telephone Number
---------------------------------------------
Tax, Identification, or Social
Security Number
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares (and
Rights) held by us for your account are to be tendered. Prior to a
Distribution Date (as defined in the Offer to Purchase), a valid tender of
Shares will constitute a tender of the associated Rights.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
- ---------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the account
(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, the first
individual on the account
(1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
(1)
- ---------------------------------------------------------------
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
<S> <C> <C>
- ---------------------------------------------------------------
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person (3)
a designated ward,
7. a. The usual revocable The grantor-trustee (1)
savings trust account
(grantor is also
trustee)
b. So-called trust
account that is not a The actual owner (1)
legal or valid trust
under State law
8. Sole proprietorship The owner (4)
account
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)
(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following (Section references are to the Internal Revenue Code):
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), an individual
retirement plan or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free government bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure is strong evidence of
negligence. If negligence is shown, you will be subject to a penalty of 20% on
any portion of an underpayment attributable to that failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 11(a)(7)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES (AS DEFINED BELOW). THE OFFER (AS DEFINED BELOW) IS MADE SOLELY
BY THE OFFER TO PURCHASE DATED NOVEMBER 25, 1997 AND THE RELATED LETTER OF
TRANSMITTAL (AND ANY AMENDMENTS THERETO) AND IS BEING MADE TO ALL HOLDERS OF
SHARES. PURCHASER (AS DEFINED BELOW) IS NOT AWARE OF ANY STATE WHERE THE MAKING
OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO
STATE STATUTE. IF PURCHASER BECOMES AWARE OF ANY STATE WHERE THE MAKING OF THE
OFFER IS PROHIBITED, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH ANY
SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, PURCHASER CANNOT COMPLY WITH ANY
APPLICABLE STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH STATE. IN THOSE
JURISDICTIONS WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO
BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON
BEHALF OF PURCHASER BY CHASE SECURITIES INC. OR ONE OR MORE REGISTERED BROKERS
OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
GENERAL HOST CORPORATION
AT
$5.50 NET PER SHARE
BY
CYRUS ACQUISITION CORP.
Cyrus Acquisition Corp., a New York corporation ("Purchaser"), is offering
to purchase all of the outstanding shares of Common Stock, par value $1.00 per
share (the "Shares"), of General Host Corporation, a New York corporation (the
"Company"), and the associated common stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of March 7, 1990 (as amended,
the "Rights Agreement"), between the Company and ChaseMellon Shareholder
Services, L.L.C., as successor to Chemical Bank, as Rights Agent (the "Rights
Agent"), at a purchase price of $5.50 per Share (and associated Rights), net to
the seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 25, 1997 (the
"Offer to Purchase") and in the related Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer"). Unless the context requires
otherwise, all references to Shares shall be deemed to refer also to the
associated Rights, and all references to Rights shall be deemed to include all
benefits that may inure to the shareholders of the Company or to holders of
Rights pursuant to the Rights Agreement. Holders of Shares will be required to
tender the Rights associated with each Share tendered in order to effect a valid
tender of such Share. If separate certificates for the Rights ("Rights
Certificates") are not issued, a valid tender of Shares will also constitute a
tender of the associated Rights.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, DECEMBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn pursuant to the Offer prior to the expiration of the
Offer such number of Shares which constitutes, on a fully-diluted basis
(excluding the dilutive effects of any of the Company's 8% Convertible
Subordinated Notes Due 2002 which remain outstanding and unconverted at the
expiration of the Offer), more than two-thirds of the Shares on the date of
purchase (the "Minimum Condition"), (2) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and (3) there being validly tendered and not withdrawn in
the tender offer and consent solicitation being conducted by the Company
concurrently with the Offer (the "Debt Offer") consents representing at least a
majority in principal amount of all of the Company's outstanding 11-1/2% Senior
Notes Due 2002 (the "Senior Notes"), all other conditions to the Debt Offer
having been satisfied or waived and the amendment to the indenture governing
such Senior Notes contemplated by the Debt Offer having been executed and
becoming operative immediately following the consummation of the Debt Offer.
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Following the consummation of the Offer, Purchaser
intends to effect the Merger, as described below.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 22, 1997 (the "Merger Agreement"), by and between Purchaser and
the Company. The Merger Agreement provides, among other things, for the making
of the Offer by Purchaser, and further provides that, following the completion
of the Offer, upon the terms and subject to the conditions of the Merger
Agreement, and in accordance with the New York Business Corporation Law (the
"NYBCL"), Purchaser will be merged with and into the Company (the "Merger"), and
each Share issued and outstanding immediately prior to the effective time of the
Merger (other than Shares owned by the Company or any subsidiary of the Company
and Shares owned by Purchaser, which shall be cancelled, and other than Shares,
if any, held by shareholders who have properly exercised and perfected appraisal
rights under Sections 623 and 910 of the NYBCL) will, by virtue of the Merger
and without any action on the part of the holders of the Shares, be converted
into the right to receive $5.50 in cash, payable to the holder thereof, without
interest, upon the surrender of the certificate formerly representing such
Share, less any required withholding taxes. The Merger Agreement is more fully
described in Section 11 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE SHARES, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES TO
PURCHASER PURSUANT TO THE OFFER.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of Purchaser's acceptance for
payment of such Shares for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payments from Purchaser and transmitting such payments to
shareholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES
WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY PURCHASER, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases,
<PAGE>
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates
representing Shares (the "Share Certificates") and, if applicable, Rights
Certificates, or timely confirmation of a book-entry transfer of such Shares
and, if applicable, Rights into the Depositary's account at The Depository Trust
Company or the Philadelphia Depository Trust Company (each a "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined in Section 2 of the Offer to Purchase) in
connection with a book-entry transfer, and (iii) any other documents required by
the Letter of Transmittal.
As described in Section 1 of the Offer to Purchase, in the Merger
Agreement, Purchaser has reserved the right, in its sole discretion, to waive
any or all conditions to the Offer (other than the Minimum Condition) and to
modify the terms of the Offer, provided that Purchaser will not, without the
prior written consent of the Company, make any change which decreases the price
per Share payable in the Offer, changes the form of consideration payable in the
Offer (other than by adding consideration), reduces the maximum number of Shares
to be purchased in the Offer, or imposes conditions to the Offer in addition to
those set forth in the Merger Agreement which are adverse to holders of the
Shares. In addition, as described in Section 1 of the Offer to Purchase,
pursuant to the terms of the Merger Agreement, Purchaser has the right, in its
sole discretion, to extend the Offer from time to time for up to an aggregate of
20 business days, notwithstanding the prior satisfaction of the conditions to
the Offer. Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the provisions of the Merger Agreement described above,
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in Section 15 of the Offer to Purchase shall have occurred, to (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary or (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. During any
such extension, all Shares previously tendered and not properly withdrawn will
remain subject to the Offer, subject to the rights of a tendering shareholder to
withdraw such shareholder's Shares. Any extension, delay, termination, waiver or
amendment of the Offer will be followed as promptly as practicable by public
announcement thereof, to be made no later than 9:00 A.M., New York City time, on
the next business day after the previously scheduled Expiration Date (as defined
below). The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, December 23, 1997, unless and until Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after January 24, 1998
(or such later date as may apply in case the Offer is extended). For a
withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered such
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates or, if applicable, Rights Certificates to be
withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase) unless such Shares have been tendered for
the account of an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares, in which case a notice of withdrawal will be effective if delivered to
the Depositary by any method of delivery described in the second sentence of
this paragraph. A withdrawal of Shares or Rights shall also constitute a
withdrawal of the associated Rights or Shares, as applicable. All questions as
to the form and validity (including time of receipt) of any notice of withdrawal
will be determined by Purchaser, in its sole discretion, whose determination
will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by Purchaser to record holders of Shares and
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent as set forth below. Requests for copies of the Offer to
Purchase and the related Letter of Transmittal and all other tender offer
materials may be directed to the Information Agent or the Dealer Manager, and
copies will be furnished promptly at Purchaser's expense. Purchaser will not pay
any fees or commissions to any broker or dealer or any other person (other than
the Dealer Manager, the Depositary and the Information Agent) for soliciting
tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
ALL OTHERS CALL TOLL FREE (800) 714-3311
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
Call Collect (212) 270-3939
November 25, 1997
<PAGE>
EXHIBIT 11(a)(8)
FOR IMMEDIATE RELEASE
CONTACT: GENERAL HOST THE CYPRESS GROUP
ROBERT LOVEJOY OWEN BLICKSILVER
313-366-8400 212-303-7603
GENERAL HOST AGREES TO $5.50 PER SHARE
ACQUISITION BY THE CYPRESS GROUP
STAMFORD, CT, NOVEMBER 24, 1997 -- General Host Corporation (NYSE: GH)
announced today it had signed a definitive agreement to be acquired by The
Cypress Group, a New York-based private investment fund, in an all-cash
transaction valued at approximately $320 million, including expenses and the
assumption of debt.
Under the terms of the transaction, a corporation formed by Cypress will make a
cash offer to purchase all of the common stock outstanding for $5.50 a share, a
60% premium over General Host's closing stock price on Friday, November 21. The
tender offer is scheduled to commence this week. Following the tender offer,
Cypress will acquire any remaining shares through a merger in which the
remaining shares (and any in-the-money options) would be cashed out at $5.50 per
share.
The Board of Directors of General Host has unanimously approved the merger
agreement and has recommended that shareholders tender their shares in the
offer. Harris J. Ashton, Chairman and CEO of General Host and the holder of
approximately 6% of the shares, has agreed to tender his shares in the offer.
The remainder of the company's management and Board, who together hold
approximately 5% of the outstanding common stock, have indicated that they
intend to tender their shares.
General Host Corporation is the operator of Frank's Nursery & Crafts, Inc.,
Detroit, the nation's largest chain of specialty retail stores devoted to the
sale of lawn and garden products, crafts, Christmas merchandise and pet food and
supplies -- including more than 200 different proprietary lawn and garden
products. The company operates 258 stores in 15 states, mostly in the East and
Midwest, and had 1996 revenues in excess of $530 million.
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Following the tender offer closing, which is expected to occur by year end, the
company will operate solely under the Frank's Nursery & Crafts name and the
corporate headquarters will move from Stamford, CT, to Detroit.
Joseph R. Baczko, 52, will be named Chairman, President and CEO of the company,
replacing Mr. Ashton who will retire in 1998.
Cypress will be acquiring General Host entirely with cash provided by its funds,
and will put a new financing facility into place at the company in order to
refinance existing debt and to provide additional liquidity to the company. The
Chase Manhattan Bank, Chase Securities Inc. and Goldman Sachs Credit Partners
L.P. have delivered a commitment letter to Cypress agreeing to provide the
financing facility, which will be made available simultaneously with the closing
of the stock tender offer.
The merger agreement provides that the company will commence a tender offer and
consent solicitation for its 11-1/2% Senior Notes at the same time as the stock
tender offer in order to permit the financing facility and increase operating
flexibility. The two tender offers are expected to close together.
The stock tender offer will be subject to a number of conditions, including the
tender of two-thirds of General Host's common stock, the expiration of the Hart-
Scott-Rodino waiting period, and the simultaneous closing of the debt tender
offer. The debt tender offer will be conditioned upon, among other things, the
receipt of tenders and consents for a majority of the senior notes, the
consummation of the financing and the simultaneous closing of the stock tender
offer.
Following the consummation of the tender offers, Cypress currently expects that
General Host will redeem any remaining senior notes and all of its 8%
convertible subordinated notes. It is anticipated that such redemption would
take place on or after February 16, 1998.
"Frank's provides us with a unique opportunity to participate in the Lawn &
Garden market where we expect to experience significant growth," said David
Spalding, Vice Chairman of The Cypress Group. "Our strategy is to increase the
capital in the business to enable it to grow, renovate and refurbish Frank's 258
existing stores, strengthen the Company's core nursery products and services,
and expand the chain with a store opening program in present and new markets
over the next three years."
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3
"Since they first approached us, Cypress has been very supportive of our company
and thus we are pleased to have reached this agreement with them, which
represents a premium for our shareholders," Mr. Ashton said.
Joe Baczko is an acknowledged and highly respected retailing executive. In the
early 1990s, he was President and Chief Operating Officer of Blockbuster
Entertainment, during a period of significant domestic and international growth
for that Company. From 1983 to 1990, Mr. Baczko, responsible for the start-up
of Toys R Us' international operations, served as President of that Company's
International Division. Prior to that, Mr. Baczko was CEO of Max Factor's
European operations and also held executive positions with W.R. Grace & Co. For
the past four years, Mr. Baczko has served as a private investor and consultant
in the specialty retailing, services and consumer goods areas.
Credit Suisse First Boston Corporation acted as financial advisor to General
Host in connection with the transaction.
The Cypress Group manages a private equity fund which closed in February 1996
with more than $1 billion in commitments. Cypress invests in privately
negotiated transactions, targeting established operating businesses and
investing with management to foster continued growth. Investments made by
Cypress include Cinemark USA, Inc., Amtrol Inc., Scotsman Holdings, as well as
The Multicare Companies, via a new joint venture company called Genesis
ElderCare Corp. The Cypress Group, based in New York City, is headed by its
four partners, James A. Stern, Jeffrey P. Hughes, James L. (Jamie) Singleton and
David P. Spalding.
###
<PAGE>
EXHIBIT 11(c)(1)
__________________________________________________________
AGREEMENT AND PLAN OF MERGER
Between
CYRUS ACQUISITION CORP.
and
GENERAL HOST CORPORATION
Dated as of November 22, 1997
__________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER...................................2
SECTION 1.1 The
Offer..................................................
2
SECTION 1.2 Company
Action.............................................3
ARTICLE II
THE MERGER...................................4
SECTION 2.1 The
Merger.................................................
4
SECTION 2.2 Effective
Time.............................................4
SECTION 2.3 Effects of the
Merger......................................4
SECTION 2.4 Certificate of Incorporation;
By-Laws......................4
SECTION 2.5 Directors and
Officers.....................................5
SECTION 2.6 Conversion of
Securities...................................5
SECTION 2.7 Dissenting
Shares..........................................6
SECTION 2.8 Surrender of
Shares........................................6
SECTION 2.9 No Further Transfer or Ownership
Rights....................8
SECTION 2.10 Treatment of
Options.......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................9
SECTION 3.1 Organization and Qualification;
Subsidiaries...............9
SECTION 3.2 Certificate of Incorporation and
By-Laws................. 10
SECTION 3.3 Capitalization.........................................
.. 10
SECTION 3.4 Authority Relative to This
Agreement..................... 11
SECTION 3.5 No Conflict; Required Filings and
Consents............... 12
SECTION 3.6 Compliance.............................................
.. 13
SECTION 3.7 SEC Filings; Financial
Statements........................ 13
SECTION 3.8 Absence of Certain Changes or
Events..................... 14
SECTION 3.9 Absence of
Litigation.................................... 14
SECTION 3.10 Employee Benefit
Plans................................... 15
SECTION 3.11 Tax
Matters..............................................
17
SECTION 3.12 Offer Documents; Proxy
Statement......................... 17
SECTION 3.13 Environmental
Matters.................................... 18
SECTION 3.14 Material
Contracts....................................... 20
SECTION 3.15 Permits................................................
.. 20
SECTION 3.16 Properties.............................................
.. 20
SECTION 3.17 Intellectual
Property.................................... 22
SECTION 3.18 Management Information
Systems........................... 22
SECTION 3.19 Affiliate
Transactions................................... 22
SECTION 3.20 Approvals; Vote
Required................................. 23
SECTION 3.21 Brokers................................................
.. 23
SECTION 3.22 Rights
Agreement......................................... 23
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<PAGE>
ARTICLE IV
Page
REPRESENTATIONS AND WARRANTIES OF PURCHASER................. 24
SECTION 4.1 Corporate
Organization................................... 24
SECTION 4.2 Certificate of Incorporation and
By-Laws................. 24
SECTION 4.3 Authority Relative to This
Agreement..................... 24
SECTION 4.4 No Conflict; Required Filings and
Consents............... 24
SECTION 4.5 Offer Documents; Proxy
Statement......................... 25
SECTION 4.6 Debt
Financing........................................... 26
SECTION 4.7 Equity
Financing......................................... 26
SECTION 4.8 Brokers................................................
.. 26
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER.................... 26
SECTION 5.1 Conduct of Business of the Company Pending the
Merger....... 26
ARTICLE VI
ADDITIONAL AGREEMENTS............................ 29
SECTION 6.1 Shareholders
Meeting..................................... 29
SECTION 6.2 Proxy
Statement.......................................... 30
SECTION 6.3 Company Board Representation; Section
14(f).............. 31
SECTION 6.4 Access to Information;
Confidentiality................... 32
SECTION 6.5 No Solicitation of
Transactions.......................... 32
SECTION 6.6 Benefits
Matters......................................... 33
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance...... 35
SECTION 6.8 Notification of Certain
Matters.......................... 35
SECTION 6.9 Further Action; Reasonable Best
Efforts.................. 35
SECTION 6.10 Public
Announcements..................................... 37
SECTION 6.11 Cancellation of Common Stock
Equivalents................. 38
SECTION 6.12 Disposition of
Litigation................................ 38
SECTION 6.13 Equity
Contribution...................................... 38
SECTION 6.14. Anti-Dilution..........................................
.. 38
SECTION 6.15. Support
Agreement........................................ 39
ARTICLE VII
CONDITIONS OF MERGER............................. 39
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger.................................................
.. 39
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER...................... 39
SECTION 8.1 Termination............................................
.. 39
SECTION 8.2 Effect of
Termination.................................... 41
SECTION 8.3 Fees and
Expenses........................................ 42
SECTION 8.4 Amendment..............................................
.. 42
SECTION 8.5 Waiver.................................................
.. 42
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<PAGE>
Page
ARTICLE IX
GENERAL PROVISIONS.............................. 43
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements.............................................
.. 43
SECTION 9.2 Notices................................................
.. 43
SECTION 9.3 Certain
Definitions...................................... 44
SECTION 9.4 Severability...........................................
.. 45
SECTION 9.5 Entire Agreement;
Assignment............................. 45
SECTION 9.6 Parties in
Interest...................................... 45
SECTION 9.7 Governing
Law............................................ 46
SECTION 9.8 Headings...............................................
.. 46
SECTION 9.9 Counterparts...........................................
.. 46
Annex A - Offer Conditions
Annex B - Debt Offer Terms
Annex C - Amendment to Company Certificate of Incorporation
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1997 (the
"Agreement"), between CYRUS ACQUISITION CORP., a New York corporation
("Purchaser"), and GENERAL HOST CORPORATION, a New York corporation (the
"Company").
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and the shareholders of the Company to
enter into this Agreement with Purchaser, providing for the merger (the
"Merger") of Purchaser with and into the Company in accordance with the New York
Business Corporation Law (the "NYBCL") and the other transactions contemplated
hereby, upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Purchaser has approved the Merger
of Purchaser with and into the Company and such other transactions in accordance
with the NYBCL upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company and Purchaser have agreed that, upon the terms
and subject to the conditions contained herein, Purchaser shall commence an
offer (the "Offer") to purchase for cash all of the issued and outstanding
shares of common stock, par value $1.00 per share (referred to herein as either
the "Shares" or "Company Common Stock"), of the Company and the associated
Company Common Stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of March 7, 1990 and subsequently amended by
Amendment No. 1 thereto, dated as of March 1, 1995, between the Company and
ChaseMellon Shareholder Services, as successor to Chemical Bank (the "Rights
Agreement"); and
WHEREAS, as a condition to its willingness to enter into this
Agreement and consummate the transactions contemplated hereby, Purchaser has
required that a principal shareholder (the "Supporting Shareholder") agree to
tender and vote Shares (as hereinafter defined) owned by him in the Offer in
accordance with the Support Agreement (as hereinafter defined) and to take such
other actions provided for therein; and in order to induce Purchaser to enter
into this Agreement, the Supporting Shareholder has agreed to execute and
deliver the Support Agreement, dated as of the date hereof, between Purchaser
and the Supporting Shareholder (the "Support Agreement").
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:
<PAGE>
2
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall, as soon as reasonably practicable after the date
hereof (and in any event within five business days from the date of public
announcement of the execution hereof), commence the Offer at a price of $5.50
per Share (and associated Right), net to the seller in cash. The obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer shall be
subject to the satisfaction of the Offer Conditions. Purchaser expressly
reserves the right, in its sole discretion, to waive any such condition (other
than the Minimum Condition as defined in the Offer Conditions) and make any
other changes in the terms and conditions of the Offer, provided that, unless
previously approved by the Company in writing, no change may be made which
decreases the price per Share payable in the Offer, changes the form of
consideration payable in the Offer (other than by adding consideration), reduces
the maximum number of Shares to be purchased in the Offer, or imposes conditions
to the Offer in addition to those set forth herein which are adverse to holders
of the Shares. The initial expiration date of the Offer shall be 20 business
days following (and inclusive of) the date of commencement. Purchaser covenants
and agrees that, subject to the terms and conditions of this Agreement,
including but not limited to the Offer Conditions, it will accept for payment
and pay for Shares as soon as it is permitted to do so under applicable law,
provided that Purchaser shall have the right, in its sole discretion, to extend
the Offer from time to time for up to an aggregate of 20 business days,
notwithstanding the prior satisfaction of the Offer Conditions. It is agreed
that the Offer Conditions are for the benefit of Purchaser and may be asserted
by Purchaser regardless of the circumstances giving rise to any such condition
(including any action or inaction by Purchaser) or, except with respect to the
Minimum Condition, may be waived by Purchaser, in whole or in part at any time
and from time to time, in its sole discretion.
(b) As soon as reasonably practicable on the date the Offer is
commenced, Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer with the Securities and Exchange
Commission (the "SEC"). The Schedule 14D-1 shall contain an Offer to Purchase
and forms of the related letter of transmittal (which Schedule 14D-1, Offer to
Purchase and other documents, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents").
Purchaser and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents that shall have become false or
misleading in any
<PAGE>
3
material respect, and Purchaser further agrees to take all steps necessary to
cause the Schedule 14D-1 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 1.2 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on November 21, 1997, has
unanimously (A) determined that this Agreement and the transactions contemplated
hereby, including each of the Offer and the Merger, are fair to and in the best
interests of the holders of Shares, (B) approved this Agreement, the Offer and
the Merger, the Equity Contribution, the Debt Offer and the Financing (each as
hereinafter defined) and the other transactions contemplated hereby and (C)
resolved to recommend that the shareholders of the Company accept the Offer,
tender their Shares to Purchaser thereunder and approve this Agreement, the
Merger and the other transactions contemplated hereby; and (ii) Credit Suisse
First Boston Corporation (the "Financial Adviser") has delivered to the Board of
Directors of the Company its opinion that the consideration to be received by
holders of Shares pursuant to the Offer and the Merger is fair to such holders
from a financial point of view. The Company will promptly provide Purchaser
with a true and complete written copy of such fairness opinion and has been
authorized by the Financial Adviser to permit the inclusion of such fairness
opinion (and, subject to prior review and consent by such Financial Adviser, a
reference thereto) in the Offer Documents and in the Schedule 14D-9 referred to
below and the Proxy Statement referred to in Section 3.12. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Company's Board of Directors described in this Section 1.2(a).
(b) The Company shall file with the SEC, contemporaneously with the
commencement of the Offer pursuant to Section 1.1, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing the recommendations of the Company's
Board of Directors described in Section 1.2(a)(i) and shall promptly mail the
Schedule 14D-9 to the shareholders of the Company. The Company and Purchaser
each agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 that 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 disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws.
(c) In connection with the Offer, if requested by Purchaser, the
Company shall promptly furnish Purchaser with mailing labels, security position
listings, any non-objecting beneficial owner lists and any available listings or
computer
<PAGE>
4
files containing the names and addresses of the record holders of Shares, each
as of a recent date, and shall promptly furnish Purchaser with such additional
information (including but not limited to updated lists of shareholders, mailing
labels, security position listings and non-objecting beneficial owner lists) and
such other assistance as Purchaser or its agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the NYBCL, at the Effective Time (as
defined in Section 2.2), 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").
SECTION 2.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Department of State of the State
of New York, in such form as required by and executed in accordance with the
relevant provisions of the NYBCL (the date and time of the filing of the
Certificate of Merger with the Department of State of the State of New York (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the NYBCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Restated Certificate of Incorporation of the Company (as amended,
the "Certificate of Incorporation"), as in effect immediately prior to the
Effective Time, shall be amended so as to add the provision set forth in Annex C
hereto, and, as so amended, until thereafter further amended (subject to Section
6.7) as provided therein and under the NYBCL, shall be the certificate of
incorporation of the Surviving Corporation following the Merger.
<PAGE>
5
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the By-Laws of the Company shall be the By-Laws of
the Surviving Corporation and thereafter may (subject to Section 6.7) be amended
or repealed in accordance with their terms or the Certificate of Incorporation
of the Surviving Corporation and as provided by law.
SECTION 2.5 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 (as the case may be) and qualified.
SECTION 2.6 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:
(i) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
(ii) Each share of Company Common Stock held in the treasury of the
Company and each Share owned by Purchaser or any direct or indirect
subsidiary of the Company, in each case immediately prior to the Effective
Time, shall be cancelled and retired without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(iii) Each issued and outstanding share of Company Common Stock (other
than shares cancelled pursuant to Section 2.6(ii) and any Dissenting Shares
(as defined in Section 2.7(a))) shall be converted into the right to
receive $5.50 in cash or any higher price that may be paid pursuant to the
Offer (the "Merger Consideration") payable to the holder thereof, without
interest, upon surrender of the certificate formerly representing such
share in the manner provided in Section 2.8, less any required withholding
taxes.
(iv) Immediately following the Effective Time, the Surviving
Corporation shall execute and deliver to the trustee under the Indenture,
dated as of February 28, 1992, between the Company and United States Trust
Company of New York, as trustee (the "Convertible Notes Indenture"),
executed in connection with the issuance by the Company of its 8%
convertible subordinated notes due 2002 (the "Convertible Notes"), a
Supplement to the Convertible Notes
<PAGE>
6
Indenture pursuant to Section 14.11 thereof providing that each Convertible
Note remaining outstanding shall after the Effective Time be convertible
into an amount in cash equal to the product of (x) the number of Shares
into which such Convertible Note was convertible immediately prior to the
Effective Time times (y) the Merger Consideration.
SECTION 2.7 Dissenting Shares. (a) Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have not
voted such Shares in favor of the Merger (or consented thereto in writing), who
shall have delivered a written objection to the Merger and a demand for
appraisal of such Shares in accordance with Sections 623 and 910 of the NYBCL,
and who shall not have failed to perfect or shall not have effectively withdrawn
or lost their rights to appraisal and payment under the NYBCL (the "Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration, but shall instead entitle the holder thereof to receive that
consideration determined pursuant to Sections 623 and 910 of the NYBCL;
provided, however, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right to appraisal and
payment under the NYBCL, such holder's Shares shall thereupon be deemed to have
been converted, at the Effective Time, into the right to receive the Merger
Consideration, without any interest thereon.
(b) The Company shall give Purchaser (i) prompt notice of any demands
for appraisal pursuant to Sections 623 and 910 of the NYBCL received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the NYBCL and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
the NYBCL. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any such demands for appraisal or
offer to settle or settle any such demands.
SECTION 2.8 Surrender of Shares. (a) Prior to the mailing of the
Proxy Statement (as defined in Section 3.12), Purchaser shall appoint a bank or
trust company which is reasonably satisfactory to the Company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration. When
and as needed, the Surviving Corporation will deposit with the Paying Agent for
the benefit of former holders of the Company's Common Stock sufficient funds to
make all payments pursuant to this Section 2.8. 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, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or
<PAGE>
7
banker's acceptances of commercial banks with capital exceeding $500 million.
Any net profit resulting from, or interest or income produced by, such
investments will be payable to the Surviving Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates"), a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. 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
aggregate amount of Merger Consideration into which the number of shares of
Company Common Stock previously represented by such Certificate or Certificates
surrendered shall have been converted pursuant to this Agreement. If any Merger
Consideration is to be remitted to a person whose name is other than that in
which the Certificate for Company Common Stock surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer, and that the person requesting such exchange shall
have paid any transfer and/or other taxes required by reason of the remittance
of Merger Consideration to a person whose name is other than that of the
registered holder of the Certificate surrendered, or the person requesting such
exchange shall have established to the satisfaction of the Surviving Corporation
that such tax either has been paid or is not applicable. No interest shall be
paid or accrued, upon the surrender of the Certificates, for the benefit of
holders of the Certificates on any Merger Consideration.
(c) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been deposited with the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) and only as general creditors thereof for payment of their
claim for Merger Consideration to which such holders may be entitled.
(d) Notwithstanding the provisions of Section 2.8(c), neither the
Surviving Corporation nor the Paying Agent shall be liable to any person in
respect of any Merger Consideration
<PAGE>
8
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates representing shares of Company
Common Stock shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any governmental entity), any such cash shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
SECTION 2.9 No Further Transfer or Ownership Rights. After the
Effective Time, there shall be no further transfer on the records of the Company
(or the Surviving Corporation) or its transfer agent of certificates
representing Shares of Company Common Stock which have been converted pursuant
to this Agreement into the right to receive Merger Consideration, and if such
certificates are presented to the Company for transfer, they shall be cancelled
against delivery of Merger Consideration. From and after the Effective Time,
the holders of Certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for herein or by applicable
law. All Merger Consideration paid upon the surrender for exchange of
Certificates representing shares of Company Common Stock in accordance with the
terms of this Article II shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the Shares of Company Common Stock
exchanged for Merger Consideration theretofore represented by such Certificates.
SECTION 2.10 Treatment of Options. Prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding stock option heretofore granted under any Company
Plan (as defined in Section 3.10) (each "Option"), whether or not then vested or
exercisable, shall, at and after the Effective Time, be exercisable solely for,
and shall entitle each holder thereof solely to, a payment in cash from the
Company (subject to any applicable withholding taxes, the "Cash Payment"), upon
exercise, equal to the product of (x) the total number of Shares subject or
related to such Option, whether or not then vested or exercisable, and (y) the
excess, if any, of the Merger Consideration over the exercise price or purchase
price, as the case may be, per Share subject or related to such Option, each
such Cash Payment to be paid to each holder of an outstanding Option upon
exercise; provided, however, that with respect to any person subject to Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
such amount shall be paid as soon as practicable after the first date payment
can be made without liability to such Person under Section 16(b) of the Exchange
Act. As provided herein, the
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9
Company Plans (and any other plan, program or arrangement) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time. The Company
will take all commercially reasonable steps to ensure that none of the Company
or any of its subsidiaries is or will be bound by any Options, other options,
warrants, rights or agreements which would entitle any person, other than the
current shareholders of Purchaser or its affiliates, to own any capital stock of
the Surviving Corporation or any of its subsidiaries or, except as otherwise
provided in this Section 2.10, to receive any payment in respect thereof and to
cause or request the holders of the Options to agree to an automatic exercise
thereof at the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth with reasonable specificity in a corresponding
numbered section of the Company Disclosure Schedule delivered to Purchaser at
the execution of this Agreement (the "Company Disclosure Schedule"), the Company
hereby represents and warrants to Purchaser that:
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of
the Company and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any 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 in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect.
Each of the Company and each of its Significant Subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially delay the consummation
of any of the Offer, the Merger, the Equity Contribution, the Debt Offer, the
Financing or the other transactions contemplated hereby (collectively, the
"Transactions"). When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change or effect
that, either individually or in the aggregate with all other changes or effects,
is materially adverse to the business, operations, assets, liabilities,
properties, financial condition, or results of operations of the Company and its
subsidiaries taken as a whole.
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10
SECTION 3.2 Certificate of Incorporation and By-Laws. The Company
has heretofore furnished to Purchaser complete and correct copies of the
Certificate of Incorporation and the By-Laws of the Company and the equivalent
organizational documents of each of its Significant Subsidiaries as currently in
effect. Such Certificate of Incorporation, By-Laws and other organizational
documents are in full force and effect and no other organizational documents are
applicable to or binding upon the Company or its Significant Subsidiaries.
Neither the Company nor any of its Significant Subsidiaries is in violation of
any of the provisions of its Certificate of Incorporation, By-Laws or other
organizational documents.
SECTION 3.3 Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $1.00 per share ("Company Preferred
Stock"). As of November 2, 1997, (i) 24,413,686 shares of Company Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights,
(ii) 7,338,764 shares of Company Common Stock were held in the treasury of the
Company, (iii) an aggregate of 1,322,688 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Options issued pursuant to the Company Plans
and (iv) an aggregate of 7,616,003 shares of Company Common Stock were reserved
for issuance and issuable upon or otherwise deliverable in connection with the
exercise of conversion rights of the Convertible Notes. Since November 2, 1997,
no options to purchase shares of Company Common Stock have been granted and no
shares of Company Common Stock have been issued except for shares issued
pursuant to the exercise of Options or the conversion of Convertible Notes. As
of the date hereof, no shares of Company Preferred Stock are issued and
outstanding. Except (i) as set forth above, (ii) as provided pursuant to
Sections 6.13 and 6.14 and (iii) for 200,000 aggregate common stock equivalents
(the "Common Stock Equivalents") issued pursuant to the agreements set forth on
Section 3.3 of the Company Disclosure Schedule (provided that any inaccuracies
in such Section 3.3 with respect to the Common Stock Equivalents which are not,
individually or in the aggregate, material to the Offer and the Merger shall not
constitute a breach of this representation and warranty), true and complete
copies of which have been provided to Purchaser, there are outstanding or
reserved for issuance (a) no shares of capital stock or other voting securities
of the Company, (b) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(c) no options or other rights to acquire from the Company, and no obligation of
the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company and (d) no equity equivalents, interests in the ownership or earnings of
the Company or other similar rights (collectively, "Company Securities").
Section 3.3 of the Company Disclosure Schedule
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11
sets forth a true and complete list of the Options and the Common Stock
Equivalents, indicating for each Option or Common Stock Equivalent the holder
thereof, the number of shares of Company Common Stock subject thereto, and the
exercise price and expiration date thereof (provided that any inaccuracies in
such list which are not, individually or in the aggregate, material to the Offer
and the Merger shall not constitute a breach of this representation and
warranty). The conversion price for the Convertible Notes is $8.53466 per share
of Company Common Stock. There are no outstanding obligations of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth above, there are no options, calls, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of its
subsidiaries to which the Company or any of its subsidiaries is a party. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, and all Shares issued pursuant to Sections 6.13 and 6.14, shall be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive (or similar) rights. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any subsidiary of the Company or any other entity which would be material to
the Company or such subsidiary, as the case may be. Each of the outstanding
shares of capital stock of each of the Company's Significant Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and all such
shares are owned by the Company or another wholly owned subsidiary of the
Company and are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations in voting rights, charges or other encumbrances
of any nature whatsoever except where the failure to own such shares free and
clear would not, individually or in the aggregate, have a Material Adverse
Effect. The Company does not hold any capital stock or other equity interests,
directly or indirectly, in any person other than its wholly-owned subsidiaries,
a true and complete list of which subsidiaries is set forth in Section 3.3 of
the Company Disclosure Schedule (provided that any inaccuracies in such list
which are not, individually or in the aggregate, material to the Offer and the
Merger shall not constitute a breach of this representation and warranty).
SECTION 3.4 Authority Relative to This Agreement. The Company 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, delivery and performance 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
<PAGE>
12
transactions so contemplated (other than, with respect to the Merger, the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of Company Common Stock if and to the extent required by applicable law,
and the filing of appropriate merger documents as required by the NYBCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by Purchaser,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of bankruptcy.
SECTION 3.5 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by the Company do not and
will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
Significant Subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, statute, rule, regulation, order,
judgment or decree applicable to the Company or any of its Significant
Subsidiaries or by which its or any of their respective properties are bound or
affected; or (iii) conflict with or result in any breach or violation of or
constitute a default (or an event which with notice or lapse of time or both
could become a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the properties
or assets of the Company or any of its Significant Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries or its or any of their respective properties are bound
or affected, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay consummation of any of the Transactions.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except for (i) applicable requirements, if any, of the Exchange Act,
and the rules and regulations promulgated thereunder, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state
securities, takeover and "blue sky" laws, (ii) the filing and
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13
recordation of appropriate merger or other documents as may be required by the
NYBCL, (iii) filings with the New York Stock Exchange (the "NYSE") and (iv) such
consents, approvals, authorizations, permits, actions, filings or notifications
the failure of which to make or obtain would not, individually or in the
aggregate, prevent or materially delay consummation of any of the Transactions
or have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
statute, rule, regulation, order, judgment or decree applicable to the Company
or any of its Significant Subsidiaries or by which its or any of their
respective properties are bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Significant
Subsidiaries is a party or by which the Company or any of its Significant
Subsidiaries or any of its or their respective properties are bound or affected,
except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay consummation of any of the Transactions.
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company and,
to the extent applicable, each of its then or current subsidiaries, has filed
all forms, reports, statements and documents required to be filed with the SEC
since January 30, 1995 (collectively, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
regulations promulgated thereunder, each as in effect on the date so filed.
None of the SEC Reports (including but not limited to any financial statements
or schedules included or incorporated by reference therein) contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except to the extent revised or
superseded by a subsequent filing with the SEC prior to the date hereof, none of
the SEC Reports contains any untrue statement of a material fact or omits to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial
statements of the Company (including any related notes thereto) included in the
SEC Reports at the time filed complied as to form in all material respects with
all applicable accounting requirements and with the published rules and
<PAGE>
14
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis throughout the periods involved (except as specifically
indicated in the notes thereto) and fairly presents the consolidated financial
position of the Company and its subsidiaries at the respective date thereof and
the consolidated results of its and their operations and cash flows for the
periods indicated (subject, in the case of unaudited quarterly statements, to
normal year-end audit adjustments).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at January 26, 1997, including the
notes thereto, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with generally accepted accounting
principles, except for liabilities or obligations: (i) specifically reflected in
the most recent unaudited quarterly statements included in the Current SEC
Reports (as defined in Section 3.8) or (ii) incurred in the ordinary course of
business since January 26, 1997 which would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or Events. Since January 26,
1997, except as specifically contemplated by this Agreement or disclosed in the
SEC Reports filed and publicly available prior to the date of this Agreement
(the "Current SEC Reports"), the Company and its subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been: (i) any condition, event
or occurrence other than those which, individually or in the aggregate, would
not have a Material Adverse Effect; (ii) any material change by the Company in
its accounting methods, principles or practices; or (iii) any revaluation by the
Company of any of its assets, including but not limited to writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business, other than those resulting in an aggregate decrease
in valuation over all such revaluations which would not have a Material Adverse
Effect.
SECTION 3.9 Absence of Litigation. Except as disclosed in the
Current SEC Reports, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its Significant Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, other than those which (i) individually or in the aggregate, would not
have a Material
<PAGE>
15
Adverse Effect and (ii) do not seek to delay or prevent the consummation of any
of the Transactions. As of the date hereof, neither the Company nor any of its
Significant Subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or award
other than those which, individually or in the aggregate, would not have a
Material Adverse Effect or prevent or materially delay consummation of any of
the Transactions.
SECTION 3.10 Employee Benefit Plans. (a) Section 3.10 of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, without limitation,
multiemployer plans within the meaning of ERISA section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated by
this Agreement or otherwise), whether formal or informal, under which any
employee or former employee of the Company or any of its subsidiaries has any
present or future right to benefits or under which the Company or any of its
subsidiaries has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Company Plans".
(b) With respect to each Company Plan, the Company has delivered to
Purchaser a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description; and
(iv) for the three most recent years (A) the Form 5500 and attached schedules,
(B) audited financial statements, (C) actuarial valuation reports and
(D) attorney's response to an auditor's request for information. No
communication by the Company or any of its subsidiaries to any of their
employees requires the payment of any benefits other than those required under
the terms of the Company Plans.
(c) Except as set forth in the Current SEC Reports and except as would
not, individually or in the aggregate, have a Material Adverse Effect or prevent
or materially delay the consummation of any of the Transactions:
(1) (i) Each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and
other applicable laws, rules and regulations; (ii) each Company Plan which
is intended to be qualified within the meaning of
<PAGE>
16
Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred,
whether by action or failure to act, that would cause the loss of such
qualification; (iii) no event has occurred and no condition exists that
would subject the Company or any of its subsidiaries, either directly or by
reason of their affiliation with any member of their "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)),
to any tax, fine, lien or penalty imposed by ERISA, the Code or other
applicable laws, rules and regulations; (iv) for each Company Plan with
respect to which a Form 5500 has been filed, no material change has
occurred with respect to the matters covered by the most recent Form since
the date thereof; and (v) no "reportable event" (as such term is defined in
ERISA section 4043), "prohibited transaction" (as such term is defined in
ERISA section 406 and Code section 4975) or "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code section
412 (whether or not waived)) has occurred with respect to any Company Plan;
(2) With respect to the only Company Plan that is not a multiemployer
plan within the meaning of section 4001(a)(3) of ERISA but is subject to
Title IV of ERISA, as of the Effective Time, the assets of such Company
Plan (as valued as of October 31, 1997 by the Company Plan's actuary) are
at least equal in value to the present value of the accrued benefits
(vested and unvested) of the participants in such Company Plan on a
termination and projected benefit obligation basis, based on the actuarial
methods and assumptions indicated in the most recent actuarial valuation
report, dated January 1, 1996, but using current interest rates;
(3) Since 1990 there has been no multiemployer pension plan (within
the meaning of ERISA section 4001(a)(3)) to which the Company, any of its
subsidiaries or any member of their Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation to
contribute); and
(4) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or threatened, and (ii) no facts or circumstances exist that would give
rise to any such actions, suits or claims.
(d) Effective as of the date hereof, the Company and its subsidiaries
have terminated any obligations under any Company Plan or other arrangement to
make loans to directors, officers or employees in respect of the exercise of any
Options or the purchase of any Shares.
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17
(e) No action has been taken by the Board of Directors of the Company
which would entitle any director, in his or her capacity as such, upon
retirement from the Board of Directors to any payments, repurchase of Shares or
other benefits.
SECTION 3.11 Tax Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Material Adverse Effect: (i)
The Company and each of its subsidiaries, and any consolidated, combined,
unitary or aggregate group for tax purposes of which the Company or any of its
subsidiaries is or has been a member, has timely filed all Tax Returns required
to be filed by it in the manner provided by law, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial statements
according to generally accepted accounting principles for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns; (ii) no
material claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries except for statutory
liens for Taxes not yet due; no audit of any Tax Return of the Company or any of
its subsidiaries is being conducted by a Tax authority; and no extension of the
statute of limitations on the assessment of any Taxes has been granted by the
Company or any of its subsidiaries and is currently in effect; and (iii) neither
the Company nor any of its subsidiaries is a party to or is otherwise bound by
(or has any assets bound by) any Tax indemnity, Tax sharing or Tax allocation
agreement or arrangement except for the tax sharing arrangement with Calloway's
Nursery, Inc. (a true and complete copy of which has been provided to
Purchaser). Neither the Company nor any of its subsidiaries has undergone an
"ownership change" within the meaning of Section 382 of the Code. As used
herein, "Taxes" shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes.
SECTION 3.12 Offer Documents; Proxy Statement. (a) None of (i) the
Schedule 14D-9, the Debt Offer Documents (as defined in Section 6.9(b)) or the
information supplied by the Company for inclusion in the Offer Documents
(including any information incorporated by reference in the Schedule 14D-9, Debt
Offer Documents or Offer Documents), shall, at the respective times such
Schedule 14D-9, the Debt Offer Documents, the Offer
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18
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to shareholders, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
(ii) the proxy statement or the information statement (as selected by Purchaser)
to be sent to the shareholders of the Company in connection with the
Shareholders Meeting (as defined in Section 6.1) (such proxy statement or
information statement, as amended or supplemented, is herein referred to as the
"Proxy Statement"), including any information incorporated by reference therein,
shall, at the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Shareholders
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Purchaser or any of its
representatives which is contained in the Schedule 14D-9, the Debt Offer
Documents or the Proxy Statement.
(b) The Schedule 14D-9, the Debt Offer Documents and the Proxy Statement
will comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 3.13 Environmental Matters. (a) Except (i) as disclosed in
the Current SEC Reports or (ii) to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, would not have a Material Adverse Effect:
(i) (A) The Company and its subsidiaries are and within the
period of all applicable statutes of limitation have been in compliance
with all applicable Environmental Laws; and (B) the Company and its
subsidiaries hold all Environmental Permits (each of which is in full force
and effect) required for any of their current operations and for any
property owned, leased, or otherwise operated by any of them, and are and
within the period of all applicable statutes of limitation have been in
compliance with all such Environmental Permits.
(ii) Neither the Company nor any of its subsidiaries has received
any Environmental Claim (as hereinafter defined) against any of them, and
the Company has no knowledge of any such Environmental Claim being
threatened.
(iii) The Company has no knowledge of the presence or suspected
presence of any Materials of Environmental Concern
<PAGE>
19
at any location that could be reasonably likely to form the basis of any
Environment Claim against the Company or any of its subsidiaries or any
entity for which any of them may be responsible.
(b) To the knowledge of the Company, the Company has provided to
Purchaser all Environmental Reports, and has disclosed to Purchaser all costs
the Company and any of its subsidiaries expect to incur for ongoing, and
reasonably anticipated, investigation and remediation of Materials of
Environmental Concern (including, without limitation, any payments to resolve
any threatened or asserted Environmental Claim for investigation and remediation
costs), except any such Environmental Reports which do not disclose or indicate
circumstances which, and except any such costs which, would not, individually or
in the aggregate, have a Material Adverse Effect.
(c) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter, or
notice (written or oral) asserting liability or potential liability
(including without limitation liability or potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Materials of Environmental Concern at any location, (ii) circumstances
forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (iii) otherwise relating to
obligations or liabilities under any Environmental Law.
"Environmental Law" means any law, rule, order, regulation, statute,
ordinance, guideline, code, decree, or other legally enforceable
requirement (including, without limitation, common law) of any foreign
government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the
environment.
"Environmental Permit" means any permit, license, registration,
approval, exemption, or other filing with or authorization by any
Governmental Authority under any Environmental Law.
"Environmental Report" means any report, study, assessment, audit, or
other similar document that addresses any issue of actual or potential
noncompliance with, or actual or potential liability under or cost arising
out of,
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20
any Environmental Law that may in any way affect the Company or any of its
subsidiaries.
"Materials of Environmental Concern" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude oil
or any fraction thereof), petroleum products, asbestos, pollutants,
contaminants, radioactivity, and all other materials and forces, whether or
not defined as such, that are regulated pursuant to or that could result in
liability under any Environmental Law.
(d) For purposes of this Section 3.13, the term "subsidiaries" of the
Company shall include any former subsidiaries of the Company to the extent that
the failure of any representation and warranty contained in this Section (as so
interpreted) could give rise to any liability or obligation of, its present
subsidiaries.
SECTION 3.14 Material Contracts. Except as would not, individually
or in the aggregate, have a Material Adverse Effect, (i) the Company and its
subsidiaries are not in default under any agreement, contract, arrangement or
other understanding ("Contract") to which the Company or any of its Significant
Subsidiaries is a party or by which any of their properties are bound, and (ii)
to the Company's knowledge, the other parties thereto are not in default
thereunder and such Contracts are valid and binding obligations of the other
parties thereto in accordance with their terms.
SECTION 3.15 Permits. Each of the Company and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
(collectively, the "Company Permits") that are necessary to own, lease and
operate the properties of the Company and its subsidiaries and to carry on their
business as owned, leased, operated or carried on as of the date of this
Agreement, except, in each case, where the failure to possess such Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect. The Company Permits are in full force and effect and there is no
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits,
except, in each case, where the failure to possess, or the suspension or
cancellation of, such Company Permits, individually or in the aggregate, would
not have a Material Adverse Effect.
SECTION 3.16 Properties. (a) The Company or its Significant
Subsidiaries has good, valid, and, in the case of Owned Properties (as defined
below), marketable fee title to: (i) all of the real property and interests in
real property owned by the Company or its Significant Subsidiaries indicated in
the most recent financial statements included in the SEC Reports, except
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21
for properties sold or otherwise disposed of in the ordinary course of business
(the "Owned Properties"), and (ii) leasehold estates in all leased real
properties indicated in the most recent financial statements included in the SEC
Reports, except leasehold interests terminated in the ordinary course of
business (the "Leased Properties"; the Owned Properties and Leased Properties
being sometimes referred to herein as the "Real Properties"), in each case free
and clear of all mortgages, liens, security interests, easements, covenants,
rights-of-way and other similar restrictions and encumbrances ("Encumbrances"),
except for (x) Encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect, and (y) those Encumbrances set forth in Section
3.16(a) of the Company Disclosure Schedule.
(b) Except to the extent that the inaccuracy of any of the following,
(or the circumstances giving rise to such inaccuracy), individually or in the
aggregate, would not have a Material Adverse Effect:(i) each of the agreements
by which the Company has obtained a leasehold interest in each Leased Property
(individually, a "Lease" and collectively, the "Leases") is in full force and
effect in accordance with its respective terms and the Company or its subsidiary
is the holder of the lessee's or tenant's interest thereunder; to the knowledge
of the Company, there exists no default under any Lease and no circumstance
exists which, with the giving of notice, the passage of time or both, could
result in such a default; the Company and its subsidiaries have complied with
and timely performed all conditions, covenants, undertakings and obligations on
their parts to be complied with or performed under each of the Leases; the
Company and its subsidiaries have paid all rents and other charges to the extent
due and payable under the Leases;(ii) there are no leases, subleases, licenses,
concessions or any other contracts or agreements granting to any person or
entity other than the Company or any of its subsidiaries any right to the
possession, use, occupancy or enjoyment of any Real Property or any portion
thereof;(iii) the current operation and use of the Real Properties does not
violate any statute, law, regulation, rule, ordinance, permit, requirement,
order or decree now in effect; the use being made of each Real Property at
present is in conformity with the certificate of occupancy issued for such Real
Property;(iv) there are no existing, or to the knowledge of the Company,
threatened, condemnation or eminent domain proceedings (or proceedings in lieu
thereof) affecting the Real Properties or any portion thereof;(v) no default or
breach exists under any of the covenants, conditions, restrictions,
rights-of-way, or easements, if any, affecting all or any portion of a Real
Property, which are to be performed or complied with by the Company or any of
its subsidiaries; and (vi) all the buildings, structures, equipment and other
tangible assets of the Company (whether owned or leased) are in normal operating
condition (normal wear and tear excepted) and are fit for use in the ordinary
course of business.
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22
(c) Neither the Company nor any of its subsidiaries is obligated
under or bound by any option, right of first refusal, purchase contract, or
other contractual right to sell or dispose of any Owned Property or any portions
thereof or interests therein which property, portions and interests,
individually or in the aggregate, are material to the Company and its
subsidiaries.
SECTION 3.17 Intellectual Property. Except to the extent the failure
of any of the following would not, individually or in the aggregate, have a
Material Adverse Effect: (i) the Company and each of its subsidiaries owns
and/or is licensed to use (in each case, clear of any liens, claims or similar
encumbrances) all patents, trademarks, trade names, copyrights, technology,
know-how and processes used in or necessary for the conduct of its business as
currently conducted; (ii) the use of such patents, trademarks, trade names,
service marks, copyrights, technology, know-how and processes by the Company and
its subsidiaries and their agents does not infringe on the rights of any person;
(iii) to the knowledge of the Company, no person is infringing on any right of
the Company or any of its subsidiaries with respect to any such patents,
trademarks, service marks, trade names, copyrights, technology, know-how or
processes; (iv) the Company and its subsidiaries are not in breach or violation
of any agreement relating to the use of any of the intellectual property
identified in this provision, and they have not received any notification,
written or oral, from any third party that there is any such violation, breach
or inability to perform under any such agreement; and (v) there are no
agreements, written or oral, which in any material respect limit or otherwise
relate to any rights by the Company or its subsidiaries to use any of their
intellectual property.
SECTION 3.18 Management Information Systems. The implementation of
the Company's planned management information systems is proceeding on schedule
and, to the Company's knowledge, there are no circumstances currently existing
or reasonably anticipated to delay such implementation or increase the cost
thereof, except to the extent the failure of any of the foregoing would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.19 Affiliate Transactions. Except to the extent that the
inaccuracy of any of the following, (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have a Material Adverse
Effect, Section 3.19 of the Company Disclosure Schedule sets forth a true and
complete list (including names of parties, amounts involved and brief
descriptions) of all transactions, agreements, arrangements or understandings
(or series thereof), written or oral, between the Company or any of its
subsidiaries and any of its or their directors or officers (including, in the
case of natural persons, any of such persons' relatives or affiliates, but
excluding any dealings exclusively among the Company and its subsidiaries)
<PAGE>
23
currently existing or effected or entered into since January 30, 1995 involving
amounts in excess of $25,000, other than any such transactions, agreements,
arrangements or understandings otherwise disclosed with at least the same level
of detail elsewhere in the Company Disclosure Schedule.
SECTION 3.20 Approvals; Vote Required. The Board of Directors of the
Company has approved this Agreement, the Offer, the Merger and the other
Transactions, and such approval is sufficient to render inapplicable hereto and
thereto the provisions of Section 912 of the NYBCL. To the best knowledge of
the Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, the Offer, this Agreement or any of
the other Transactions. The Board of Directors of the Company has also approved
this Agreement and the Support Agreement as a "memorandum of understanding" with
Purchaser pursuant to Section (D)(i) of Article XI of the Company's Certificate
of Incorporation with respect to the transactions contemplated hereby and by the
Support Agreement, and such action is sufficient to render Section (A) of
Article XI of the Certificate of Incorporation inapplicable hereto and to the
Support Agreement, the Offer, the Merger and the other Transactions. As a
result of the foregoing actions, the only action required to authorize this
Agreement and the Merger is the affirmative vote of two-thirds of the
outstanding Shares, and no further action is required to authorize the other
Transactions.
SECTION 3.21 Brokers. No broker, finder or investment banker (other
than the Financial Adviser) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company. The Company has heretofore furnished to
Purchaser a complete and correct copy of all agreements between the Company and
the Financial Adviser pursuant to which such firm would be entitled to any
payment relating to the Transactions.
SECTION 3.22 Rights Agreement. The Company and the Board of
Directors of the Company have taken all necessary action so that none of the
execution of this Agreement or the Support Agreement, the making of the Offer,
the acquisition of Shares pursuant to the Offer and the Equity Contribution, or
the consummation of the Merger or the other Transactions will (i) cause any
Rights issued pursuant to the Rights Agreement to become exercisable, (ii) cause
Purchaser or any of its Affiliates (as defined in the Rights Agreement) or
Associates (as defined in the Rights Agreement) to be an Acquiring Person (as
defined in the Rights Agreement) or (iii) give rise to a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement), and
will take any further action as may be necessary in furtherance of the
foregoing. The copy of the Rights Agreement included in the Current SEC Reports
is complete and correct and includes all amendments and supplements to and
including the date of this Agreement. The Company has delivered
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24
to Purchaser a true and complete copy of all resolutions of the Company's Board
of Directors made with respect to the actions referred to in this Section 3.22,
which resolutions are in full force and effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company that:
SECTION 4.1 Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals could not, individually or in
the aggregate, reasonably be expected to prevent or materially delay the
consummation of the Offer or the Merger.
SECTION 4.2 Certificate of Incorporation and By-Laws. Purchaser has
heretofore furnished to the Company complete and correct copies of the
Certificate of Incorporation and the By-Laws of Purchaser as currently in
effect. Such Certificate of Incorporation and By-Laws are in full force and
effect and no other organizational documents are applicable to or binding upon
Purchaser. Purchaser is not in violation of any provisions of its Certificate
of Incorporation or By-Laws.
SECTION 4.3 Authority Relative to This Agreement. Purchaser has all
necessary corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the Transactions have been duly authorized by all necessary
corporate action on the part of Purchaser other than filing and recordation of
appropriate merger documents as required by the NYBCL. This Agreement has been
duly executed and delivered by Purchaser and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each such corporation enforceable against such corporation in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of bankruptcy.
SECTION 4.4 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Purchaser do not and
will not: (i) conflict with or
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25
violate the certificate of incorporation or by-laws of Purchaser; (ii) assuming
that all consents, approvals and authorizations contemplated by clauses (i),
(ii) and (iii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
statute, rule, regulation, order, judgment or decree applicable to Purchaser or
by which it or its properties are bound or affected; or (iii) conflict with or
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the property or assets 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 of its properties are bound or affected, except, in the
case of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent or materially delay the consummation of the
Offer or the Merger.
(b) The execution, delivery and performance of this Agreement, and the
consummation of the Offer, by Purchaser do not and will not require any consent,
approval, authorization or permit of, action by, filing with or notification to,
any governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act, and the rules and
regulations promulgated thereunder, the HSR Act, state securities, takeover and
"blue sky" laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the NYBCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the consummation of the Offer or the
Merger.
SECTION 4.5 Offer Documents; Proxy Statement. None of (i) the Offer
Documents, as filed pursuant to Section 1.1, or the information supplied by
Purchaser for inclusion in the Debt Offer Documents or the Schedule 14D-9,
shall, at the time such Offer Documents, Debt Offer Documents, Schedule 14D-9 or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to shareholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) the information supplied by Purchaser for inclusion in
the Proxy Statement shall, on the date the Proxy Statement is first mailed to
shareholders, at the time of the Shareholders Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
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26
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
false or misleading. Notwithstanding the foregoing, Purchaser makes no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in or incorporated by
reference in any of the foregoing documents. The Offer Documents will comply in
all material respects as to form with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
SECTION 4.6 Debt Financing. Assuming the Financing is obtained, the
Company or the Surviving Corporation, as the case may be, will have sufficient
funds to (i) consummate the transactions contemplated by the Debt Offer and (ii)
make and satisfy the obligations under the change in control offer under the
Convertible Notes Indenture.
SECTION 4.7 Equity Financing. Purchaser will have sufficient funds
to (i) accept for payment and pay for all Shares tendered pursuant to the Offer,
(ii) purchase the Shares in the Equity Contribution (iii) permit the Surviving
Corporation to pay the aggregate Merger Consideration in the Merger and (iv)
purchase Shares in the event it exercises its rights pursuant to the
anti-dilution provisions set forth in Section 6.14, in each case upon the
consummation thereof and subject to terms and conditions specified herein
including, in the case of the Offer, the Offer Conditions.
SECTION 4.8 Brokers. No unaffiliated broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date hereof to
such time as Purchaser's designees shall constitute a majority of the Company's
Board of Directors, except as specifically contemplated hereby, unless Purchaser
shall otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable laws; and
the Company and its subsidiaries shall each use its commercially reasonable
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries
<PAGE>
27
with customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and
not limitation, except as specifically contemplated hereby, neither the Company
nor any of its Significant Subsidiaries (or, in the case of clause (j) below,
its subsidiaries) shall, during such period, directly or indirectly do, or
commit to do, any of the following without the prior written consent of
Purchaser:
(a) Amend or otherwise change its certificate of incorporation or
by-laws or equivalent organizational documents or, except as expressly
contemplated by this Agreement, amend the Rights Agreement;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, (A)
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including but not limited
to stock appreciation rights or phantom stock), of the Company or any of
its subsidiaries (except for (i) the issuance of up to 1,322,688 shares of
Company Common Stock issuable in accordance with the terms of Options
outstanding as of November 2, 1997, and (ii) the issuance of up to
7,616,003 shares of Company Common Stock issuable in accordance with the
terms of Convertible Notes outstanding as of November 2, 1997) or (B) any
assets of the Company or any of its subsidiaries, except for (x) assets
(excluding real property) sold, leased, pledged or otherwise encumbered in
the ordinary course of business and in a manner consistent with past
practice and (y) sale/leaseback transactions on commercially reasonably
terms and in an aggregate amount not in excess of $15 million, so long as
such transactions are not consummated prior to January 15, 1998 and so long
as such transactions can be abandoned by the Company at any time prior to
consummation without the payment or incurrence of material cost, expense or
fees;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) other than with respect to borrowings necessary to
effect the Debt Offer, incur any indebtedness for borrowed money (other
than (x) up to an aggregate principal amount of $10
<PAGE>
28
million at any one time outstanding and incurred in the ordinary course of
business or (y) pursuant to the Financing), or issue any debt securities,
or enter into any sale/leaseback transaction other than as described in
clause (b) above, or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments in,
any other person; (iii) enter into any contract or agreement other than in
the ordinary course of business consistent with past practice; (iv)
authorize any single capital expenditure (or series of capital
expenditures) which is in excess of $50,000 or capital expenditures which
are, in the aggregate, in excess of $250,000 for the Company and its
subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(e); provided that the Company and its
subsidiaries may obtain commitments for up to $25 million of financing in
replacement for any existing commitments so long as no material fees are
incurred in respect thereof on or prior to the initial expiration date of
the Offer and so long as any such commitments may be terminated by the
Company at any time without the payment or incurrence of material cost,
expense or fees;
(f) Except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement, increase the compensation or fringe benefits of any of its
directors, officers or employees, other than increases in salary or wages
of employees of the Company or its subsidiaries who are not officers of the
Company in the ordinary course of business in accordance with past
practice, or grant any severance or termination pay not currently required
to be paid under existing severance plans or enter into any employment,
consulting or severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its
subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining agreement or Company Plan, including, but not limited
to, bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees, or make any loans to
any employees, officers or directors (other than advances in respect of
reimbursable expenses) or cancel or forgive any such existing loans;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
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29
(h) Make or change any tax election, file any amended Tax Return, or
settle or compromise any material federal, state, local or foreign Tax
liability;
(i) Settle or compromise any pending or threatened suit, action or
claim for an amount in excess of $25,000 or which relates to the
Transactions;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries other than the
Merger and other than with respect to an inactive subsidiary so long as
neither the Company nor its Significant Subsidiaries incurs or assumes any
liabilities or obligations in connection therewith or as a result thereof;
(k) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities; or
(l) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(k)
or any action which would make any of the representations or warranties of
the Company contained in this Agreement untrue and incorrect as of the date
when made if such action had then been taken, or would result in any of the
Offer Conditions not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Shareholders Meeting. (a) The Company, acting through
its Board of Directors, shall, if required to approve the Merger in accordance
with applicable law and the Company's Certificate of Incorporation and By-Laws,
(i) duly call, give notice of, convene and hold a meeting of its shareholders as
soon as practicable following consummation of the Offer for the purpose of
considering and taking action on this Agreement, the Merger and the other
Transactions (the "Shareholders Meeting"), (ii) include in the Proxy Statement
the unanimous recommendation of the Board of Directors that the shareholders of
the Company vote in favor of the approval of this Agreement, the Merger and the
other Transactions, which recommendation may not be withdrawn, amended or
modified in a manner adverse to Purchaser (nor may the Board of Directors of the
Company announce publicly its intention to do so), and the written opinion of
the Financial Adviser that the consideration to be received by the shareholders
of the Company pursuant to the Merger is fair to such shareholders and (iii) use
its reasonable
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30
best efforts to obtain the necessary approval of this Agreement and the Merger
by its shareholders. At the Shareholders Meeting, Purchaser shall cause all
Shares then owned by it or for which it has the power to vote or direct the vote
to be voted in favor of approval of this Agreement and the Transactions.
(b) The Board of Directors of the Company shall set the record date
for the Shareholders Meeting to occur immediately following the consummation of
the Offer and the Equity Contribution so that Purchaser is the holder of record
for purposes of such Shareholders Meeting of the Shares acquired in the Offer
and the Equity Contribution, which Shares shall constitute in excess of
two-thirds of the issued and outstanding Shares of record at such record date.
In the event that it becomes necessary to delay the date of the Shareholders
Meeting, the Company shall use its reasonable best efforts to ensure that any
such delay does not frustrate the purpose of the immediately preceding sentence,
including by issuing Shares in accordance with Section 6.14 immediately prior to
setting any new record date for the Shareholders Meeting.
(c) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Purchaser, subject to Article VII, to take 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
shareholders, in accordance with Section 905 of the NYBCL.
SECTION 6.2 Proxy Statement. (a) As soon as practicable following
the date hereof, the Company shall prepare and file with the SEC under the
Exchange Act and the rules and regulations promulgated thereunder, and shall use
its reasonable best efforts to have cleared by the SEC as promptly as
practicable after such filing, the Proxy Statement with respect to the
Shareholders Meeting. Purchaser and the Company will cooperate with each other
in the preparation of the Proxy Statement; without limiting the generality of
the foregoing, Purchaser will furnish in writing to the Company the information
relating to it and its affiliates required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company agrees to use its reasonable best efforts, after consultation with
Purchaser, to respond promptly to any comments made by the SEC with respect to
the Proxy Statement and any preliminary version thereof filed by it, and to
cause such Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable. The Company and Purchaser each agrees to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading.
(b) The Company will as promptly as practicable notify Purchaser of
(i) the receipt of any comments from the SEC with
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31
respect to the Proxy Statement and (ii) any request by the SEC for any
additional information. All filings by the Company with the SEC, including the
Proxy Statement and any amendments thereto, and all mailings to the Company's
shareholders in connection with the Merger, including the Proxy Statement, shall
be subject to the prior review, comment and approval of Purchaser (such approval
not to be unreasonably withheld or delayed).
SECTION 6.3 Company Board Representation; Section 14(f). (a)
Immediately upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser (including Shares as to which any such
person has the right to vote or direct the voting) bears to the total number of
Shares then outstanding, and the Company shall, at such time, take all action
necessary to cause Purchaser's designees to be so elected, including by securing
the resignations of incumbent directors. Purchaser shall determine for the
approval of the Board of Directors the classes into which such directors are
placed, so long as such placement does not violate or conflict with the
Company's Certificate of Incorporation or By-laws or the NYBCL and the Company
shall cause Purchaser's designees to be so placed. The Company will use its
reasonable best efforts to cause persons designated by Purchaser to constitute
the same percentage as is on the board of (i) each committee of the Board of
Directors, (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board, in each case only to the extent
permitted by law and the rules of the NYSE to the extent applicable.
(b) The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 6.3 and shall include in the Schedule 14D-9 or a separate
Rule 14f-1 information statement provided to shareholders such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 6.3.
Purchaser will supply to the Company and be solely responsible for any
information with respect to it and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Purchaser's designees
pursuant to this Section 6.3 and prior to the Effective Time, so long as at
least one director of the
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32
Company then in office is neither designated by Purchaser nor an employee of the
Company (a "Disinterested Director"), any amendment of this Agreement or, to the
extent material, the Certificate of Incorporation or By-Laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of
Purchaser or waiver of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors hereunder, will require the
concurrence of a majority of the Disinterested Directors or, if there is only
one Disinterested Director, of such Disinterested Director. The Company shall
use its best efforts to insure that at least one Disinterested Director remains
on the Board of Directors prior to the Effective Time.
SECTION 6.4 Access to Information; Confidentiality. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Purchaser and its
affiliates, and financing sources who shall agree to be bound by the provisions
of this Section 6.4 as though a party hereto, access at all reasonable times (i)
to its officers, employees, agents, properties, offices, stores and other
facilities and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as they may from time to
time request, (ii) the Company's and its subsidiaries' vendors and (iii) the
Company's and its subsidiaries' management information systems and other
consultants.
(b) The documents and information provided pursuant to this Section
6.4 shall be subject to the provisions of the letter agreement dated March 25,
1997 between the Company and The Cypress Group L.L.C. (the "Confidentiality
Agreement").
(c) No investigation pursuant to this Section 6.4 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.5 No Solicitation of Transactions. The Company agrees that
it shall not, and shall cause its subsidiaries and its and its subsidiaries'
officers, directors, employees, representatives, agents, advisors and affiliates
not to, solicit, initiate or encourage inquiries or proposals with respect to,
or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, or enter into an agreement with,
any person relating to any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries or any proposal or offer to acquire in any manner a greater than
20% equity interest in, or more than 20% of the assets of, the Company or any of
its subsidiaries, other than the
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33
Transactions (any of the foregoing, an "Acquisition Proposal"); provided, that
the Company may (i) at any time prior to the consummation of the Offer, if the
Company is not otherwise in violation of this Section 6.5, furnish information
to, and negotiate or otherwise engage in discussions with, any party who
delivers a written proposal for an Acquisition Proposal if and so long as the
Board of Directors of the Company determines in good faith by a majority vote,
based upon advice of its outside legal counsel, that failing to take such action
would reasonably be expected to constitute a breach of the fiduciary duties of
the Board; and (ii) take a position with respect to the Acquisition Proposal, or
amend or withdraw such position, in compliance with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to the Acquisition Proposal. The
Company also agrees immediately to cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Purchaser and its affiliates, with respect
to any of the foregoing. The Company shall promptly (and in any event within 24
hours) advise Purchaser following the receipt by it of any Acquisition Proposal
or any inquiry or request relating thereto and the substance thereof (including
the identity of the person making such Acquisition Proposal and a copy of any
written proposal), and, if consistent with its fiduciary duties, advise
Purchaser of any developments with respect to such Acquisition Proposal, inquiry
or request promptly upon the occurrence thereof, including the Company's
entering into discussions or negotiations with respect thereto. The Company
agrees not to release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party.
Without limiting the generality of the foregoing, it is understood that any
violation of the restrictions set forth in this paragraph by any officer,
director, employee, representative, agent, advisor or affiliate of the Company
or any subsidiary shall be deemed to be a breach of this paragraph by the
Company.
SECTION 6.6 Benefits Matters. (a) On and after the Effective Time,
the Surviving Corporation shall promptly pay or provide when due all
compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees) and
directors (and former directors) of the Company and previously disclosed to
Purchaser. Purchaser and the Company agree that the Surviving Corporation shall
pay promptly or provide when due all compensation and benefits accrued or
incurred prior to the Effective Time and required to be paid pursuant to the
terms of any individual agreement with any employee, former employee, director
or former director in effect and disclosed to Purchaser as of the date hereof,
or pursuant to any applicable collective bargaining agreement.
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34
(b) Notwithstanding the remaining provisions of this Section 6.6, the
Company and its subsidiaries, and the Surviving Corporation, its subsidiaries
and its successors and assigns, will honor all director retirement benefits, and
all employment or severance agreements with any Employee (as defined below) or
former employee of the Company or any of its subsidiaries, in existence on the
date hereof which are listed on Section 3.10 of the Company Disclosure Schedule
and a full and complete copy (or, in the case of oral agreements, written
summary) of which has been provided to Purchaser prior to the date hereof.
"Employee" shall mean any employee of the Company or its subsidiaries
immediately prior to the purchase of Shares pursuant to the Offer.
(c) Notwithstanding the remaining provisions of this Section 6.6, from
the Effective Time until the first anniversary of the Effective Time, the
Surviving Corporation, its subsidiaries, successors and assigns shall provide
Employees and former employees of the Company and its subsidiaries (and
directors and former directors of the Company) with benefit and compensation
plans, programs, policies or arrangements (including, without limitation, annual
and long-term incentive plans, retirement plans, life insurance, medical, dental
and other similar employee welfare benefit plans) no less favorable (subject to
the following proviso) in the aggregate as to each Employee, former employee,
director or former director than those currently provided to similarly situated
persons by the Company and its subsidiaries pursuant to plans, programs,
policies and arrangements listed on Section 3.10 of the Company Disclosure
Schedule and a full and complete copy (or, in the case or oral agreements,
written summary) of which has been provided to Purchaser prior to the date
hereof; provided, however, that this sentence shall not require the Surviving
Corporation or its subsidiaries, successors and assigns to provide any plan,
program or arrangement providing for the issuance or grant of any interest or
right in respect of the capital stock of the Surviving Corporation or any of its
subsidiaries. Purchaser acknowledges that the purchase of Shares pursuant to
the Offer will constitute a change in control of the Company (to the extent such
concept is applicable) for the purposes of all agreements, contracts, plans,
programs, policies or arrangements of the Company listed in Section 3.10 of the
Company Disclosure Schedule.
(d) Purchaser acknowledges the obligations of the Company and the
Surviving Corporation (and their subsidiaries, successors and assigns) set forth
in this Section 6.6. Nothing in this Section 6.6 shall require the continued
employment of any person or prevent the Company and/or the Surviving Corporation
(or its subsidiaries) from taking any action or refraining from taking any
action which the Company (or its subsidiaries), prior to the Effective Time,
could have taken or refrained from taking.
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35
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation and the By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the By-Laws of the Company on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who prior to the
purchase of Shares in the Offer were directors, officers or employees of the
Company unless such modification is required by law.
(b) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect for six years from the Effective Time the current policies of
the directors' and officers' liability insurance maintained by the Company with
respect to matters occurring prior to the Effective Time (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
advantageous to the covered officers and directors) to the extent available;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 200% of current annual premiums
paid by the Company (which annual premium the Company represents and warrants to
be not more than $230,000) to maintain or procure insurance coverage pursuant
hereto, but in such case shall purchase as much coverage as possible for such
amount.
SECTION 6.8 Notification of Certain Matters. The Company shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.8 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 6.9 Further Action; Reasonable Best Efforts. (a) 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, including under applicable laws and regulations, to consummate and
make effective the Transactions, including but not limited to (i) cooperation in
the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy
Statement or any required filings under the HSR Act and any amendments to any
thereof, (ii) using its reasonable best efforts to make and cooperate in making
all required regulatory filings and applications and to obtain and
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36
cooperate in obtaining all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and third
parties as are necessary or advisable for the consummation of the Transactions
and to fulfill the conditions to the Offer, the Merger, the Debt Offer, and the
Financing and (iii) using its reasonable best efforts to oppose, defend against,
remove and appeal any injunction, order, decree or ruling restraining, enjoining
or otherwise prohibiting the Offer, the Merger or any of the other Transactions.
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 necessary action.
(b) The Company shall, as soon as reasonably practicable after the
date hereof (and in any event within five business days from the date of public
announcement of the execution hereof), commence a debt tender offer for its
11-1/2% senior notes due 2002 (the "Senior Notes"), together with a solicitation
of consents to amend the Senior Notes Indenture, dated as of February 28, 1992,
between the Company and Bankers Trust Company, as trustee (the "Senior Notes
Indenture"; such amendment, the "Senior Notes Indenture Amendment"; and such
debt tender offer and consent solicitation, collectively, the "Debt Offer").
The Debt Offer shall be on the terms and conditions specified in Annex B hereto
or as otherwise agreed by the Company and Purchaser. Purchaser shall be
entitled to be involved in and shall cooperate with the Company in the Company's
preparation of the documents to be sent to the holders of the Senior Notes in
connection with the Debt Offer (together with any supplements or amendments
thereto, the "Debt Offer Documents"). The Company shall waive any of the
conditions to the Debt Offer and make any other changes in the terms and
conditions of the Debt Offer as may be reasonably requested by Purchaser, and
the Company shall not, without Purchaser's prior written consent, waive any
condition to the Debt Offer or make any changes to the terms and conditions of
the Debt Offer. In determining whether or not to give such consent, Purchaser
agrees to act in a commercially reasonable manner. Purchaser and the Company
each agrees promptly to correct any information provided by it for use in the
Debt Offer Documents that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause the
Debt Offer Documents as so corrected to be disseminated to holders of Senior
Notes. Provided the Company is able to obtain the Financing to consummate the
Debt Offer, and the other conditions of the Debt Offer are met or, at the sole
discretion of Purchaser, waived, the Company shall accept for payment and pay
for the Senior Notes validly tendered and not withdrawn pursuant to the Debt
Offer simultaneously with the consummation of the Offer.
(c) The Company agrees to provide, and will cause its subsidiaries and
its and their respective officers, employees,
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37
representatives and agents to provide, cooperation in connection with the
arrangement and closing of the financing described in the commitment letter
dated November 21, 1997 from The Chase Manhattan Bank, Chase Securities Inc. and
Goldman Sachs Credit Partners L.P. to, and accepted and agreed by, The Cypress
Group L.L.C., including the attached term sheet (a true and complete copy of
which has been provided to the Company) or any other financing on terms and
conditions not significantly less favorable to or otherwise reasonably
acceptable to the Company and arranged or approved by Purchaser or its
affiliates (the "Financing"), to be consummated contemporaneous with or at or
after consummation of the Offer or the Effective Time in respect of the
Transactions, including without limitation, the negotiation and execution of
loan documents, the preparation of disclosure schedules, the preparation of
offering memoranda, private placement memoranda or other similar documents,
participation in meetings, due diligence sessions and road shows (consistent
with such individuals' responsibilities for the ongoing operations of the
Company), the execution and delivery, with effectiveness no earlier than
consummation of the Offer, of any pledge and security documents, other
definitive financing documents, or other requested certificates or documents as
reasonably may be requested by Purchaser. In addition, in connection with the
obtaining of any such financing, the Company agrees to request opinions of the
Company's legal counsel and "comfort letters" of the Company's accountants
reasonably required in connection with such financing and, at the request of
Purchaser, following the consummation of the Offer, to call for prepayment or
redemption, or to prepay, redeem and/or renegotiate, as the case may be, any
then existing indebtedness of the Company to the extent financing is available
therefor.
(d) If any "fair price" or "control share acquisition" or other state
takeover statute or regulation shall become or be deemed applicable to this
Agreement or any of the Transactions, Purchaser and the Company and their
respective Boards of Directors shall use their best efforts to grant such
approvals and take such actions as are necessary so that the Transactions may be
consummated as promptly as practicable on the terms and subject to the
conditions contemplated hereby and otherwise act to minimize the effects of any
such statute or regulation on the Transactions.
(e) Following the consummation of the Offer, the Company or the
Surviving Corporation, as the case may be, shall make the change in control
offer required under the Convertible Notes Indenture at the times and pursuant
to the procedures provided therein.
SECTION 6.10 Public Announcements. Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer or the Merger and shall not issue
any such press release or make any such public statement prior to such
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38
consultation, except as may be required by law or any listing agreement with its
securities exchange.
SECTION 6.11 Cancellation of Common Stock Equivalents. The Company
shall use its commercially reasonable efforts to cause the cancellation of the
Common Stock Equivalents in consideration of a payment in cash at the Effective
Time to the holders thereof equal to the product of (x) the number of Shares
represented by the Common Stock Equivalents and (y) the excess of the Merger
Consideration over the exercise price per Common Stock Equivalent.
SECTION 6.12 Disposition of Litigation. The Company and Purchaser
each agrees that it will not settle any litigation against it or any of its
directors by any shareholder or creditor of the Company relating to any of the
Transactions without the prior written consent of the other.
SECTION 6.13 Equity Contribution. Simultaneously with the
consummation of the Offer, the Company will sell to Purchaser, and Purchaser
will purchase from the Company, an aggregate number of Shares specified by
Purchaser up to 5,586,314 Shares (including from treasury or through new
issuance) at a price per Share equal to the Merger Consideration (the "Equity
Contribution"), such Shares to be validly issued, fully paid and nonassessable,
approved for listing on the NYSE and issued and sold free of preemptive (or
similar) rights and any liens, claims or similar encumbrances.
SECTION 6.14. Anti-Dilution. The Company will as promptly as
practicable notify Purchaser if it issues any Shares, whether upon the exercise,
exchange or conversion of securities exercisable or exchangeable for or
convertible into Shares or otherwise. If the Offer is consummated, the Company
agrees that if, at the time of closing of the Offer and the Equity Contribution
or at any time thereafter until the later of (a) the Effective Time of the
Merger and (b) two years from the closing of the Offer and the Equity
Contribution, the number of Shares held by Purchaser shall not represent at
least two-thirds of the outstanding Shares as a result of the issuance of Shares
by the Company, whether upon the exercise, exchange or conversion of Options,
Convertible Notes or other securities exercisable or exchangeable for or
convertible into Shares or otherwise, the Company will sell (including from
treasury or through new issuance) to Purchaser, upon notice from Purchaser, at a
price per share equal to the Merger Consideration, in cash, such number of
validly issued, fully paid and non-assessable shares of Company Common Stock
(which shares shall be approved for listing on the NYSE if the Shares are then
so listed and issued and sold free of preemptive (or similar) rights and any
liens, claims or similar encumbrances) as may be necessary so that the
percentage of outstanding shares of Company Common Stock held by Purchaser
represents at least two-thirds of the outstanding Shares.
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39
SECTION 6.15. Support Agreement. The Company agrees not to take any
action, and shall direct its directors, officers, employees, transfer agent,
other agents, and representatives not to take any action, which would permit or
facilitate a transfer of record ownership of Shares held by the Supporting
Shareholder in violation of the Support Agreement.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect 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:
(a) If required by the NYBCL, this Agreement shall have been approved
by the affirmative vote of the shareholders of the Company owning of record
at least two-thirds of the outstanding Shares entitled to vote thereon.
(b) No temporary restraining order, preliminary or permanent
injunction or other order shall have been issued by any court or by any
governmental or regulatory agency, body or authority which prohibits the
consummation of the Merger or any of the other Transactions and which is in
effect at the Effective Time, provided, however, that, in the case of any
such decree, injunction or other order, 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 decree, injunction or
other order that may be entered.
(c) No statute, rule, regulation, executive order, decree, or other
order of any kind (whether temporary, preliminary or permanent) shall have
been enacted, entered, promulgated or enforced by any United States or
state court or governmental authority which prohibits or enjoins the
consummation of the Merger.
(d) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
(e) Purchaser shall have accepted for payment and paid for the Shares
tendered pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time
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40
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) By mutual written consent of Purchaser and the Company;
(b) By Purchaser or the Company if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States shall have issued a final injunction, order, decree or ruling or
taken any other final action restraining, enjoining or otherwise
prohibiting the Offer, the Merger or any of the other Transactions and such
order, decree, ruling or other action is or shall have become final and
nonappealable;
(c) By Purchaser or the Company if due to an occurrence or
circumstance which would result in a failure of the Offer Conditions to be
capable of satisfaction, (i) Purchaser shall have terminated the Offer,
(ii) the Offer shall have expired without Purchaser having accepted Shares
for payment pursuant thereto, or (iii) Purchaser shall not have accepted
Shares for payment pursuant to the Offer in accordance with the terms
thereof, unless such failure has been caused by or results from the breach
by the party seeking termination of any of its representations, covenants
or agreements contained in this Agreement;
(d) By the Company if Purchaser shall have failed to commence the
Offer within five business days of the public announcement thereof (within
the meaning of Rule 14d-2(b) of the Exchange Act) unless the failure to
commence the Offer shall be due to (A) the failure of the Company to
perform in any material respect any of its obligations under this Agreement
then required to be performed or (B) the failure of any condition to the
Offer set forth in Annex A hereto;
(e) By Purchaser or the Company prior to the purchase of the Shares
pursuant to the Offer (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach is not cured within five business days following written
notice given by the terminating party to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the date on which
the Offer expires; or
(f) By either Purchaser or the Company prior to the purchase of
Shares pursuant to the Offer if the Board of Directors of the Company shall
reasonably determine in good faith by a majority vote that an Acquisition
Proposal is more favorable to the Company's shareholders in the
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41
aggregate and from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transactions proposed by Purchaser in response to such
Acquisition Proposal) and shall reasonably determine in good faith by a
majority vote, based upon advice of its outside legal counsel, that failing
to accept such Acquisition Proposal would reasonably be expected to
constitute a breach of the fiduciary duties of the Board and the Company
shall have delivered to Purchaser a written notice of the determination by
the Company's Board of Directors to terminate this Agreement pursuant to
this Section 8.1(f) setting forth a summary of all material terms of such
Acquisition Proposal; provided, however, that the Company may not terminate
this Agreement pursuant to this clause (f) unless (i) five business days
shall have elapsed after delivery to Purchaser of the notice referred to
above, (ii) at the end of such five business day period the Company's Board
of Directors shall continue to believe that such Acquisition Proposal is
more favorable to the Company's shareholders in the aggregate and from a
financial point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions of such
transactions proposed by Purchaser in response to such Acquisition
Proposal), and (iii) simultaneously with such termination the Company shall
enter into a definitive acquisition, merger or similar agreement to effect
such Acquisition Proposal and shall make payment of the full reimbursement
required by Section 8.3(a)(i) hereof; or
(g) By Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger or
shall have recommended another Acquisition Proposal, offer or transaction;
or (ii) the Minimum Condition shall not have been satisfied by the
expiration date of the Offer and on or prior to such date (A) any person
(other than Purchaser or its affiliates) shall have made a public
announcement or proposal, or a communication to the Company which becomes
publicly known, with respect to an Acquisition Proposal which is superior
from a financial point of view to the Offer and the Merger or (B) any
person (including the Company or any of its affiliates or subsidiaries),
other than Purchaser or any of its affiliates, shall have become the
beneficial owner of 20% or more of the Shares.
SECTION 8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 8.3 and Section 9.1; provided, however, that nothing
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42
herein shall relieve any party from liability for any breach hereof.
SECTION 8.3 Fees and Expenses.
(a) If Purchaser terminates this Agreement pursuant to Section 8.1(f),
(g)(i) or (g)(ii)(B) hereof, or if the Company terminates this Agreement
pursuant to Section 8.1(f) hereof or in circumstances that would have permitted
Purchaser to terminate pursuant to Section 8.1(f), (g)(i) or (g)(ii)(B) hereof,
then:
(i) The Company shall reimburse Purchaser and its affiliates for all
reasonable out-of-pocket fees and expenses actually incurred by any of them
or on their behalf in connection with the Offer and the Merger and the
negotiation, preparation, diligence in respect of and consummation of all
Transactions (including, without limitation, fees and disbursements payable
to financing sources, investment bankers, counsel to Purchaser or its
affiliates or any of the foregoing, and accountants) up to an aggregate
maximum reimbursement of $750,000. The Company shall pay the amounts
requested within one business day of such requests (accompanied by a
submission of statements therefor); and
(ii) If (x) such termination is pursuant to Section 8.1(g)(ii)(B) or
in circumstances that would have permitted Purchaser to terminate pursuant
to Section 8.1(g)(ii)(B) or (y) within 12 months of such termination the
Company consummates a transaction contemplated by the definition of
"Acquisition Proposal", then in each case the Company shall pay to or as
directed by Purchaser, within one business day following such termination,
in the case of clause (x) above, or within one business day following
consummation of such transaction, in the case of clause (y) above, a fee,
in cash, of $3 million, provided, however, that the Company in no event
shall be obligated to pay more than one such fee with respect to all such
terminations and transactions.
(b) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the Transactions.
SECTION 8.4 Amendment. Subject to Section 6.3 and any applicable
law, this Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time prior to the
Effective Time. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in
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43
the representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements set forth in this
Agreement shall terminate upon the purchase of Shares in the Offer or upon the
termination of this Agreement pursuant to Section 8.1, as the case may be,
except that the agreements set forth in Article II, Section 6.6, Section 6.7 and
Article IX shall survive the Effective Time and those set forth in Section
6.4(b), Section 8.3 and Article IX shall survive termination of this Agreement.
SECTION 9.2 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 by like notice):
if to Purchaser:
The Cypress Group
65 East 55th Street, 19th Floor
New York, NY 10022
Attention: David P. Spalding
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Robert E. Spatt, Esq.
if to the Company:
General Host Corporation
c/o Frank's Nursery & Crafts, Inc.
6501 East Nevada
Detroit, MI 43234
Attention: J. Theodore Everingham, Esq.
<PAGE>
44
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Joseph A. Coco, Esq.
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any Shares means a person who,
or any of whose affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act), (i) beneficially owns, directly or indirectly,
such Shares, (ii) has, directly or indirectly, (A) the right to acquire
such Shares (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 such
Shares pursuant to any agreement, arrangement or understanding or (iii) has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of such Shares with any other beneficial owner
of such Shares; "beneficially own" and "beneficial ownership" shall have
correlative meanings.
(c) "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 policies of a person, whether through the ownership of stock,
power to elect a majority of directors or other managers, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended January 26, 1997 were prepared;
<PAGE>
45
(e) "knowledge" of the Company shall include knowledge of the officers
of its Significant Subsidiaries.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which the Company, the Surviving
Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder
of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity; and
(h) "Significant Subsidiary" has the meaning set forth in Regulation
S-X promulgated by the SEC.
SECTION 9.4 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 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 an acceptable manner to the end that the
Transactions are fulfilled to the fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement and the
Confidentiality 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.
SECTION 9.6 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 rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except for Sections 6.6(a) and (b) and 6.7,
<PAGE>
46
which are intended to be for the benefit of the persons referred to therein, and
may be enforced by such persons.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8 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 9.9 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.
<PAGE>
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.
CYRUS ACQUISITION CORP.
By: /s/ David P. Spalding
--------------------------
Title: President
GENERAL HOST CORPORATION
By: /s/ Harris J. Ashton
---------------------------------
Title: Chairman, President & CEO
<PAGE>
ANNEX A to
Agreement and
Plan of Merger
Offer Conditions
The capitalized terms used in this Annex A have the meanings
set forth in the attached Agreement, except that the term "Merger
Agreement" shall be deemed to refer to the attached Agreement and the
term "Commission" shall be deemed to refer to the SEC.
Notwithstanding any other provision of the Offer, Purchaser
shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to Purchaser's obligation to
pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for any Shares tendered pursuant to the
Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may amend or terminate the Offer as to any
Shares not then paid for if, prior to the expiration of the Offer, (i)
a number of Shares which constitutes more than two-thirds of the
voting power (determined on a fully-diluted basis, without giving
effect to potential dilution resulting from conversion of Convertible
Notes which are outstanding and unconverted at the expiration date of
the Offer), on the date of purchase, of all the securities of the
Company entitled to vote generally in the election of directors or in
a merger shall not have been validly tendered and not properly
withdrawn prior to the expiration of the Offer (the "Minimum
Condition") or (ii) at any time on or after the date of the Merger
Agreement and prior to the acceptance for payment of Shares, any of
the following events have occurred:
(a) there shall have been instituted or pending any action
or proceeding brought by any governmental authority before any
federal or state court, or any order or preliminary or permanent
injunction entered in any action or proceeding before any federal
or state court or governmental, administrative or regulatory
authority or agency, or any other action taken, or statute, rule,
regulation, legislation, interpretation, judgment or order
enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to Purchaser, the Company or any subsidiary or
affiliate of Purchaser or the Company or to the Offer or the
Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency
which could reasonably be expected to have the effect of: (i)
making illegal, materially delaying or otherwise directly or
indirectly restraining or prohibiting or making materially more
costly the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates, or the consummation of any of the transactions
A-1
<PAGE>
ANNEX A
contemplated by the Merger Agreement or materially delaying the
Merger; (ii) prohibiting or materially limiting the ownership or
operation by the Company or any of its Significant Subsidiaries
or Purchaser or any of Purchaser's affiliates of all or any
material portion of the business or assets of the Company or any
of its Significant Subsidiaries, or compelling Purchaser or any
of its affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company or any
of its Significant Subsidiaries or Purchaser or any of its
affiliates, as a result of the transactions contemplated by the
Offer or the Merger Agreement; (iii) imposing or confirming
limitations on the ability of Purchaser or any of its affiliates
effectively to acquire or hold or to exercise full rights of
ownership of Shares, including without limitation the right to
vote any Shares acquired or owned by Purchaser or any of its
affiliates on all matters properly presented to the shareholders
of the Company, including without limitation the adoption and
approval of the Merger Agreement and the Merger or the right to
vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (iv) requiring divestiture by
Purchaser or any of its affiliates of any Shares;
(b) there shall have occurred, after the date of the Merger
Agreement, an event that has had a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New
York Stock Exchange or in the Nasdaq National Market for a period
in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference not
relating to monetary conditions), (ii) a decline of at least 25%
in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date hereof, or a material
disruption of or material adverse change in financial, banking or
capital market conditions that could materially adversely affect
syndication of loan facilities, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States, (iv) any limitation (whether or not mandatory)
by any domestic government or governmental, administrative or
regulatory authority or agency on, or any other event that could
reasonably be expected to materially adversely affect the
extension of credit by banks or other lending institutions, (v) a
commencement of a war or armed hostilities or other national or
international calamity having a Material Adverse Effect or
materially adversely affecting (or materially delaying) the
consummation of the Offer or any of the other Transactions or
(vi) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening
thereof;
A-2
<PAGE>
ANNEX A
(d) (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 more than 15.0%
of the outstanding Shares has been acquired by any corporation
(including the Company or any of its subsidiaries or affiliates),
partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than Purchaser or
any of its affiliates, or (ii) (A) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser the approval or recommendation
of the Offer, the Merger or the Merger Agreement, or approved or
recommended any Acquisition Proposal or any other acquisition of
Shares other than the Offer and the Merger or (B) any such
corporation, partnership, person or other entity or group shall
have entered into a definitive agreement or an agreement in
principle with the Company with respect to an Acquisition
Proposal;
(e) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified as to
materiality shall not be true and correct, or any such
representations and warranties that are not so qualified shall
not be true and correct in any material respect, in each case as
if such representations and warranties were made at the time of
such determination;
(f) 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;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated
with the consent of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares contemplated by the Merger Agreement,
including pursuant to the Offer, the Equity Contribution and the
Merger, shall not have expired or been terminated;
(i) consents in respect of the Senior Note Indenture
Amendment on behalf of Senior Notes representing at least a
majority in principal amount of all outstanding Senior Notes
shall not have been validly tendered and not withdrawn in the
Debt Offer, or any other condition to the Debt Offer shall not
have been satisfied or waived in accordance with the Merger
Agreement, or the Senior Note Indenture Amendment shall not have
been executed or shall not become operative immediately following
the consummation of the Debt Offer; or
A-3
<PAGE>
ANNEX A
(j) all consents and approvals of and notices to or filings
with governmental authorities and third parties required in
connection with the Transactions shall not have been obtained or
made other than those the absence of which, individually or in
the aggregate, would not have a Material Adverse Effect or
prevent or materially delay consummation of any of the
Transactions.
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 (subject in each case to the terms of the Merger
Agreement). 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.
Any determination by Purchaser concerning the events described in this
Annex A will be final and binding upon all parties.
A-4
<PAGE>
ANNEX B to
Agreement and
Plan of Merger
Summary of Key Debt Offer Terms and Conditions
Transaction: Tender Offer and Consent Solicitation.
Type of Tender: Any and all; subject to minimum majority
tender with receipt of exit consents.
Conditions: Noteholders may not tender without consenting
and may not consent without tendering.
All of the conditions precedent to the Offer
as set forth in Annex A to the Merger
Agreement shall have been satisfied except
the condition set forth at paragraph (i); the
Company must have evidence that such
paragraph (i) will be satisfied upon the
Closing of the Debt Offer. Purchaser shall
have accepted Shares for payment
simultaneously with the acceptance for
payment of the Senior Notes.
The Financing shall be consummated
simultaneously with the acceptance for
payment of the tendered Senior Notes.
Other conditions typical for transactions of
this type and not inconsistent with the
foregoing.
Launch Date: Simultaneous with Offer launch.
Consent Date: 10 business days after launch date, or such
later date on which the requisite consents
have been received.
Expiration Date: 20 business days after launch date, or any
later date to which the Offer is extended.
Consideration: Tender price per Bond: Offer Price plus
accrued and unpaid interest to payment date.
Consent Fee per Bond: $20 per $1,000.
Payable only to noteholders who validly
tender (and do not withdraw) Senior Notes and
consents on or prior to Consent Date.
B-1
<PAGE>
ANNEX B
Total Payment per Bond: Offer Price plus
accrued and unpaid interest to payment date.
Offer Price: $1,036.25 per $1,000.
Exit Consents: Exit consents to (i) eliminate certain
restrictive provisions set forth in Articles
5, 6 and 11 of the Indenture in order to
permit the Transactions to proceed,
including:
- Limitation on Restricted Payments;
- Limitation on Transactions with
Affiliates;
- Limitation on Indebtedness;
- Limitation on Dividend and Other Payment
Restrictions Affected Restricted
Subsidiaries;
- Restriction on Liens;
- Limitation on Asset Dispositions;
- Limitation on Sale or Issuance of
Certain Stock;
- Limitation on Issuance of Subordinated
Indebtedness;
and (ii) waive certain restrictive provisions
set forth in Articles 5, 6 and 11 of the
Indenture in order to permit the Transactions
to proceed, including:
- Change of Control;
- When Company May Merge, Etc.;
- Events of Default (paragraph (5)
(cross-acceleration) only).
Co-Dealer Managers: Goldman Sachs & Co.
Credit Suisse First Boston Corporation
B-2
<PAGE>
ANNEX C to
Agreement and
Plan of Merger
Amendment to Company Certificate of Incorporation
XV. Whenever under the Business Corporation Law or otherwise the
shareholders of the Corporation are required or permitted to take any
action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted,
subject to any limitations under the Business Corporation Law.
C-1
<PAGE>
<PAGE>
EXHIBIT 11(c)(2)
SUPPORT AGREEMENT dated as of November 22, 1997 (the "Agreement")
between CYRUS ACQUISITION CORP., a New York corporation ("Purchaser"), and
HARRIS J. ASHTON, a resident of Greenwich, Connecticut (the "Shareholder").
WHEREAS, Purchaser and General Host Corporation (the "Company"), a New
York corporation, propose to enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended or supplemented, the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement) pursuant to which, among other
things, Purchaser will agree to make a tender offer (the "Offer") for all
outstanding shares of common stock, par value $1.00 per share (the "Common
Stock"), of the Company, net to the seller in cash, to be followed by a merger
(the "Merger") of Purchaser with and into the Company, upon the terms and
subject to the conditions set forth in the Merger Agreement; and
WHEREAS, the Shareholder owns the number of shares of Common Stock set
forth opposite his name on the signature page of this Agreement (such shares of
Common Stock, together with any other shares of Common Stock acquired by the
Shareholder after the date hereof and during the term of this Agreement whether
upon the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution or otherwise, being collectively referred to herein as the "Subject
Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Purchaser has required that the Shareholder enter into this
Agreement;
NOW, THEREFORE, to induce Purchaser to enter into, and in
consideration of its entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. Representations and Warranties of the Shareholders. The
Shareholder hereby represents and warrants to Purchaser as of the date hereof in
respect of himself as follows:
(a) Authority. The Shareholder has all requisite power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Shareholder and constitutes
a valid and binding obligation of the Shareholder enforceable in accordance
with its terms subject to (i) applicable bankruptcy, insolvency,
moratorium, or other similar laws relating to creditors' rights and general
principles of bankruptcy and (ii) general principles of equity (regardless
of whether considered in a proceeding at
<PAGE>
2
law or in equity). The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not (i) conflict with or violate any law,
statute, rule, regulation, order, judgment or decree applicable to the
Shareholder or by which the Shareholder or any of his properties is bound
or affected, or (ii) conflict with or result in any breach or violation of
or constitute a default (or an event which with notice or lapse of time or
both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any
of the properties or assets of the Shareholder pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Shareholder is a party or by
which the Shareholder or any of his properties is bound or affected.
(b) The Subject Shares. The Shareholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares set
forth opposite his or its name on the signature page of this Agreement,
free and clear of any claims, liens, encumbrances and security interests
whatsoever. The Shareholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the Subject Shares set
forth opposite his or its name on the signature page of this Agreement.
The Shareholder has the sole right to vote, and the sole power of
disposition with respect to, such Subject Shares, and none of such Subject
Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting or disposition of such Subject
Shares, except as contemplated by this Agreement.
2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Shareholder that Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of New York and
has all requisite corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Purchaser,
and the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and constitutes a
valid and binding obligation of Purchaser enforceable in accordance with its
terms subject to (i) applicable bankruptcy, insolvency, moratorium, or other
similar laws relating to creditors' rights and general principles of bankruptcy
and (ii) general principles of equity (regardless of whether considered in a
proceeding at law or in equity). The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
<PAGE>
3
compliance with the terms hereof will not (i) conflict with or violate any law,
statute, rule, regulation, order, judgment or decree applicable to Purchaser or
by which Purchaser or any of its properties is bound or affected, or (ii)
conflict with or result in any breach or violation of or constitute a default
(or an event which with notice or lapse of time or both could become a default)
or result in the loss of a material benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
Purchaser pursuant to, any provision of the certificate of incorporation or
by-laws of Purchaser or 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 of its properties is
bound or affected.
3. Covenants of the Shareholder. Until the termination of this
Agreement in accordance with Section 6, the Shareholder agrees as follows:
(a) To (or cause the record owner thereof to) validly tender and not
withdraw, all the Subject Shares, pursuant to and in accordance with the
terms of the Offer. The Shareholder hereby acknowledges and agrees that
Purchaser's obligation to accept for payment and pay for shares of Common
Stock in the Offer, including any Subject Shares tendered by such
Shareholder, is subject to the terms and conditions of the Offer.
(b) At any meeting of shareholders of the Company held prior to the
consummation of the Offer and called to vote upon the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or at any adjournment thereof or in any other circumstances in
which a vote, consent or other approval with respect to the Merger, the
Merger Agreement or any of the other transactions contemplated by the
Merger Agreement is sought, the Shareholder shall vote (or cause to be
voted) the Subject Shares in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement.
(c) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances in which the
Shareholder's vote, consent or other approval is sought and which meeting
is held or other action is taken prior to the consummation of the Offer,
the Shareholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger Agreement
and the Merger), consolidation, combination, sale of all or substantial
assets, reorganization, recapitalization, dissolution, liquidation or
winding-up of or by the Company or any other takeover proposal or
<PAGE>
4
Acquisition Proposal (as such term is defined in the Merger Agreement) or
(ii) any amendment of the Company's certificate of incorporation or by-laws
or other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement, or would change in any manner the voting rights of the Common
Stock. The Shareholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
(d) The Shareholder hereby grants to, and appoints Purchaser and any
designee of Purchaser, each of them individually, Shareholder's irrevocable
(until the termination of this Agreement) proxy and attorney-in-fact (with
full power of substitution) to vote the Subject Shares of Shareholder as
indicated in Section 3(b) and 3(c) above. The Shareholder intends this
proxy to be irrevocable (until the termination of this Agreement) and
coupled with an interest and will take such further action or execute such
other instruments as may be necessary to effectuate the intent of this
proxy and Agreement (including, if requested by Purchaser, causing an
appropriate legend to be affixed to the certificates representing such
Subject Shares regarding the provisions of this Agreement) and hereby
revokes any proxy previously granted by the Shareholder with respect to
such Shareholder's Subject Shares.
(e) The Shareholder agrees not to (i) sell, transfer, pledge, assign
or otherwise dispose of (including by gift) (collectively, "Transfer"), or
enter into any contract, option or other arrangement (including any
profit-sharing arrangement) with respect to the Transfer of, the Subject
Shares to any person other than pursuant to the terms of the Merger and the
Offer or (ii) enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection with, directly or indirectly, any
Acquisition Proposal, and agrees not to commit or agree to take any of the
foregoing actions. Notwithstanding anything to the contrary provided in
this Agreement, Shareholder shall have the right to Transfer Subject Shares
to (i) any Family Member, (ii) the trustee or trustees of a trust solely
for the benefit of Shareholder and/or one or more Family Members, (iii) a
foundation created or established by Shareholder, (iv) a corporation of
which Shareholder and/or any Family Member owns all of the outstanding
capital stock, (v) a partnership of which Shareholder and/or any Family
Members owns all of the partnership interests, (vi) the executor,
administrator or personal representative of the estate of Shareholder, or
(vii) any guardian, trustee or conservator appointed with respect to the
assets of Shareholder; provided, that in the case of any such Transfer, the
transferee shall execute an agreement to be
<PAGE>
5
bound by the terms of this Agreement, or terms substantially identical
thereto. "Family Member" shall have the meaning ascribed to "Related
Parties" under Section 672(c) of the Internal Revenue Code of 1986, as
amended.
(f) Until the termination of this Agreement, Shareholder will comply
with the provisions of Section 6.5 of the Merger Agreement to the extent
applicable to Shareholder in his capacity as a director or officer of the
Company; provided, that nothing in this Section 3(f) shall prohibit
Shareholder from taking any actions that the Company is permitted to take
in accordance with Section 6.5 of the Merger Agreement.
4. Further Assurances. The Shareholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Purchaser may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except as provided in
Section 3(e) and except that Purchaser may assign, in its sole discretion, any
or all of its rights, interests and obligations hereunder to any affiliate (as
such term is defined in the Merger Agreement) of Purchaser. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
6. Termination. This Agreement shall terminate upon the earlier of
(a) the date upon which Purchaser shall have purchased all of the Subject Shares
of the Shareholder in accordance with the Offer and the Merger and (b) the date
on which the Merger Agreement is terminated in accordance with its terms.
7. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Purchaser in accordance
with Section 9.2 of the Merger Agreement and to the Shareholder at his
address set forth on the signature page of this Agreement (or at such other
address for a party as shall be specified by like notice).
<PAGE>
6
(c) Interpretation. Unless other indicated, references made in this
Agreement to Sections shall be to Sections to this Agreement. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Wherever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
8. Shareholder Capacity. No person executing this Agreement who is
or becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
The Shareholder signs solely in his capacity as the record holder and beneficial
owner of, or the trustee of a trust whose beneficiaries are the beneficial
owners of, such Shareholder's Subject Shares and nothing herein shall limit or
affect any actions taken by a Shareholder in his capacity as a director or
officer of the Company including in the exercise of his fiduciary duties as a
director and officer of the Company.
9. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in a New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
<PAGE>
7
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court; (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the State of New York
or a New York state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement.
<PAGE>
IN WITNESS WHEREOF, Purchaser has caused this Agreement to be signed
by its officer thereunto duly authorized and the Shareholder has signed this
Agreement, all as of the date first written above.
CYRUS ACQUISITION CORP.
By: /s/ David P. Spalding
-------------------------------------
Name: David P. Spalding
Title: President
Number of Subject Shares: Shareholder:
1,532,157
/s/ Harris J. Ashton
----------------------------------------
Name: Harris J. Ashton
Address: 191 Clapboard Ridge Rd.
Greenwich, CT 06830
<PAGE>
Exhibit 11g(1)
CONFORMED COPY
THE CHASE MANHATTAN BANK GOLDMAN SACHS CREDIT
CHASE SECURITIES INC. PARTNERS L.P.
270 Park Avenue 85 Broad Street
New York, New York 10017 New York, New York 10004
November 21, 1997
The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10022
Attention of Mr. David P. Spalding
ACQUISITION OF EDEN CORPORATION
SENIOR SECURED CREDIT FACILITIES
COMMITMENT LETTER
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase"), Chase Securities
Inc. ("CSI") and Goldman Sachs Credit Partners L.P. ("GSCP") that (a) The
Cypress Group L.L.C., a Delaware limited liability corporation ("Cypress"),
intends to form a Delaware or New York corporation ("Acqco"), which will be
wholly owned and controlled by Cypress and certain other investors arranged by
Cypress (Cypress and such other investors, collectively, the "Investors"), and
(b) the Investors intend to acquire (the "Acquisition") all the outstanding
common stock (the "Shares") of a New York corporation identified to us as "Eden
Corporation" ("Eden"), pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") between Acqco and Eden. The Merger Agreement will provide that (a)
Acqco will make a tender offer (the "Equity Tender Offer") to acquire all the
outstanding Shares of Eden, (b) simultaneously with the Equity Tender Offer,
Eden will make a tender offer (the "Debt Tender Offer" and, together with the
Equity Tender Offer, the "Tender Offers") for all its outstanding Senior Notes
(as such term is defined in the Summary of Principal Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet")) and (c) the consummation of
each of the Equity Tender Offer and the Debt Tender Offer will be conditioned on
the consummation of the other Tender Offer. As promptly as practicable
following the acceptance of Shares of Eden pursuant to the Equity Tender Offer
and the acceptance of Senior Notes pursuant to the Debt Tender Offer, (a) Acqco
will merge into Eden, with Eden as the surviving corporation
<PAGE>
2
(the "Merger"), and (b) subject to stockholders' appraisal rights, each
outstanding Share of Eden not acquired in the Equity Tender Offer will be
converted into the right to receive an amount in cash equal to the per-Share
price paid in connection with the Equity Tender Offer (the "Cash Merger
Consideration"). The Acquisition, the Tender Offers, the Merger and the
transactions described in the following three paragraphs are referred to herein
collectively as the "Transactions".
You have further advised Chase, CSI and GSCP that, in connection with
the Merger, (a) substantially simultaneously with the Merger, each option and
common-stock-equivalent of Eden that is outstanding immediately prior to the
Merger will be modified so as to become exercisable solely for an amount of cash
equal to the excess, if any, of the Cash Merger Consideration over the exercise
price or purchase price of such option or common-stock-equivalent; (b)
substantially simultaneously with the purchase by Acqco of Shares pursuant to
the Equity Tender Offer, the Investors will make common equity contributions to
Acqco in an aggregate amount of $165,000,000 in cash; (c) substantially
simultaneously with the purchase by Acqco of Shares pursuant to the Equity
Tender Offer, Acqco will make a common equity contribution to Eden in an amount
equal to (i) $165,000,000 minus (ii) the sum of (A) the amount that was required
to purchase Shares tendered in the Equity Tender Offer, (B) an amount sufficient
to pay the aggregate Cash Merger Consideration in the Merger and (C) an amount
to be agreed upon by Cypress, the Borrower and the Agents; (d) substantially
simultaneously with the purchase by Eden of Senior Notes pursuant to the Debt
Tender Offer, Eden will make a common equity contribution to the primary
subsidiary of Eden on the date hereof (the "Borrower") in an amount in cash
equal to the amount of cash of Eden remaining following such purchase of Senior
Notes; (e) the Borrower will obtain the Facilities (as defined below); (f) Eden
and the Borrower will repay any outstanding indebtedness under the
Mortgage-Backed Credit Agreement dated as of November 29, 1996, as amended, by
and among Eden, the Borrower and Comerica Bank and (except as otherwise agreed
upon with the Agents) prepay those of the Borrower's mortgage notes existing on
the date of the initial borrowing under the Facilities (the "Closing Date") as
to which waivers of defaults have not been obtained on or prior to the Closing
Date and which are subject to prepayment or have become due; (g) Eden will pay
the Ashton
<PAGE>
3
Termination Payment (as defined in the Term Sheet); (h) substantially
simultaneously with the Merger, Eden will make a common equity contribution to
the Borrower in an amount in cash equal to the amount of cash of Eden remaining
following payment of the aggregate Cash Merger Consideration and the Transaction
Costs (as defined in the Term Sheet); and (i) costs and expenses incurred in
connection with the Transactions will be paid.
You have further advised Chase, CSI and GSCP that, in connection with
the Transactions, you are interested in arranging for the Borrower to obtain the
senior secured credit facilities described in the Term Sheet in an aggregate
principal amount of up to $220,000,000 (the "Facilities"). You have requested
that Chase and GSCP commit to provide the entire principal amount of the
Facilities and that CSI agree to structure, arrange and syndicate the
Facilities.
You have further advised Chase, CSI and GSCP that, on or before the
date that is 120 days after the Closing Date, (a) Eden will redeem any Senior
Notes that remain outstanding following the consummation of the Debt Tender
Offer in accordance with the terms of the Senior Notes Indenture, (b) Eden will
redeem all its Convertible Subordinated Notes, (c) either (i) the Borrower will
issue $100,000,000 in aggregate principal amount of its senior subordinated
notes (the "Subordinated Notes") in a public offering or in a Rule 144A or other
private placement or (ii)(A) Eden will issue to the Investors $45,000,000 in
aggregate principal amount of its 8% subordinated pay-in-kind debentures (the
"8% PIK Debentures") in exchange for the payment by the Investors to Eden of
$45,000,000 in cash and (B) Eden will make a common equity contribution to the
Borrower of $45,000,000 in cash and (d) the Borrower will apply a portion of the
net cash proceeds of the Subordinated Notes or such equity contribution, as the
case may be, to repay any borrowings then outstanding under the Term Facility
(as defined in the Term Sheet) to the extent such borrowings were used to
(i) repurchase Senior Notes pursuant to the Debt Tender Offer, (ii) repay,
repurchase or redeem Senior Notes not purchased in the Debt Tender Offer or
(iii) repay, repurchase or redeem the Convertible Subordinated Notes.
In connection with the foregoing, Chase is pleased to advise you of
its commitment to provide $121,000,000 of
<PAGE>
4
the Facilities and (b) GSCP is pleased to advise you of its commitment to
provide the remainder of the Facilities, in each case upon the terms and subject
to the conditions set forth or referred to in this Commitment Letter and in the
Term Sheet. Each of Chase's and GSCP's commitment will be allocated pro rata to
each of the Facilities. You hereby appoint CSI to act, and CSI hereby agrees to
act, as exclusive arranger for the Facilities (the "Arranger") on the terms set
forth or referred to in this Commitment Letter and in the Term Sheet.
It is understood and agreed that (a) Chase will act as the sole and
exclusive administrative agent, syndication agent and collateral agent
(collectively, the "Administrative Agent") for the Facilities and (b) GSCP will
act as documentation agent for the Facilities (together with the Administrative
Agent, the "Agents"), and each will, in such capacities, perform the duties
customarily associated with such roles. It is further understood and agreed
that (a) no additional agents or co-agents will be appointed in connection with
the Facilities without the approval of Chase, CSI and GSCP and (b) no Lender (as
defined below) will receive compensation outside the terms contained herein and
in the Fee Letter referred to below in order to obtain its commitment to
participate in the Facilities.
Each of Chase and GSCP reserves the right, prior to or after the
execution of definitive documentation for the Facilities, to syndicate all or a
portion of its commitment hereunder to one or more financial institutions,
reasonably acceptable to you, that will become parties to such definitive
documentation pursuant to a syndication to be managed by the Arranger in
consultation with GSCP and you (Chase, GSCP and the other financial institutions
becoming parties to such definitive documentation being collectively called the
"Lenders"). You understand that the Arranger intends to commence syndication
efforts promptly upon the execution of this Commitment Letter, and you agree
actively to assist the Arranger in completing a timely and orderly syndication
satisfactory to Chase, GSCP, the Arranger and you. Such assistance shall
include (a) your using your reasonable efforts to ensure that the syndication
efforts benefit from the existing lending relationships of Cypress and the
Borrower, (b) direct contact during the syndication between senior management,
representatives and advisors of Cypress, its controlling affiliates, the other
Investors and Acqco and, to the extent reasonably possible, Eden and the
<PAGE>
5
Borrower, on the one hand, and the proposed Lenders, on the other hand, (c) your
providing assistance (including the use of your best efforts to cause your
affiliates and advisors to provide assistance) in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication and (d) the hosting, with the Arranger, of one
or more meetings of prospective Lenders. Chase, GSCP and CSI shall be entitled,
with your agreement, to change the structure, terms or amount of, or eliminate,
any of the Facilities if Chase, GSCP and CSI determine, after consultation with
you, that such changes are advisable in order to ensure a successful syndication
or an optimal credit structure and if the aggregate amount of the Facilities
shall remain unchanged.
It is understood and agreed that the Arranger will, in consultation
with GSCP and you (and, in the case of the final selection of Lenders, with your
agreement, not to be unreasonably withheld), manage all aspects of the
syndication, including determination of the potential Lenders to be approached
and when the Arranger will approach such potential Lenders, final selection of
Lenders, determination of the time of acceptance of the Lenders' commitments,
any naming rights and the final allocations of the commitments among the
Lenders. It is also understood and agreed that the amount and distribution of
fees among the Lenders will be at the Arranger's discretion, following
consultation with GSCP and you. To assist the Arranger in its syndication
efforts, you agree promptly to prepare and provide (and to use reasonable
efforts to cause the Borrower to provide) to Chase, CSI and GSCP all information
with respect to Acqco, Eden, the Borrower and its subsidiaries, the Transactions
and the other transactions contemplated hereby, including all financial
information and projections (the "Projections"), as they may reasonably request
in connection with the arrangement and syndication of the Facilities. You
hereby represent and covenant that, to your knowledge, all information other
than the Projections (the "Information") that has been or will be prepared by or
on behalf of you, Acqco, Eden or the Borrower or any of your or their authorized
representatives and made available to Chase, CSI and GSCP, when taken as a
whole, 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
<PAGE>
6
circumstances under which such statements are made. You agree that if, at any
time from and including the date hereof until the closing of the Facilities, any
of the representations in the preceding sentence would be incorrect if the
Information were being furnished, and such representations were being made, at
such time, then you will promptly supplement the Information so that such
representations will be correct under those circumstances. In arranging the
Facilities, including the syndication of the Facilities, Chase, CSI and GSCP
will be entitled to use and rely primarily on the Information and the
Projections without responsibility for independent verification thereof.
As consideration for each of Chase's and GSCP's commitment hereunder
and the Arranger's agreement to structure, arrange and syndicate the Facilities
and to provide advisory services in connection therewith, you agree to pay (and
to cause the Borrower to pay) to Chase, for the account of Chase and GSCP, the
fees as set forth in the Term Sheet and in the Fee Letter dated the date hereof
and delivered herewith (the "Fee Letter"). Once paid, such fees shall not be
refundable under any circumstances.
Each of Chase's and GSCP's commitment hereunder is subject to
(a) Chase and GSCP not having discovered or otherwise becoming aware of
information not previously disclosed to them that they believe to be materially
inconsistent with their understanding, based on the information provided to them
prior to the date hereof, of the business, assets, operations, properties,
financial condition or prospects of Acqco, Eden, the Borrower or Eden's other
subsidiaries, (b) there not having occurred since January 26, 1997, any material
adverse change in the business, assets, operations, properties, financial
condition or prospects of Acqco, Eden, the Borrower and its subsidiaries, taken
as a whole, (c) there not having occurred and being continuing a material
disruption of or material adverse change in financial, banking or capital market
conditions that, in Chase's and GSCP's reasonable judgment, could materially
impair the syndication of the Facilities, (d) Chase's and GSCP's reasonable
satisfaction in all respects with (i) the material terms of the Merger Agreement
and all other agreements to be entered into in connection with the Transactions,
(ii) all legal, tax and accounting matters relating to the Transactions and
(iii) the capitalization, structure and equity ownership of Eden and its
subsidiaries after giving effect to the
<PAGE>
7
Transactions, (e) the negotiation, execution and delivery of definitive
documentation with respect to the Facilities reasonably satisfactory to Chase,
GSCP and you and (f) the other conditions set forth in the Term Sheet. Those
matters that are not covered by or made clear under the provisions hereof and of
the Term Sheet are subject to the approval and agreement of Chase, CSI, GSCP and
you.
By executing this Commitment Letter, you agree (a) to indemnify and
hold harmless CSI, Chase, GSCP and their respective officers, directors,
partners, 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 persons may become subject arising out of or in connection
with this Commitment Letter, the Fee Letter, the Term Sheet, the Transactions,
the Facilities or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any of such indemnified parties is a party thereto, and to reimburse
each of such indemnified parties 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 indemnified
party, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found in a final judgment of a court to have resulted from the
willful misconduct or gross negligence of such indemnified party, and (b) if the
Closing Date occurs, to reimburse CSI, Chase and GSCP from time to time, upon
presentation of a summary statement, for all reasonable out-of-pocket expenses
(including but not limited to expenses of Chase's and GSCP's due diligence
investigation, consultants' fees (if such consultants are engaged with your
consent), syndication expenses, travel expenses and reasonable fees,
disbursements and other charges of counsel for the Agents in each applicable
jurisdiction), in each case incurred in connection with the Facilities and the
preparation of this Commitment Letter, the Term Sheet, the Fee Letter, the
definitive documentation for the Facilities and the security arrangements in
connection therewith. Notwithstanding any other provision of this Commitment
Letter, no indemnified person shall be liable for any indirect or consequential
damages in connection with its activities related to the Facilities.
<PAGE>
8
You acknowledge that Chase, CSI and GSCP 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. None of
Chase, CSI or GSCP 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 the performance by Chase, CSI or GSCP
of services for other companies, and none of Chase, CSI or GSCP will furnish any
such information to other companies. You also acknowledge that none of Chase,
CSI or GSCP has any obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, confidential
information obtained by Chase, CSI or GSCP from other companies.
This Commitment Letter and each of Chase's and GSCP's commitment
hereunder shall not be assignable by you without the prior written consent of
Chase, CSI and GSCP, and any attempted assignment without such consent shall be
void; PROVIDED, HOWEVER, that this Commitment Letter, each of Chase's and GSCP's
commitment hereunder and the Fee Letter may be assigned by you to the Borrower
pursuant to a writing reasonably satisfactory to Chase, CSI and GSCP, and
PROVIDED, FURTHER, that Cypress's obligations hereunder and thereunder shall
terminate upon the execution of definitive financing documentation for the
Facilities. This Commitment Letter may not be amended or any provision hereof
waived or modified except by an instrument in writing signed by Chase, CSI, GSCP
and you. 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 of this Commitment Letter. 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 agree that you will not disclose this Commitment Letter, the Fee
Letter, the Term Sheet, the contents of any of the foregoing or the activities
of Chase,
<PAGE>
9
CSI or GSCP pursuant hereto or thereto to any person without the prior approval
of Chase, CSI and GSCP, except that (a) you may disclose this Commitment Letter,
the Fee Letter, the Term Sheet and the contents hereof and thereof (i) to your
respective officers, employees, attorneys and advisors on a confidential and
need-to-know basis and (ii) as required by applicable law, applicable regulation
or compulsory legal process (in which case you will promptly notify Chase, CSI
and GSCP thereof), (b) you may disclose this Commitment Letter and the Term
Sheet and the contents hereof and thereof (but not the Fee Letter or the
contents thereof) on a confidential basis to Eden and the Borrower and their
attorneys and advisors in connection with the Acquisition and (c) you may
disclose the existence of this Commitment Letter and a summary of the principal
terms and conditions of the commitments of Chase and GSCP hereunder (but not the
terms of the Fee Letter) in any public filings to be made in connection with the
Tender Offers and, if applicable, Eden's solicitation of proxies from its
stockholders for purposes of obtaining the approval of such stockholders for the
Merger, PROVIDED that any such disclosure that is in writing shall be subject to
Chase's and GSCP's prior review and approval, such approval not to be
unreasonably withheld. The provisions contained in this paragraph shall remain
in full force and effect notwithstanding the termination of this Commitment
Letter or each of Chase's and GSCP's commitment hereunder.
Please indicate your acceptance of the terms hereof and of the Fee
Letter by signing in the appropriate space below and in the Fee Letter and
returning to each of Chase and GSCP the enclosed duplicate originals (or
facsimiles) of this Commitment Letter and the Fee Letter not later than
5:00 p.m., New York City time, on November 28, 1997. Each of Chase's and GSCP's
commitment hereunder will expire at such time in the event that Chase and GSCP
have not received such executed duplicate originals (or facsimiles) in
accordance with the immediately preceding sentence. In the event that the
initial borrowing in respect of the Facilities does not occur on or before
January 31, 1998, then this Commitment Letter and each of Chase's and GSCP's
commitment hereunder shall automatically terminate unless Chase, CSI and GSCP
shall, in their discretion, agree to an extension. The indemnification and
confidentiality provisions contained herein and in the Fee Letter shall remain
in full force and effect until defi-
<PAGE>
10
nitive financing documentation shall be executed and delivered.
Chase, CSI and GSCP are pleased to have been given the opportunity to
assist you in connection with the financing for the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK,
by
/s/ Lawrence Palumbo, Jr.
-----------------------------
Name:Lawrence Palumbo, Jr.
Title:Vice President
CHASE SECURITIES INC.,
by
/s/ Lawrence Palumbo, Jr.
-----------------------------
Name:Lawrence Palumbo, Jr.
Title:Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.,
by
/s/ Edward C. Forst
-----------------------------
Name: Edward C. Forst
Title:Authorized Signatory
Accepted and agreed to as of
the date first above written:
THE CYPRESS GROUP L.L.C.,
by
/s/ David P. Spalding
----------------------------
Name: David P. Spalding
Title: Vice Chairman
<PAGE>
CONFIDENTIAL
November 21, 1997 EXHIBIT A
ACQUISITION OF EDEN CORPORATION
SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
BORROWER: The primary operating subsidiary (the "Borrower") of a
New York corporation identified to the Agents and the
Arranger (each as defined below) as "Eden Corporation"
("Eden").
TRANSACTIONS: (a) The Cypress Group L.L.C., a Delaware limited
liability corporation ("Cypress"), intends to form a
Delaware or New York corporation ("Acqco"), which will
be wholly owned and controlled by Cypress and certain
other investors arranged by Cypress (Cypress and such
other investors, collectively, the "Investors"), and
(b) the Investors intend to acquire (the "Acquisition")
all the outstanding common stock (the "Shares") of
Eden, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") between Acqco and Eden. The Merger
Agreement will provide that (a) Acqco will make a
tender offer (the "Equity Tender Offer") to acquire all
the outstanding Shares of Eden, (b) simultaneously with
the Equity Tender Offer, Eden will make a tender offer
(the "Debt Tender Offer" and, together with the Equity
Tender Offer, the "Tender Offers") for all its
outstanding Senior Notes due 2002 (the "Senior Notes")
issued under the indenture dated as of February 28,
1992 (the "Senior Notes Indenture"), governing such
notes and (c) the consummation of each of the Equity
Tender Offer and the Debt Tender Offer will be
conditioned on the consummation of the other Tender
Offer. As promptly as practicable following the
acceptance of Shares of Eden pursuant to the Equity
Tender Offer
<PAGE>
2
and the acceptance of the Senior Notes pursuant to the
Debt Tender Offer, (a) Acqco will merge into Eden, with
Eden as the surviving corporation (the "Merger"), and
(b) subject to stockholders' appraisal rights, each
outstanding Share of Eden not acquired in the Equity
Tender Offer (the "Untendered Shares") will be
converted into the right to receive an amount in cash
equal to the per-Share price paid in connection with
the Equity Tender Offer (the "Cash Merger
Consideration").
In connection with the foregoing, (a) substantially
simultaneously with the Merger, each option and
common-stock-equivalent of Eden that is outstanding
immediately prior to the Merger will be modified so as
to become exercisable solely for an amount of cash
equal to the excess, if any, of the Cash Merger
Consideration over the exercise price or purchase price
of such option or common-stock- equivalent;
(b) substantially simultaneously with the purchase by
Acqco of Shares pursuant to the Equity Tender Offer,
the Investors will make common equity contributions to
Acqco in an aggregate amount of $165,000,000 in cash
(the "Investor Equity Contributions");
(c) substantially simultaneously with the purchase by
Acqco of Shares pursuant to the Equity Tender Offer,
Acqco will make a common equity contribution to Eden in
an amount equal to (i) $165,000,000 minus (ii) the sum
of (A) the amount that was required to purchase Shares
tendered in the Equity Tender Offer, (B) an amount
sufficient to pay the aggregate Cash Merger
Consideration in the Merger and (C) an amount to be
agreed upon by Cypress, the
<PAGE>
3
Borrower and the Agents (the "Acqco Equity
Contribution"); (d) substantially simultaneously with
the purchase by Eden of Senior Notes pursuant to the
Debt Tender Offer, Eden will make a common equity
contribution to the Borrower in an amount equal in cash
to the amount of cash of Eden remaining following such
purchase of Senior Notes (the "Eden Equity
Contribution" and, together with the Investor Equity
Contributions and the Acqco Equity Contribution, the
"Equity Contributions"); (e) the Borrower will obtain
the Facilities (as defined below); (f) Eden and the
Borrower will (i) repay or cause to be repaid any
outstanding indebtedness under the Mortgage-Backed
Credit Agreement dated as of November 29, 1996, as
amended (the "Existing Credit Agreement"), by and among
Eden, the Borrower and Comerica Bank and (ii) except as
otherwise agreed upon with the Agents, prepay those of
the Borrower's mortgage notes (the "Existing
Mortgages") existing on the date of the initial
borrowing under the Facilities (the "Closing Date") as
to which waivers of default (or other rights to require
repayment) have not been obtained on or prior to the
Closing Date and which are subject to prepayment or
have become due, including payment of any accrued
interest thereon (any such Existing Mortgages as to
which waivers of default (or other rights to require
repayment) have not so been obtained, the "Refinanced
Existing Mortgages"); (g) Eden will pay to Harris J.
Ashton ("Ashton") an amount not to exceed $7,100,000
(the "Ashton Termination Payment") in full satisfaction
and payment of Eden's obligations (excluding on-going
benefits, reimbursement of expenses incurred by Ashton
prior
<PAGE>
4
to termination and tax gross-ups, if applicable)
pursuant to the Employment Agreement, dated as of
January 1, 1992, by and between Eden and Ashton;
(h) substantially simultaneously with the Merger, Eden
will make a common equity contribution to the Borrower
in an aggregate amount in cash equal to the amount of
cash of Eden remaining following payment of the
aggregate Cash Merger Consideration and the Transaction
Costs (as defined below); and (i) any premiums payable
in connection with the redemption of options and
common-stock-equivalents, the repurchase of Senior
Notes and the prepayment of the Refinanced Existing
Mortgages, any accrued interest payable in connection
with the repurchase of Senior Notes, financing fees,
investment banking fees and legal and accounting fees
(collectively, the "Transaction Costs"), incurred in
connection with the Transactions (as defined below)
will be paid. The Acquisition, the Tender Offers, the
Merger and the other transactions described in this
paragraph and in the immediately preceding paragraph
are collectively referred to herein as the
"Transactions".
On or before the date (the "Redemption Completion
Date") that is 120 days after the Closing Date,
(a) Eden will redeem any Senior Notes that remain
outstanding following the consummation of the Debt
Tender Offer in accordance with the terms of the Senior
Notes Indenture, (b) Eden will redeem all its
Convertible Subordinated Notes (as defined below) in
accordance with the terms of the Subordinated Notes
Indenture (as defined below), (c) either (i) the
Borrower will issue $100,000,000 in aggregate principal
amount of its senior
<PAGE>
5
subordinated notes (the "Subordinated Notes") in a
public offering or in a Rule 144A or other private
placement or (ii)(A) Eden will issue to the Investors
$45,000,000 in aggregate principal amount of its 8%
subordinated pay-in-kind debentures (the "8% PIK
Debentures") in exchange for the payment by the
Investors to Eden of $45,000,000 in cash and (B) Eden
will make a common equity contribution to the Borrower
of $45,000,000 in cash (the "Additional Eden Equity
Contribution") and (d) the Borrower will apply a
portion of the net cash proceeds of the issuance of the
Subordinated Notes or the Additional Eden Equity
Contribution, as the case may be, to repay any
borrowings then outstanding under the Term Facility (as
defined below) to the extent such borrowings were used
to (i) repurchase Senior Notes pursuant to the Debt
Tender Offer, (ii) repay, repurchase or redeem Senior
Notes not purchased in the Debt Tender Offer or
(iii) repay, repurchase or redeem the Convertible
Subordinated Notes.
AGENTS: The Chase Manhattan Bank ("Chase") will act as sole
administrative agent, syndication agent and collateral
agent (collectively, the "Administrative Agent") and
Goldman Sachs Credit Partners L.P. ("GSCP") will act as
documentation agent (together with Chase, the
"Agents"), in each case for a syndicate of financial
institutions (the "Lenders") reasonably satisfactory to
the Agents and Cypress, and each will perform the
duties customarily associated with such roles.
ADVISOR AND ARRANGER: Chase Securities Inc. ("CSI") will act as exclusive
advisor and
<PAGE>
6
arranger for the Facilities (the "Arranger"), and will
perform the duties customarily associated with such
roles, and will also manage the syndication of the
Facilities.
FACILITIES: (A) A Senior Secured Term Loan Facility (the "Term
Facility") in an aggregate principal amount of up to
$95,000,000. The aggregate principal amount of the
Term Facility will be reduced on the Closing Date by an
aggregate amount equal to the aggregate principal
amount of any Existing Mortgages that are not
Refinanced Existing Mortgages.
(B) A Senior Secured Revolving Credit Facility (the
"Revolving Facility" and, together with the Term
Facility, the "Facilities") in an aggregate principal
amount equal to $125,000,000. A portion to be agreed
upon of the Revolving Facility will be available in the
form of letters of credit.
In connection with the Revolving Facility, a swingline
facility will be made available by Chase to the
Borrower under which the Borrower may make short-term
borrowings of up to an amount to be agreed upon. Any
such swingline loans will reduce availability under the
Revolving Facility on a dollar-for-dollar basis. Each
Lender under the Revolving Facility shall, promptly
upon request by Chase, fund to Chase its pro rata share
of any swingline borrowings.
PURPOSE: (A) The proceeds of loans under the Term Facility will be
used by the Borrower, together with (a) an amount equal
to the sum of (i) $45,400,000 and (ii) the amount of
cash recorded on a consolidated balance sheet of the
Borrower as of the Closing Date prepared in accordance
with generally accepted
<PAGE>
7
accounting principles, drawn under the Revolving
Facility, and (b) a portion of the Eden Equity
Contribution, solely (i) to pay (or make a dividend to
Eden to enable Eden to pay) any amounts in excess of
the Cash Merger Consideration to be paid in connection
with the exercise by the holders of the Untendered
Shares, if any, of their appraisal rights, and to make
the cash payments due to each holder of an option or
common-stock-equivalent of Eden upon the exercise of
such option or common-stock-equivalent (ii) to repay,
repurchase or redeem (or make a dividend to Eden to
enable Eden to repay, repurchase or redeem) existing
indebtedness of Eden and its subsidiaries, including
the Senior Notes accepted pursuant to the Debt Tender
Offer or otherwise redeemed, all of Eden's outstanding
Convertible Subordinated Notes due 2002 (the
"Convertible Subordinated Notes") issued under the
indenture dated as of February 28, 1992 (the
"Subordinated Notes Indenture"), governing such notes,
and indebtedness owed under the Refinanced Existing
Mortgages (PROVIDED that (A) no more than $55,000,000
in proceeds under the Term Facility shall be used to
repay, repurchase or redeem the Senior Notes and the
Convertible Subordinated Notes and (B) no more than
$40,000,000 in proceeds under the Term Facility shall
be used for the prepayment of any Refinanced Existing
Mortgages), (iii) to pay (or to make a dividend to Eden
to enable Eden to pay) the Ashton Termination Payment
and (iv) to pay the Transaction Costs. The estimated
sources and uses of the funds necessary to consummate
the Transactions and the other
<PAGE>
8
transactions contemplated hereby are set forth on
Annex II hereto.
(B) The proceeds of loans under the Revolving Facility
(other than loans used for the purposes specified in
the immediately preceding paragraph) will be used by
the Borrower to repay indebtedness owed under the
Existing Credit Agreement on the Closing Date and for
general corporate purposes.
(C) Letters of credit issued under the Revolving Facility
will be used by the Borrower for general corporate
purposes.
AVAILABILITY: (A) Loans under the Term Facility will be available in
multiple drawings on and after the Closing Date
pursuant to procedures to be agreed upon by the
Administrative Agent and the Borrower. Amounts
borrowed under the Term Facility that are repaid or
prepaid may not be reborrowed.
(B) Loans under the Revolving Facility will be available at
any time on and after the Closing Date and prior to the
final maturity of the Revolving Facility, in minimum
principal amounts to be agreed upon. Amounts repaid
under the Revolving Facility may be reborrowed.
(C) Letters of credit will be available at any time before
the fifth business day prior to the final maturity of
the Revolving Facility.
(D) At least once during each fiscal year, the Borrower
must reduce for a period of not less than
30 consecutive days the aggregate amount of loans and
letters of credit outstanding under the
<PAGE>
9
Revolving Facility to an amount to be agreed upon.
LETTERS OF CREDIT: Letters of credit under the Revolving Facility will be
issued by Chase or one of its affiliates (the "Issuing
Bank"). Each letter of credit shall expire no later
than the earlier of (a) 12 months after its date of
issuance and (b) the fifth business day prior to the
final maturity of the Revolving Facility.
Drawings under any letter of credit shall be reimbursed
by the Borrower on the same business day. To the
extent that the Borrower does not reimburse the Issuing
Bank on the same business day, the Lenders under the
Revolving Facility shall be irrevocably obligated to
reimburse the Issuing Bank pro rata based upon their
respective Revolving Facility commitments, with the
amount of such reimbursement payment being deemed to be
a drawing under the Revolving Facility.
The issuance of all letters of credit shall be subject
to the customary procedures of the Issuing Bank.
FINAL MATURITY AND (A) TERM FACILITY
AMORTIZATION:
The Term Facility will mature on the date that is
seven years after the Closing Date, and will amortize
in quarterly installments (after a grace period to be
agreed upon) pursuant to a schedule to be determined.
(B) REVOLVING FACILITY
The Revolving Facility will mature on the date that is
six years after the Closing Date.
<PAGE>
10
GUARANTEES: All obligations of the Borrower under the Facilities
(and under any interest rate protection agreement
entered into with any Lender or any affiliate thereof)
will be unconditionally guaranteed (the "Guarantees")
by Acqco, by Eden and by each existing and subsequently
acquired or organized domestic and, to the extent no
adverse tax consequences would result, foreign
subsidiary of Eden. Any guarantees to be issued in
respect of the Subordinated Notes shall be junior to
the obligations under the Guarantees.
SECURITY: The Facilities, any interest rate protection agreement
entered into with any Lender (or any affiliate thereof)
and the Guarantees will be secured by substantially all
the assets of Acqco, Eden, the Borrower and each
existing and subsequently acquired or organized
domestic and, to the extent no adverse tax consequences
would result, foreign subsidiary of Eden (collectively,
the "Collateral"), including but not limited to (a) a
first-priority pledge of (i) prior to the Merger, all
the capital stock of Eden owned by Acqco and (ii) all
the capital stock of the Borrower and each other
existing and subsequently acquired or organized
domestic and, to the extent no adverse tax consequences
would result, foreign subsidiary of Eden (which pledge,
in the case of the voting stock of any foreign
subsidiary, shall be limited to 65% of the voting stock
of such foreign subsidiary to the extent the pledge of
any greater percentage would result in adverse tax
consequences to the Borrower) and (b) perfected
first-priority security interests in, and mortgages
(other than with respect to real estate subject to
Existing Mortgages if and for so long as
<PAGE>
11
such Existing Mortgages remain outstanding following
the Closing Date) on, substantially all tangible and
intangible assets of Acqco, Eden, the Borrower and each
other existing and subsequently acquired or organized
domestic and, to the extent no adverse tax consequences
would result, foreign subsidiary of Eden (including but
not limited to accounts receivable, inventory,
intellectual property, real property (other than as
provided above), cash and proceeds of the foregoing).
All the above-described pledges, security interests and
mortgages shall be created on terms, and pursuant to
documentation, reasonably satisfactory to the
Administrative Agent, and none of the Collateral shall
be subject to any other pledges, security interests or
mortgages.
INTEREST RATES As set forth on Annex I hereto.
AND FEES:
DEFAULT RATE: The applicable interest rate plus 2% per annum.
MANDATORY PREPAYMENTS: Loans under the Term Facility shall be prepaid with
(a) 75% of Excess Cash Flow (to be defined), (b) 100%
of the net cash proceeds of all non-ordinary-course
asset sales or other dispositions of property by Acqco,
Eden, the Borrower and Eden's other subsidiaries
(including insurance and condemnation proceeds in
excess of an agreed-upon amount), subject to limited
exceptions to be agreed upon, and (c) 100% of the net
cash proceeds of issuances of equity and debt
obligations of Eden, the Borrower and Eden's other
subsidiaries (other than, (i) if the Subordinated Notes
are issued on or prior to the Redemption
<PAGE>
12
Completion Date, the net cash proceeds of the
Subordinated Notes to the extent that such net cash
proceeds will be used to redeem (A) Senior Notes that
remain outstanding following the consummation of the
Debt Tender Offer or (B) the Convertible Subordinated
Notes, and (ii) if the Subordinated Notes are issued
after the Redemption Completion Date, the net cash
proceeds of the Subordinated Notes to the extent that
such net cash proceeds are used to make a dividend to
Eden and applied by Eden to redeem 8% PIK Debentures as
contemplated under the caption "Negative Covenants"
below), subject to limited exceptions to be agreed
upon. Notwithstanding the foregoing, the percentage of
Excess Cash Flow to be applied to prepayment of loans
under the Term Facility shall be subject to reduction
in increments to be agreed upon based on performance
goals to be agreed upon.
The above-described mandatory prepayments shall be
applied (a) in the case of mandatory prepayments
described in clause (a) of the immediately preceding
paragraph, in a manner to be agreed upon to the
remaining amortization payments under the Term Facility
and (b) in the case of mandatory prepayments described
in clauses (b) and (c) of the immediately preceding
paragraph, pro rata to the remaining amortization
payments under the Term Facility.
VOLUNTARY PREPAY- Voluntary prepayments of borrowings
MENTS/REDUCTIONS under the Facilities, and voluntary
IN COMMITMENTS: reductions of the unutilized portion of the Revolving
Facility commitments, will be permitted at any time, in
minimum principal amounts to be agreed upon, without
<PAGE>
13
premium or penalty, subject to reimbursement of the
Lenders' redeployment costs in the case of a prepayment
of Adjusted LIBOR borrowings other than on the last day
of the relevant Interest Period. The above-described
voluntary prepayments shall be applied pro rata to the
remaining amortization payments under the Term
Facility.
REPRESENTATIONS Usual for facilities and
AND WARRANTIES: transactions of this type and reasonably acceptable to
the Borrower and its counsel, Acqco and its counsel and
the Administrative Agent and its counsel.
CONDITIONS PRECEDENT Usual for facilities and
TO INITIAL BORROWING: transactions of this type, those specified below and
others to be reasonably specified by the Administrative
Agent, including but not limited to delivery of
satisfactory legal opinions and audited financial
statements; first-priority perfected security interests
in the Collateral (free and clear of all liens, subject
to limited exceptions to be agreed upon); execution of
the Guarantees, which shall be in full force and
effect; accuracy of representations and warranties;
absence of defaults, prepayment events or creation of
liens under debt instruments or other agreements as a
result of the transactions contemplated hereby (subject
to exceptions (including exceptions with respect to
Existing Mortgages) to be agreed upon); evidence of
authority; absence of litigation affecting the
Transactions or that could reasonably be expected to
result in a material adverse change; compliance with
applicable laws and regulations (including but not
limited to ERISA, margin regulations and environmental
<PAGE>
14
laws); absence of material adverse change in the
business, assets, operations, properties or financial
condition (or, with respect to the initial borrowing
only, prospects) of Acqco, Eden, the Borrower and its
subsidiaries, taken as a whole, since January 26, 1997;
delivery of a borrowing certificate; payment of fees
and expenses; and obtaining of satisfactory insurance.
The Administrative Agent shall be reasonably satisfied
with the terms and conditions of (a) the Merger
Agreement (including any provisions relating to any
shareholder rights plan or other defensive measures of
Eden), (b) the Tender Offers and (c) all related
documentation. All material conditions to the purchase
of Shares in the Equity Tender Offer shall have been
satisfied without giving effect to any waiver or
amendment thereof not approved by the Administrative
Agent, and Acqco shall have accepted for payment
pursuant to the Equity Tender Offer a number of Shares
that, on a fully diluted basis (without giving effect
to any potential dilution that could result from the
exercise, after the consummation of the Equity Tender
Offer, of conversion rights by any holder of the
Convertible Subordinated Notes), shall be sufficient to
enable Acqco to effect stockholder approval of the
Merger under applicable law and the charter and by-laws
of Eden without the vote of any other shareholder.
Substantially simultaneously with the consummation of
the Equity Tender Offer, (a) Eden's existing board of
directors shall have taken all steps necessary to cause
persons designated by Cypress to constitute a majority
of Eden's board of directors and (b) Joseph R. Baczko
shall have
<PAGE>
15
assumed management responsibilities with respect to
Eden and its subsidiaries.
All material conditions to the purchase of the Senior
Notes in the Debt Tender Offer shall have been
satisfied without giving effect to any waiver or
amendment thereof not approved by the Administrative
Agent, Eden shall have repurchased not less than a
majority in principal amount of the Senior Notes at
prices and on terms satisfactory to the Agents, any
significant negative covenants with respect to the
Senior Notes shall have been eliminated or modified in
a manner satisfactory to the Administrative Agent and
any "change of control" provisions with respect to the
Senior Notes shall have been eliminated, modified in a
manner satisfactory to the Administrative Agent or
waived.
The consummation of the Tender Offers and the other
transactions contemplated hereby shall not (a) violate
any applicable law, statute, rule or regulation or (b)
conflict with, or result in a default or event of
default under, any agreement of Acqco, Eden, the
Borrower or any of Eden's other subsidiaries that will
be in effect following the consummation of the
Acquisition (except for defaults (and other rights to
require repayment) under certain Existing Mortgages
(i) of which the Lenders shall have received written
notice from the Borrower and (ii) which in the
aggregate would not result, in the reasonable judgment
of the Agents, in a material adverse change in the
business, assets, operations, properties, financial
condition or prospects of Acqco, Eden, the Borrower and
Eden's other subsidiaries, taken as a whole).
<PAGE>
16
The Administrative Agent shall (a) be reasonably
satisfied with the capitalization, structure and equity
ownership of Eden and its subsidiaries after giving
effect to the Transactions and (b) be reasonably
satisfied that the Transaction Costs shall not exceed
$25,600,000.
The Investors, Acqco and Eden shall have made the
Equity Contributions.
Any amounts outstanding under the Existing Credit
Agreement shall have been repaid in full, and the
Existing Credit Agreement and any related guarantee and
collateral documents shall have been terminated.
Prior to the closing of the Facilities, Cypress and the
Borrower shall have used commercially reasonable
efforts to obtain waivers of defaults under, or to
cause each of the promissory notes and other operative
documents relating to, each of the Existing Mortgages
and the existing capital leases to remain in effect on
the Closing Date (the "Capital Leases") to be amended
in a manner reasonably satisfactory to the
Administrative Agent, which waivers or amendments
shall, among other things, waive the "change of
control" provisions thereof with respect to the
Acquisition and the Merger, and make such other changes
as shall be necessary so that, after giving effect
thereto and to the consummation of the other
Transactions and the financing therefor, no default or
event of default would exist thereunder (except for
defaults or events of default that in the aggregate
would not result, in the reasonable judgment of the
Agents, in a material adverse change in the
<PAGE>
17
business, assets, operations, properties, financial
condition or prospects of Acqco, Eden, the Borrower and
Eden's other subsidiaries, taken as a whole). In the
event that such waivers or amendments are not obtained
with respect to any Capital Lease, such Capital Lease
shall be terminated prior to the Closing Date except as
otherwise agreed upon by the Administrative Agent.
After giving effect to the Transactions and the other
transactions contemplated hereby, on the Closing Date
Eden and its subsidiaries shall have outstanding no
indebtedness or preferred stock other than (a) the
loans and other extensions of credit under the
Facilities, (b) any Senior Notes not repurchased in the
Debt Tender Offer, (c) the Convertible Subordinated
Notes, (d) any Existing Mortgages and Capital Leases
that will remain outstanding following the Closing Date
and (e) other limited indebtedness to be agreed upon.
The Administrative Agent shall have received a pro
forma consolidated balance sheet of Eden as of the
Closing Date, after giving effect to the Transactions
and the other transactions contemplated hereby, which
balance sheet shall not be materially inconsistent with
the forecasts previously provided to the Administrative
Agent.
The Administrative Agent shall be reasonably satisfied
with any tax sharing agreements between Eden and its
subsidiaries after giving effect to the Transactions
and the other transactions contemplated hereby.
<PAGE>
18
The Administrative Agent shall have received a
certificate, in form and substance satisfactory to the
Administrative Agent, from an appropriate financial
officer of Eden as to the solvency of Eden and its
subsidiaries on a consolidated basis after giving
effect to the Transactions and the consummation of the
other transactions contemplated hereby.
The Administrative Agent shall have received
satisfactory title insurance policies, current
certified surveys, evidence of zoning and other legal
compliance, certificates of occupancy and other permits
(including such endorsements as the Administrative
Agent may require), lien searches, legal opinions and
other customary documentation reasonably required by
the Administrative Agent with respect to substantially
all real property of Eden and its subsidiaries subject
to mortgages securing the Facilities.
All requisite governmental authorities shall have
approved or consented to the Transactions and the other
transactions contemplated hereby to the extent
required, all applicable appeal periods shall have
expired and there shall be no governmental or judicial
action, actual or threatened, that could reasonably be
expected to restrain, prevent or impose materially
burdensome conditions on the Transactions or the other
transactions contemplated hereby.
AFFIRMATIVE Usual for facilities and
COVENANTS: transactions of this type (including materiality
concepts and other exceptions to be agreed upon) and
others to be reasonably acceptable to Acqco and its
counsel, the Borrower and its
<PAGE>
19
counsel and the Administrative Agent and its counsel
(to be applicable to Acqco, Eden and its subsidiaries),
including but not limited to maintenance of corporate
existence and rights; performance of obligations;
delivery of audited annual consolidated and
consolidating financial statements for Eden and
unaudited quarterly and monthly consolidated and
consolidating financial statements for Eden; notices of
default and litigation; maintenance of properties in
good working order; maintenance of satisfactory
insurance; compliance with laws; inspection of books
and properties; further assurances; and payment of
taxes.
The Borrower will be required to redeem, not later than
the Redemption Completion Date, (a) any Senior Notes
that remain outstanding following the consummation of
the Debt Tender Offer and (b) all the then-outstanding
Convertible Subordinated Notes, in each case in
accordance with the provisions of the respective
indenture governing such notes.
The Borrower will make commercially reasonable efforts
to issue the Subordinated Notes in an aggregate
principal amount of $100,000,000 not later than the
Redemption Completion Date. Pursuant to documentation
reasonably satisfactory to the Administrative Agent,
(a) the Investors will agree that, in the event that
the Subordinated Notes are not issued by the Borrower
on or before the Redemption Completion Date, Eden will
issue to the Investors, and the Investors will purchase
from Eden, $45,000,000 in aggregate principal amount of
the 8% PIK
<PAGE>
20
Debentures in exchange for the payment by the Investors
to Eden of $45,000,000 in cash and (b) Eden will agree
to make the Additional Eden Equity Contribution to the
Borrower.
The Borrower will also be required to maintain
appropriate interest protection and other hedging
arrangements with one or more Lenders on terms
reasonably satisfactory to the Administrative Agent.
NEGATIVE COVENANTS: Usual for facilities and transactions of this type
(including materiality concepts and other exceptions to
be agreed upon) and others to be reasonably acceptable
to the Borrower and its counsel, Acqco and its counsel
and the Administrative Agent and its counsel (to be
applicable to Acqco, Eden and its subsidiaries),
including but not limited to limitations on dividends
on capital stock; limitations of redemptions and
repurchases of capital stock; limitations of
prepayments, redemptions and repurchases of debt (other
than the redemption or repurchase of the Convertible
Subordinated Notes pursuant to the Subordinated Notes
Indenture, the redemption or repurchase of the Senior
Notes pursuant to the Senior Notes Indenture or the
Debt Tender Offer, the repayment or the refinancing of
the Existing Mortgages, the redemption of the 8% PIK
Debentures as described below and the repayment of
loans under the Facilities); limitations on liens
(which will permit the liens with respect to the
Existing Mortgages that will remain outstanding
following the Closing Date) and sale-leaseback
transactions; limitations on loans and investments;
limitations on
<PAGE>
21
debt, preferred stock and guarantees; limitations on
capital expenditures; limitations on mergers,
acquisitions and asset sales; limitations on
transactions with affiliates; limitations on changes in
business conducted by the Borrower; limitations on
change in the status of Eden (and, prior to the Merger,
Acqco) as holding companies; and limitations on
amendment of debt and other material agreements.
The Credit Agreement for the Facilities (the "Credit
Agreement") will permit (a) the issuance by the
Borrower of up to $100,000,000 in aggregate principal
amount of the Subordinated Notes and (b) the issuance
of any related subordinated guarantees. The terms and
conditions of the Subordinated Notes (including but not
limited to terms and conditions relating to the
interest rate, fees, amortization, maturity,
subordination, covenants, events of defaults, remedies
and redemption dates) and the terms and conditions of
any related subordinated guarantees shall be reasonably
satisfactory in all respects to the Administrative
Agent.
The Credit Agreement will permit, in the event that the
Subordinated Notes are not issued by the Borrower on or
before the Redemption Completion Date, the issuance by
Eden of its 8% PIK Debentures for net cash proceeds of
$45,000,000. The terms and conditions of the 8% PIK
Debentures (including but not limited to terms and
conditions relating to fees, maturity, subordination,
covenants, events of default, remedies, redemption and
pay-in-kind features) shall be reasonably
<PAGE>
22
satisfactory in all respects to the Administrative
Agent.
The Credit Agreement will permit, in the event that the
Subordinated Notes are issued by the Borrower after the
issuance of the 8% PIK Debentures, (a) payment of a
dividend by the Borrower to Eden from the proceeds of
the issuance of the Subordinated Notes in an amount
sufficient to permit Eden to redeem the 8% PIK
Debentures and (b) the redemption of the 8% PIK
Debentures by Eden for a redemption price equal to the
outstanding principal amount thereof plus accrued but
unpaid interest thereon.
In the event that the Subordinated Notes are not issued
by the Borrower after the issuance of the 8% PIK
Debentures, the Credit Agreement will permit, subject
to the satisfaction of certain conditions to be agreed
upon by Cypress, the Borrower and the Administrative
Agent, (a) payment of a dividend by the Borrower to
Eden in an amount sufficient to permit Eden to redeem
the 8% PIK Debentures and (b) the redemption of the 8%
PIK Debentures by Eden for a redemption price equal to
the outstanding principal amount thereof plus accrued
but unpaid interest thereon.
SELECTED FINANCIAL The Credit Agreement will contain
COVENANTS: the following financial covenants: (a) a maximum
leverage ratio, (b) a minimum interest coverage ratio
and (c) a minimum fixed charge ratio, in each case with
definitions and levels to be agreed upon.
EVENTS OF DEFAULT: Usual for facilities and transactions of this type
(including grace periods and materiality concepts to be
agreed
<PAGE>
23
upon) and others to be reasonably acceptable to the
Borrower and its counsel, Acqco and its counsel and the
Administrative Agent and its counsel (to be applicable
to Acqco, Eden and its subsidiaries), including but not
limited to nonpayment of principal or interest,
violation of covenants, incorrectness of
representations and warranties, cross default and cross
acceleration, bankruptcy, material judgments, ERISA,
actual or asserted invalidity of security documents or
guarantees and Change in Control (to be defined and to
include (a) a requirement that Cypress at all times
hold more than 50% of the Shares of Eden and (b) a
requirement that no person other than Cypress hold more
than a percentage to be agreed upon of the Shares of
Eden).
VOTING: Amendments and waivers of the Credit Agreement and the
other definitive credit documentation will require the
approval of Lenders holding more than 50% of the
aggregate amount of the loans and commitments under the
Facilities, except that the consent of each Lender
adversely affected thereby shall be required with
respect to, among other things, (a) increases in
commitments, (b) reductions of principal, interest or
fees, (c) extensions of scheduled amortization or final
maturity and (d) releases of all or substantially all
the Collateral or release of any material guarantee (in
each case other than in connection with any sale of
Collateral permitted by the Credit Agreement).
COST AND YIELD Usual for facilities and
PROTECTION: transactions of this type.
<PAGE>
24
ASSIGNMENTS AND The Lenders will be permitted to
PARTICIPATIONS: assign loans and commitments to other Lenders (or their
affiliates) or to any Federal Reserve Bank without
restriction, or to other financial institutions with
the consent of the Borrower and the Administrative
Agent, in each case not to be unreasonably withheld.
Each assignment (except to other Lenders or their
affiliates) will be in a minimum amount of $5,000,000.
The Administrative Agent will receive a processing and
recordation fee of $3,500, payable by the assignor
and/or the assignee, with each assignment. Assignments
will be by novation and will not be required to be pro
rata among the Facilities.
The Lenders will be permitted to participate loans and
commitments without restriction to other financial
institutions. Voting rights of participants shall be
limited to matters in respect of (a) increases in
commitments, (b) reductions of principal, interest or
fees, (c) extensions of scheduled amortization or final
maturity and (d) releases of all or substantially all
the Collateral or release of any material guarantee (in
each case other than in connection with any sale of
Collateral permitted by the Credit Agreement).
EXPENSES AND All reasonable out-of-pocket
INDEMNIFICATION: expenses (including but not limited to expenses
incurred in connection with due diligence) of the
Arranger and the Agents associated with the syndication
of the Facilities and with the preparation, execution
and delivery, administration, waiver or modification
and enforcement of the Credit Agreement and the other
documentation contemplated hereby and thereby
(including the
<PAGE>
25
reasonable fees, disbursements and other charges of a
single counsel for the Agents in each applicable
jurisdiction) are to be paid by the Borrower. In
addition, all reasonable out-of-pocket expenses of the
Lenders for enforcement costs and documentary taxes
associated with the Facilities are to be paid by the
Borrower.
The Borrower will indemnify the Arranger, the Agents
and the other Lenders and hold them harmless from and
against all costs, expenses (including reasonable fees,
disbursements and other charges of counsel) and
liabilities of the Arranger, the Agents and the other
Lenders arising out of or relating to any claim or any
litigation or other proceedings (regardless of whether
the Arranger, the Agents or any other Lender is a party
thereto) that relate to the proposed transactions,
including the financing contemplated hereby, the Tender
Offers, the Merger or any transactions connected
therewith, PROVIDED that none of the Arranger, the
Agents or any other Lender will be indemnified for its
gross negligence or willful misconduct.
GOVERNING LAW New York.
AND FORUM:
COUNSEL TO AGENTS Cravath, Swaine & Moore.
AND ARRANGER:
<PAGE>
ANNEX I
INTEREST RATES: The interest rates under the Facilities will be as
follows:
REVOLVING FACILITY
At the Borrower's option, Adjusted LIBOR plus 2.25% or
ABR plus 1.25%, except that the interest rate for any
swingline loans will be ABR plus 1.25%.
TERM FACILITY
At the Borrower's option, Adjusted LIBOR plus 2.50% or
ABR plus 1.50%.
ALL FACILITIES
The Borrower may elect interest periods of 1, 2, 3 or 6
months (or, if available from all the Lenders, 9 or 12
months) for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis of actual
days elapsed in a year of 360 days (or 365 or 366 days,
as the case may be, in the case of ABR loans based on
the Prime Rate) and interest shall be payable at the
end of each interest period and, in any event, at least
every 3 months or 90 days, as the case may be.
ABR is the Alternate Base Rate, which is the highest of
Chase's Prime Rate, the Federal Funds Effective Rate
plus 1/2 of 1% and the Base CD Rate plus 1%.
Adjusted LIBOR and the Base CD Rate will at all times
include statutory reserves (and, in the case of the
Base CD Rate, FDIC assessment rates).
<PAGE>
2
LETTER OF CREDIT A per annum fee equal to (a) in the
FEE: case of standby letters of credit, the spread over
Adjusted LIBOR from time to time under the Revolving
Facility and (b) in the case of trade letters of
credit, 60% of the applicable spread over Adjusted
LIBOR from time to time under the Revolving Facility
will accrue on the aggregate face amount of the
applicable outstanding letters of credit under the
Revolving Facility, in each case payable in arrears at
the end of each quarter and upon the termination of the
Revolving Facility, in each case for the actual number
of days elapsed over a 360-day year. Such fees shall
be distributed to the Lenders participating in the
Revolving Facility pro rata in accordance with the
amount of each such Lender's Revolving Facility
commitment. In addition, the Borrower shall pay to the
Issuing Bank, for its own account, (a) a fronting fee
of 1/4 of 1% per annum on the aggregate face amount of
outstanding letters of credit, payable in arrears at
the end of each quarter and upon the termination of the
Revolving Facility, in each case for the actual number
of days elapsed over a 360-day year, and (b) customary
issuance and administration fees.
COMMITMENT FEES: 1/2 of 1% per annum of the undrawn portion of the
commitments in respect of the Facilities, in each case
commencing to accrue on the Closing Date and payable
quarterly in arrears after the Closing Date. For
purposes of calculating the commitment fees,
outstanding swingline loans will be deemed not to
utilize the Revolving Facility commitments.
REDUCTIONS IN The Credit Agreement will contain
COMMITMENT FEES AND provisions under which commitment
<PAGE>
3
INTEREST RATES: fees and interest rates under the Facilities will be
reduced in increments to be agreed upon based on
performance goals to be agreed upon.
<PAGE>
ANNEX II
Sources and Uses of Funds
(in millions of dollars)
For Consolidated Entity
Uses of Funds Sources of Funds
- ------------- ----------------
Purchase of Stock (1) $134.3 Revolving Facility $ 45.4 (2),(3)
Net Purchase of Convertible
Options and Subordinated
Common-Stock- Notes 65.0
Equivalents 2.8
Senior Notes, Existing Mortgage
including tender Notes 39.6 (3)
premiums and
accrued interest 85.0 Existing Capital
Convertible Leases 11.8
Subordinated
Notes 65.0
Existing Mortgage Contributed Equity 165.0
Notes (3) 40.0
Existing Capital Term Facility 35.0 (4)
Leases 11.8
Ashton Termination
Payment 7.1
Fees 15.8
------ ------
Total Uses $361.8 Total Sources $361.8
====== ======
______________________
(1) Stock will be purchased with the proceeds of the Investor Equity
Contribution, and not with loans under the Facilities.
(2) Represents the portion of the Revolving Facility expected to be
funded in connection with the Transactions.
(3) Does not include approximately $3,900,000 in premiums that will
become due and payable in the event that all of the Existing Mortgages
are refinanced.
(4) On the Closing Date, funding under the Term Facility will be
increased by an aggregate amount equal to the aggregate principal amount
of the Refinanced Existing Mortgages.
